Brierley clears path for Singapore offer

By GEOFF SENESCALL

Brierley Investments was positioning itself yesterday to increase its shareholding in Air New Zealand so it could deliver a 25 per cent holding to Singapore Airlines.

Under the deal, which was hanging in the balance last night, Brierley needs to buy a further 46 million of the unrestricted shares in Air New Zealand to meet its side of the bargain.

At present it holds around 96 million B shares, which equates to 17 per cent of the total shares on issue in the local carrier. In a telling move, Brierley extended to October 1 the formal notice to Air New Zealand shareholders, needed to raise its stake in the airline to 60 per cent from 47 per cent.

Brierley first issued the notice in June 1999 when it initially tried to woo Singapore Airlines into buying shares in the local carrier without success.

In the latest notice Brierley has also amended the price it intends paying for each share to a range between 250c and 300c. Previously the company had said it would pay between 240c and 340c for A shares and between 330c and 430c for B shares.

The lower price reflects the recent weakness in the Air New Zealand share price as the company looks to digest its $A580 million purchase of the remaining 50 per cent of Ansett Australia it agreed to buy last month. It also straddles the 280c price Brierley is understood to have agreed to sell shares to Singapore.

On speculation of a deal with Singapore, the Air New Zealand B shares closed at 249c after trading as high as 262c yesterday. The A shares closed at 202c.

To buy the extra shares Brierley needs it can either stand in the market or try to target local institutions owning B shares and attempt to swap them for Brierley A shares, which can be owned only by New Zealanders.

There was speculation that Brierley might have already sounded out institutions about the share swap option. But this could not be confirmed last night by the Business Herald.

Brokers were sceptical about Brierley's ability to source Air New Zealand B shares through a stand in the market without pushing the price through the roof. According to Jason Smith - an Australian-based aviation analyst for Salomon Smith Barney - the proposed deal made sense for both Air New Zealand and Ansett Australia as well as Singapore.

"It makes logical sense, it raises the barriers to entry for new airlines into the Australia marketplace and it does form what should be a stronger competitor, on a three-year view, to Qantas," he said.

"But I would still want to emphasise there is still a lot of work that needs to be done in the integration of Air New Zealand and Ansett, regardless of Singapore coming in. It is probably going to expedite the integration process but there is still a couple of years of solid work that needs to be done before the thing starts earning what it should be."

Mr Smith said it made sense that Air New Zealand had a large shareholder which knew how to run an airline and was committed to the industry as opposed to one which was an asset manager, such as Brierley.

"But realistically Singapore is not going to be sticking in extra capital and how can they under the A and B share structure?

"But Singapore does give them extra access to systems, operations, people and certainly there is some surplus capacity that is expected to come out of the Singapore fleet at the end of the year which the domestic and international businesses of Ansett would easily be able to use."