Stock Takes

A closer look at the markets by Tamsyn Parker

Stock takes: Takeover target

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Aussies around the world will be spluttering into their beer at the news their beloved Foster's has backed a takeover from a British firm.

Foster's this week recommended an improved A$12.3 billion ($15.4 billion) bid from global giant SABMiller. It described the sweetened proposal as "compelling" but also left the door open for a better offer. However, Foster's insists it will still brew in Australia.

"You can't really move a brewery making VB anywhere else, so I think you'll continue to see heavy investment in our business in Australia," said Foster's group chief executive John Pollaers.

Foster's had previously rejected SABMiller's original bid of A$4.90 per share, which valued the target at A$9.5 billion, as being too low.

On Wednesday, the Foster's board recommended a better offer of A$5.5325 cash per share. The bid compares to Foster's closing price on Wednesday of A$4.89. Shares surged 37c, or 7.6 per cent, yesterday to a record high close of A$5.26.

BEWARE CANNIBALS

Analysts have hailed Kathmandu's result this week as impressive, but say there are risks facing the Christchurch-based outdoor apparel retailer.

Kathmandu reported a strong full-year result on Wednesday, with record sales and a surge in net profit to $39.1 million.

"While the Kathmandu brand remains strong and there is ample store roll-out potential, we remain concerned about the longer term threat posed by competition and store cannibalisation [stores belonging to one company competing for the same customers], plus the weakness associated with a heavy reliance on seasonal promotions," said Linwar Securities analyst Mark Wade in a research note.

In another note Goldman Sachs and Partners Australia analyst George Batsakis said Kathmandu had an attractive valuation and favourable earnings per share growth prospects.

But he said risks to earnings-per-share forecasts included weakened consumer spending and increased competition from retailers such as Macpac and Australia's Super Retail Group, which had invested about $15 million to establish 10 outdoor equipment stores across the North Island by Christmas.

Kathmandu shares closed yesterday down 6c at $2.14.

LOW-CONTACT

Contact Energy annual meetings have been in the "must-attend" category in the past with efforts to sell the company or push up directors' fees sparking shareholder anger.

The agenda for this year's gathering in Rotorua on October 19 makes for a far less volatile affair. The election to the board of former managing director David Baldwin re-election of directors, Origin Energy managing director Grant King and professional company director Sue Sheldon is the main business set down for the meeting.

Given Origin is Contact's majority owner, it gets the directors it wants.

Shareholders Association corporate liaison Des Hunt said Origin's sway over the makeup of the board remained an irritation but the company was not looking to upset anyone.

"They're keeping a low profile and under the radar so we've got no ammunition to go after them."

Unless shareholders are desperate for refreshments his recommendation is don't bother making the trip.

TAKEOVER TURKEY

Well, that's one takeover you can presume has hit the waste paper bin: The $1.6 billion "merger" between DNZ Property Fund and Argosy Property Trust.

No one actually announced who lost and who won but it's been pretty clear, with no new announcements, that DNZ has its tail between its legs. And one consultant went rather quiet this week when asked about the status of the, um, takeover.

The deal collapsed mainly because cornerstone Argosy unitholder and related party MFL Funds stepped in and voted its units to defeat DNZ's plans as well those of three big institutions.

MFL's vote spelt doom for DNZ's plans to become the behemoth of the NZX real estate listed stocks. So after all the insults traded for most of this year between the two landlords, after all the consultants, the PR men, the independent appraisals and NZX notices - nothing.

GETTING RADICAL

Talking of listed landlords, in the last week a real behemoth - $1.98 billion Kiwi Income Property Trust - issued its investor update, having morphed into a developer and ensuring Fletcher Construction is busy down in the Wynyard Quarter on ASB Bank's new HQ.

Instead of buying buildings, Kiwi is now putting them up and scored a trump when it got the bank, even though the trust has a history of taking a hammering on new developments. If you've got a long memory, you might remember the awful Vero debacle and Kiwi, but that's history.

On its new development, Kiwi said: "The building is starting to take shape with foundations, ground level and first level now largely complete. The development site is very prominent thanks to the trust's distinctive orange hoardings that have been erected on the northern boundary, fronting Jellicoe St."

The radical block is due to be finished by 2013 and a delight for the orderbook of (Mark) Binns the Builder.

Kiwi Income shares closed up 1.5c yesterday at $1.07.5.

QUAKE HUB

More than 2000 people have used Westpac's business hub at Addington, set up for Christchurch business earthquake victims. Accountants, lawyers, even fitness instructors have used the 2600sq m venue with offices, two boardrooms and a corporate lounge, the bank says.

- Additional reporting: AAP

- NZ Herald

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