KEY POINTS:
Propertyfinance group will likely find the going tough as it seeks to prise sufficient stock from Canterbury Building Society (CBS) shareholders to coax the company into merger talks.
Christchurch-based propertyfinance group (PFG) yesterday began a $6.5 million, $5-a-share stand in the market for 19.9 per cent of CBS's NZAX-listed stock.
The offer, run by Forsyth Barr, is at a 20 per cent premium to CBS's $4.16 closing price on Tuesday.
"We've got no intention of making a full takeover," said PFG chairman Barney Sundstrom.
"We would like to sit down with CBS and look at ways of growing the combined businesses."
The two companies have similar businesses, specialising in non-bank first mortgage lending.
"We see better growth in that market for the combined business than for the two organisations operating on their own," said Sundstrom.
Also NZAX-listed, PFG has total assets of more than $400 million and as well as residential and commercial property loans, has a home equity release business.
CBS chairman Graham Kennedy said his board were encouraged by the recognition PFG were giving to CBS by buying into the organisation.
"But, as far as any closer association, we'd need a lot more information before we supported it."
CBS's directors would communicate with shareholders once they had assessed the outcome of the market stand and had more information on PFG's plans.
CBS was among the first companies to list on the NZAX and last year merged with another Christchurch lender, SMC Building Society.
Last month, CBS posted a 20 per cent rise in net interim profit, benefiting from amalgamation and growth in the Canterbury economy.
James Smalley of Christchurch brokerage Hamilton Hindin Greene said CBS's stock was tightly held, mostly by local Ashburton and Christchurch shareholders, "and you know how Cantabrians can be pretty parochial, even if it is a local company making the offer".
Kennedy echoed that view, saying the estimated 1800 shareholders were very loyal.
By the close of trade yesterday, Forsyth Barr had secured just over 180,000 or 2.7 per cent of the 1.3 million CBS shares it is seeking on behalf of PFG in the stand,which closes on Friday if PFG doesn't secure 19.9 per cent sooner. The stand may be extended further.
Smalley said the offer was "reasonable" on fundamentals, but believed shareholders inclined to sell may hold out for a higher one. PFG shares closed unchanged at $1.30, having been as low as 96c in the past year.
