Ports will need to lift profit if ARC bid succeeds

Ports of Auckland will need to improve its annual profit performance to cover the Auckland Regional Council's cost of capital as it moves for 100 per cent control, an analyst says.

The analyst calculates that if the council's investment manager, Auckland Regional Holdings, is successful with its $8 a share bid for the 20 per cent of the port company not already owned, Ports of Auckland will need to make a net annual profit of $62 million.

This looks a comfortable target, given that the company posted a 20 per cent rise in surplus after tax to $57.2 million for the last financial year.

But the result included the gain of about $15 million from the sale of the Westhaven and Hobson West marinas last May.

NZX yesterday posted details of Auckland Regional Holdings' $169.6 million takeover offer.

Key conditions, effective from April 22, include acquiring 90 per cent of shares; that the NZX 50 index does not sink for any three consecutive days to a level equivalent to 15 per cent below the level of the April 1 takeover notice; and that the company does not make any announcement or profit warning that its net profit after tax for the 2005 June end year will, or may, be less than for the year ended last June.

An independent adviser's report on the offer and the port company's response is expected by May 6. The country's biggest container port will be delisted from the stock exchange if Auckland Regional Holdings is successful.

A big fishhook in the ports company's performance in the next five years could be the loss of 90,000 or more of P&O shipping line containers. P&O is expected by port analysts to take the main export business of major dairy customer Fonterra south to Tauranga.

An announcement by P&O is imminent. But one analyst said even if the decision went against Auckland, the port's performance would probably "sneak in" under that key Auckland Regional Holdings financial performance condition.

Auckland lost 8 per cent of its container business to Tauranga last year when P&O turned its Asian fleet south.

National's John Key said Auckland ratepayers should be sceptical about the bid.

"Why does the council need to make a decision any individual ratepayer can make for themselves by just buying some shares? Now all ratepayers are paying whether they like it or not."