Stock Takes: Overseas takeover deal puts freight firm on a roll

Mainfreight still has to get shareholder approval for the Wim Bosman deal but it seems assured. Photo / Sarah Ivey

Opinion

Mainfreight's share price has had a phenomenal run since February 24, when it traded at $8.07.

New Zealand companies have in general had a poor track record when it comes to acquiring businesses overseas, but the market so far likes the look of its purchase of the Wim Bosman Group - one of the largest privately-owned, integrated transport and logistics providers in the Netherlands and Belgium. At $205 million, Wim Bosman is not exactly small beer.

"From what we understand today, it looks like a good acquisition," Goldman Sachs analyst Marcus Curley said.

Mainfreight still has to secure approval from its shareholders for the deal. Going on the market's reaction so far, Stock Takes thinks it is unlikely to meet with much resistance. Mainfreight shares closed yesterday at $8.88, after peaking earlier in the week at $9.10, and a far cry off its $5.85 low for the year.

MOVER AND SHAKER

NZX chief executive Mark Weldon has made a name for himself as someone who gets things done. Prime Minister John Key has recognised this trait and made him the man in charge of the Government's Earthquake Appeal for four to six weeks.

Stock Takes applauds such altruism, but wonders whether the NZX will dock his (considerable) pay while he is off work for the required four to six weeks. In any event, Weldon need not worry. On March 1, the NZX board announced that he could take delivery of 896,264 NZX shares coming to him under the 2007 CEO share plan. At Thursday's close of $2.05, this parcel is worth $1.8 million.

CHH CHANGES

Michael Falconer, the chief executive of Carter Holt Harvey's Building Supplies group, has moved on. Carter Holt is wholly owned by Graeme Hart's Rank Group and the New Zealand billionaire has been focusing on building a global beverage packaging business from the Carter Holt business he bought for $3.3 billion in 2005.

Falconer joined Carter Holt Harvey in May 2005, initially as chief financial officer. In 2006, heT was appointed chief executive of woodproducts for New Zealand before becoming chief executive of building supplies in 2007.

Falconer has significant overseas experience with Credit Suisse in New York and a background working in and around the forest products industry. Carter Holt declined to comment.

Carter Holt has made it plain that its future lies only in the beverage packaging businesses, so businesses such as Building Supplies are clearly surplus to requirements. The latest move may be a sign that Building Supplies is being smartened up for sale.

ZUELLIG WAITS

The silence is deafening for PGG Wrightson's shareholders. International investment company Zuellig Group, which has a strong track record in the New Zealand market, has made its pitch to PGG Wrightson and associated parties for a cornerstone stake, but shareholders are still in the dark as to what's going on behind the scenes.

It's an odd situation because Singapore's Agria already has a takeover offer in place. This offer, pitched at 60 cents a share, closes on April 15. At last count, Agria had amassed almost 40 per cent of PGG Wrightson's stock, so it looks as if it's almost game over for the rural services group. There has obviously been a lot going on behind the scenes with this market play, and Stock Takes thinks it's about time there was some disclosure.

CAVALIER CLIMBS

Carpet maker Cavalier has enjoyed a strong run over the past 12 months, perhaps reflecting the joys of a weak New Zealand/Australian dollar cross rate, which is languishing at around 19-year lows.

The company, which has extensive exposure to the strong Australian economy, last month reported a 22 per cent improvement in its first-half profit, but off a relatively low base in the previous corresponding period.

"The NZ/Australian dollar cross rate will be a major positive for them as they translate their Australian earnings - which are going very strongly - back into New Zealand dollars," Forsyth Barr's John Cairns told Stock Takes.

Cavalier is also expected to benefit from rebuilding activity following the Christchurch earthquakes, and from a lift in demand from flood-ravaged Queensland.

Cavalier's 50 per cent-owned associate, Cavalier Wool Holdings (CWH), has lodged an application with the Commerce Commission to take control of the wool-scouring business of NZ Wool Services International.

CWH has played a key role in the rationalisation of the wool-scouring industry over many years and was involved in the acquisition and closure of scours owned by Godfrey Hirst NZ in 2009.

Wool Services International is 63.8 per cent owned by South Canterbury Finance associated companies, Plum Duff and Woolpak Holdings which, with South Canterbury, are in receivership.

There are four wool scours left in New Zealand, two of them owned by CWH and the other two by Wool Services International.

If Wool Services International did end up in Cavalier's hands, it would leave the company in a commanding market position, assuming it gets Commerce Commission approval.

Wool Services International has so far rebuffed Cavalier's advances. Cavalier's shares closed yesterday at $3.26, not far off its 52-week high of $3.50 and well up from its year-ago level of $2.20.

KIWISAVER EQUILIBRIUM

New Zealand's managed funds industry reported another positive overall funds flow in the December 2010 quarter of $503.2 million, as total assets increased to $25.07 billion, according to investment fund analysts Morningstar.

KiwiSaver funds accounted for 98.8 per cent of this total flow, with PIE investment fund trusts offsetting outflows and all other product types.

Funds flowing to KiwiSaver totalled $497.2 million in the last quarter of 2010, lower than the $535.8 million of inflows from the same quarter of the previous year.

Total inflows for the year are estimated to be $2.44 billion, which is in line with the annual figures from the previous quarters.

"This represents a possible equilibrium in net funds flow for KiwiSaver, as most people who will sign up are likely to have already done so," Morningstar said in its latest investment report.

JUMBO DEAL

AMP's and AXA Asia Pacific's Australasian operations are set to become one unit by the end of the month after the parties gained Victorian Supreme Court approval for their A$14 billion ($19.2 billion) merger plan early this week.

It will create the largest non-bank wealth management company in Australia and New Zealand - one of the world's fastest-growing wealth management markets.

The combined entity will hold the number one market position for individual risk insurance, retail superannuation, retirement income and financial advice in Australasia.

Over time, the AXA brand will disappear and will be replaced with AMP-branded services, but in the short term customers are unlikely to see much change, Morningstar's Sydney-based insurance analyst, David Walker, told Stock Takes.

"This was a jumbo deal," he said.

"It combines two independent firms who now will not be merging with anyone else."

The size of the deal also gives AMP some takeover protection, should any of Aussie's big four banks start getting ideas.