NZ Herald business editor at large

Liam Dann: Ron Brierley makes Jagger's move

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Bearing in mind Brierley is a Wellington native, maybe he has affection for the Kirks brand and sees value in reviving it. Photo / Natalie Slade
Bearing in mind Brierley is a Wellington native, maybe he has affection for the Kirks brand and sees value in reviving it. Photo / Natalie Slade

Like Mick Jagger heading back out on tour, corporate raider Ron Brierley rides again.

The 78-year-old is unlikely to have any pressing financial need to take over the remains of retailer Kirkcaldie & Stains yet here he goes, offering shareholders a premium on the market price if they are prepared to take a discount on the value the company claims it may eventually return in cash once the wind-down is complete.

Perhaps it is an offer that could deliver shareholders a tidy exit and Sir Ron a tidy profit - and a shell company to play with.

But it looks complicated and far from glamorous and begs the question - why bother?

Bearing in mind Brierley is a Wellington native, maybe he has affection for the Kirks brand and sees value in reviving it.

A more likely scenario is that takeovers are what he loves to do and he doesn't see why age should stop him. Fair play to him if that is the case - and Jagger too for that matter.

Having Sir Ron active in the local market again represents more than just nostalgia value for long-time followers of business news.

His play for Kirks is the third NZX takeover offer we've seen emerge this month. We've seen New York-based Insight Venture Partners' offer of US$4.90 ($7.39) - or $941 million - for locally founded and listed (but now US based) tech firm Diligent.

An even bigger offer is in play for local resins manufacturer Nuplex Industries, via a scheme of arrangement, which could see Belgium's Allnex taking control at a 44 per cent premium.

Allnex, controlled by private equity firm Advent International, based in Boston, Massachusetts, would offer $5.55 a share for Nuplex, valuing the target at $1.05 billion.

Of course there is an element of coincidence in the timing of these three offers, but it is relevant that they come as the markets here and globally are sliding for the first time in years.

Market weakness creates opportunity for those with cash in hand.

Throw in the low cost of borrowing around the world right now and conditions look ripe for a private equity shopping spree.

Offers will be made at what look like substantial premiums.

Market weakness creates opportunity for those with cash in hand.

Funds looking at negative quarterly returns may feel more pressure to sell for short-term gains.

There is a risk particularly in a small market like New Zealand's that we see great companies lost to local investors in the rush of merger and acquisition activity that can accompany a market slowdown.

We've certainly been through this before in the 1990s and early 2000s.

The Takeovers Panel, the body that oversees the takeovers code, last week published its half-year report.

A strong six months to December 31 saw 12 sets of final takeover applications received.

The panel projects it will process 24 in the 12 months to June 30. That's up from 18 in the 12 months to June 30, 2015, and 17 to June 30, 2014.

Market activity is important. Despite the bad press it gets from deals such as the Dick Smith IPO, private equity has its place too.

For many listed firms, particularly high-growth stocks, a good market exit strategy is a sensible way to realise value. For more mature businesses that may have been underperforming, a new owner and merger can provide new life.

But investors who have grown used to good returns in the past few years will need to hold their nerve as buyers come knocking.

A buyer who has taken the time to get as far a formal offer clearly sees long-term value and there is no reason to assume the first offer should be the best.

For the good of the market we need to be sure we have a healthy pipeline of new companies listing. Right now that is looking a little uncertain.

Then there is the holy grail for New Zealand capital markets, which would be to see Kiwi companies on the front foot and doing the global bargain hunting themselves - scaling up through acquisitions.

New Zealand has had its champions in this: Graeme Hart, although he prefers to do it himself these days, and the old master, Brierley.

It would be great to see some more locally led takeovers but local investors aren't hugely fond of the risk involved.

More important, and more realistic, for the market right now is to ensure we have our defensive strategy right.

For the sake of New Zealand's long-term growth we can't afford to see good local companies going for a song if M&A activity does heat up over the next year.

- NZ Herald

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NZ Herald business editor at large

Liam Dann is business editor at large at the New Zealand Herald. He has been a journalist for 20 years, covering business for the last 14 of them. He has also worked in the banking sector in London and travelled extensively. His passion is for Markets and Economics, because they are the engine of the New Zealand economy. He hosts The Economy Hub video show every Thursday.

Read more by Liam Dann

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