Editorial: Chinese bid makes us value F&P

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File photo / Richard Robinson
File photo / Richard Robinson

It is human nature not to fully appreciate the value of something until we are in danger of losing it. That tendency applies as much in sharemarkets as anywhere. Now that a Chinese whiteware company, Haier, is bidding to take over Fisher & Paykel Appliances, the price on the NZX seems far too low.

Market commentators consider that the takeover offer, though well above the price at which the company's shares were previously trading in this country, may still undervalue the brand in this part of the world. The company has "iconic" status in this country as one of the few home-grown heavy manufacturers to have survived the economic changes of the 1980s and proved it could compete on quality and innovation.

It was not always so loved. Back in the era of protection it became notorious for insisting that retailers stocking its products must stock no other brands, as if tariffs on imports were not enough of an advantage. But F&P was never content with a closed domestic market and began exporting in the 1970s.

By the 1980s it was establishing an international reputation for patented products, a model for the innovative, stylish, world-leading brands New Zealand needed. The company persevered for longer than any other under the exporting disadvantage of a high exchange rate before moving some manufacturing to cheaper labour markets in China a few years ago. But it retains a plant at East Tamaki and its research and development facilities are here.

It is that intellectual property that New Zealand would be saddest to lose. Haier has said it does not intend to close the East Tamaki factory if it succeeds in a full takeover, and talked of investing in more research and development in New Zealand. It says it would be content with 70 or 80 per cent of the company, which would leave the stock on the NZX, but it is bidding for the 90 per cent that would trigger a full takeover.

It already has 20 per cent and is said to be assured of a further 17.5 per cent held by an Australian interest. It could reach more than 50 per cent if major institutions such as ACC, AMP and Tower sold. But Tower, for one, has declared Haier's offer price of $1.20 a share to be a "steal". Tower's head of investment believes the shares are worth at least $1.50 in view of the technological advances F&P has made in recent years.

He is talking up the stock in the hope that other international whiteware manufacturers who, like Haier, buy F&P components, might not want the Chinese rival to become their supplier. But any realistic hope of retaining the company in New Zealand probably depends on its 12,800 small shareholders who together hold 30 per cent.

Many of them probably bought in when the share price was languishing around 35c to 50c during the past two years, and for them it would be tempting to cash in at $1.20. The price is 60 per cent above the 75c at which the stock was trading before the offer, which is well above the normal premium for control. Already, New Zealanders can only wonder that local investors let the price drift so low.

We make our companies vulnerable to overseas takeovers by concentrating too much on immediate performance and not enough on their innate strength.

The knee-jerk response of some politicians is to erect investment barriers, usually after the horse has bolted.

The better solution is to let a company find its true value in the world and pay the price its shares were always worth. For F&P it is not too late to preserve a New Zealand stake.

- NZ Herald

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