SOE shares likely to stay in NZ - Tower boss

By Ben Chapman-Smith

Sam Stubbs, head of investment management at Tower. Photo / Janna Dixon
Sam Stubbs, head of investment management at Tower. Photo / Janna Dixon

Offshore investors are unlikely to take much interest in the partial sales of four New Zealand state-owned companies and ownership will almost certainly remain in local hands, says the head of Tower Investments.

The Government has made its clear its intention to sell off a 49 per cent stake in Mighty River Power, Meridian, Genesis Energy and Solid Energy over a four-year period.

Speaking yesterday, Sam Stubbs said that regardless of who bought shares in the first round of sell downs, these companies would probably end up being almost totally owned by New Zealand entities and New Zealanders.

"On a global scale, these are not particularly massive floats and so they won't necessarily be generating a lot of international interest, particularly when the signal from the Government is they want New Zealanders owning these stocks," Stubbs said in his market and economic overview.

The second potentially off-putting factor for overseas buyers was that there would be no control premium for the shares.

"You can't own them outright, you can't cut them up, you can't sell them," Stubbs said.

"The Government owns 51 per cent. So with the absence of a control premium, offshore buyers will not be so interested in these stocks."

Stubbs said there would probably be a high level of interest in buying shares shown by the New Zealand public.

"When you look at these sorts of floats here and around the world, quite often the public interest can really surprise people in terms of how many people are prepared to register for shares.

"And it looks like the Government wants to encourage that and the stock exchange is making positive noises about that as well."

Tower Investments was "completely agnostic" about the Government's "Mixed Ownership Model" but what needed to happen was for all the information to be out on the table, Stubbs said.

"The more clarity there is, the more accurately the shares will be priced," he said.

"Financial markets hate insecurity. If these come to the market where there's a good deal of insecurity, it will be reflected in the price that people are prepared to pay."

In the long-term, Stubbs said companies like his would be net buyers of stocks in the SOEs as Kiwisaver money came in.

"They fulfil the criteria that we look for - long-term stable dividends, well governed, unlikely to be any surprises in terms of what they do with their businesses having the Government as the majority shareholder.

"We think Kiwsaver funds will end up net buyers of these things for quite some time."

The Government is also planning to sell down its present shareholding in Air New Zealand to 51 per cent.

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