Money Editor for NZ Herald

Stock takes: Takeover action

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It's good to finally see some takeover action happening on the market with Chinese appliance giant Haier making a bid to buy out Fisher & Paykel Appliances.

But Stock Takes is not convinced the $1.20 a share offer price is a fair offer for one of New Zealand's longest standing businesses.

Appliances hit the skids in 2009 after getting caught by high debt amid the global financial crisis and needed a white knight to bail it out.

But before that it had been a relatively strong performer on the New Zealand market. It split off from the Fisher & Paykel Healthcare division in 2001 and initially traded at $1.77 before peaking at $3.42 in July 2006.

Those who bought Fisher & Paykel Appliances during better times and have stuck by the company through its recent challenges will potentially take a hit on their investment if they sell out now.

Haier paid around $82 million for its cornerstone 20 per cent stake in Appliances in 2009.

The $1.20 a share offer values the entire business at $869 million, meaning Haier will have to cough up another $695 million to buy it in total.

Investors have several weeks to wait before an independent valuation is due out.


Two of the largest institutional shareholders don't seem to be that excited by the offer price either. The Accident Compensation Corporation, which owns 8.34 per cent, and AMP, which has a 5.17 per stake, were approached last week by Haier to try to seal a lock- up agreement.

But neither have taken up the offer.

Only Australian fund manager Allan Gray Australia, with a 17.46 per cent stake, went for the money.

If AMP and ACC banded together they could potentially block a full takeover or try to squeeze more money out of Haier. There has also been talk of a rival bidder or blocking stake emerging from Bosch.

Whirlpool and Electrolux are also believed to be watching the deal with interest.

Whirlpool ruled itself out as a buyer in 2009 but another possible bidder was never publicly declared.


Stock Takes also notes the considerable upwards drift in Fisher & Paykel Appliances' share price ahead of Monday's announcement of the takeover offer.

Shares in F&P price rose from 56c on August 3 to 75c on September 7 - more than 30 per cent in just over a month.

Admittedly the company had its annual general meeting and a positive trading update during that time but market sources say there was a bit of scuttlebutt about the takeover before it was formerly announced.

A spokesman for the Financial Markets Authority said it had not received any complaints about Fisher & Paykel's share price rise but it was standard practice for the FMA and NZX to look at the trading data of any company that is subject to a takeover bid.

Fisher & Paykel Appliances closed up 1.5c at $1.18 yesterday.


Haier's bid for the appliance manufacturer will focus investors' minds on other NZX-listed potential takeover targets.

Rakon also has valuable intellectual property that Asian technology players would love to get.

Rakon's shares have been climbing this week, suggesting there could be some speculative buying going on, although the small rise in the stock - from 44c on Monday to 48c at the close of trading yesterday - could well have been triggered by comments made at the components manufacturer's annual meeting last week.

And then there's PGG Wrightson, already controlled by China's Agria, whose share price was wallowing at 38c yesterday.

Could that firm's majority Chinese shareholder take a pop at a full takeover bid?


Certainly the Haier move has the market in speculation mode and several other stocks have seen higher-than-normal trading activity.

New Zealand companies have been operating in a very lean environment for some time. That's served to make them very efficient, and in some cases highly profitable. Most have pared back their debt quite dramatically.

Stock Takes thinks it looks like the market is putting two and two together and getting seven in some cases but for what it's worth, here are a few other candidates being talked about.

Tower, with all its well-publicised issues, is of course near the top of the list.

But there is talk also around wine grower Delegat's and NZ Oil & Gas has been mentioned as another possible, although unlikely, prospect.

Children's clothing retailer Pumpkin Patch was seen as being in the mix.

There is even talk around the bigger ticket companies such as Sky City.

Skellerup, with its balance sheet now in positively rude good health, has been mentioned as a possible takeover candidate.

Talk has also emerged of Rupert Murdoch's News Corp wanting to go to full control of its associate, Sky Network TV.

Tap and shower head maker Methven was seen as a possible, as was specialised resins maker Nuplex, and software company Xero.

One fund manager said the speculative activity around these stocks looked a bit overdone. Even so, analysts have been brushing a thick cake of dust off their valuations, just in case.


There is one other takeover which has quietly taken place recently.

Austron's partial bid for Acurity Health Group (formerly Wakefield Health) went unconditional this week, easily passing its 50.01 minimum acceptance level, hitting 61.4 per cent (although it has since been scaled back to the 50.01).

The deal has been seen as controversial because the company's two largest shareholders banded together to form Austron and then reached a lock-up agreement with AMP before the remaining shareholders even knew of the offer.

Its $6 a share bid also fell well short of an independent valuation of between $6.92 and $7.88 with very little fight put up by the company's board to encourage shareholders to hold out for a better price.

Acurity's share price has plateaued at $5.85 since the deal was finalised.


Tower's revelation that it is "considering a number of proposals with interested parties" after completing its strategic review failed to excite investors yesterday. The share price fell 5c on the announcement.

Tower previewed the review last week after revealing a profit down-grade leading investors to believe there could be something significant to say - such as reaching an agreement to sell some part of the business.

Possibly the only interesting move is the early departure of chairman Bill Falconer. He was going to be standing down in February after 10 years on the board but this opens the door for new leadership.

Director Stephen Smith will temporarily fill the role but it will be interesting to see who is brought on board as the permanent chair. Sources indicate it will be someone with transformational experience.

Shares in Tower closed down 5c at $1.80 yesterday.


There are obviously very different viewpoints on retailer Kathmandu from across the Tasman. While two major Australian shareholders took the chance to reduce their stake in the outdoor clothing retailer this week New Zealanders were on the buy side.

Sydney-based boutique manager Eley Griffiths reduced its stake from 7.23 to 6.03 per cent while the Commonwealth Bank of Australia sold down from 11.91 per cent to 10.48 per cent.

Meanwhile, the Accident Compensation Corporation increased its stake from 7.65 per cent to 9.186 per cent.

It will be interesting to see who gets the call right. Shares in Kathmandu closed up 2c at $1.78 yesterday.

- NZ Herald

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Money Editor for NZ Herald

Tamsyn Parker is the NZ Herald's Money Editor. A business journalist for ten years, she has worked in the UK and NZ for the New Zealand Herald, the National Business Review and a specialist publication on investment products for financial advisors. She is passionate about helping readers learn more about to make their money work for them.

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