NZ stocks: Contact merger powers up sharemarket

The sharemarket surged ahead today, driven by a positive response to Contact Energy's proposal to merge with its Australian majority owner, Origin Energy.

The benchmark NZSX-50 gross index gained 36.7 points to 3369.96, while the NZSX all capital index rose 7.7 points to 1001.52.

The stock exchange's number two stock Contact Energy today announced plans to merge with Origin, to form Australasia's largest integrated energy group.

If successful, the merger would take place under a dual-listed company (DLC) structure, under which both companies would maintain separate stock exchange listings.

Contact shareholders would get a fully imputed special dividend of 5c per share in cash and 7.3 shares per existing 100 shares just prior to the merger and a post-merger final dividend of 15c per share for the 2005/2006 financial year.

Capping off a busy day, Contact also announced the resignation of its chief executive David Hunt, and a 57 percent rise in half year profits today.

The flurry of news pushed up Contact by over 10 percent during the day to as high as 720. But by 5pm the stock had settled back to end the day up 8.4 percent, or 55c, at 707.

Hamilton, Hindin, Greene partner Grant Williamson said shareholders obviously thought the merger would create a major force in energy markets on both sides of the Tasman.

Takeover target Calan Healthcare rose 2c to 129, after independent directors today advised shareholders not to sell into a cash-and-scrip offer of $1.25 a unit by ING Property Trust, describing the offer as "unfair".

The recommendation was based on an independent appraisal report by valuers Ferrier Hodgson concluding the ING offer undervalued Calan by between 20c and 34c a unit.

Carpetmaker Feltex slipped 2c to 48c after the company announced a net loss of $11.83 million for the six months to December 31, compared with a $12.97m profit for the same period a year earlier -- a difference of 191 percent.

The result was hit by one-off restructuring costs of $15m.

Mr Williamson said investors were likely to be disappointed with both the result, and the fact that merger talks with Australian firm Godfrey Hirst seemed to be over.

But he said Godfrey Hirst could decide to take a more hostile approach to boosting its Feltex holdings, and the market should not rule out further corporate activity.

Rival Cavalier, which last week reported a 38 percent fall in half year profit, rose 5c to 285.

Top stock Telecom today continued its rise from a two-year low on Thursday, up 7c at 553.

Fletcher Building, which last week reported a 10 percent rise in net profit, rose 10c to 778 today. Mr Williamson said investors were increasingly seeing Fletcher Building as a defensive stock, a view which was reinforced by last week's result.

Total market turnover today was worth $132 million, with 70 rises and 50 falls among the 154 stocks traded.

- NZPA