NZ stocks: PGG-Wrightson merger adds fizz

The sharemarket's benchmark index continued to forge into uncharted territory in morning trade today with news of a merger between the country's two biggest rural services companies providing early fizz.

By 11.40am the benchmark NZSX-50 gross index had added 11.11 points or 0.34 per cent to yesterday's fresh closing high to reach 3260.45 while the NZSX all capital index was 5.85 points or 0.57 per cent higher at 1026.33.

The early action was with rural service rivals Wrightson and Pyne Gould Guinness (PGG) who announced their intention to merge.

The plan which will be put to shareholders in September, will see Wrightson merged into PGG to become PGG Wrightson, which will remain listed on the Stock Exchange as a top 20 company with an initial turnover of $1.1 billion and total assets of around $900 million.

The move follows a period of consolidation in the rural services industry.

Shareholders welcomed the news with Wrightson trading up 25c, or 13.5 per cent, at 210 by late morning, while PGG was 25c, or 13 per cent, higher at 220. PGG's majority shareholder, Pyne Gould Corp, stacked on 25c, or 5 per cent, to 505.

UBS head of research Richard Leggat said the deal would likely raise competition issues.

"But if they can get it through the Commerce Commission I would think that it would be very positive for the combined entity.

"The benefits of size in the sector are going to be potentially quite significant and you'd also have to say that in some areas they will become the dominant provider of some services in different areas and that's often a good position to be in."

Elsewhere on the market, top listing Telecom was up 5c to 608.

Amro Craigs Equities broker Matt Willis said Telecom was "trading like a bond almost at the moment," with prospects of a capital return at the end of the full year driving its price.

Number two stock Contact Energy was up 3c to 780.

Export focused Fisher & Paykel Healthcare was this morning continuing to benefit from what Mr Willis said was a rerating of the sector which had already benefited overseas rivals Resmed and Respironics.

Its shares were 15c higher at 355c. Mr Willis said the company was was also benefiting from what economists were saying looked like a decisive move lower by the kiwi dollar. "Their bottom line is seriously sensitive to the kiwi-US cross rate."

Guinness Peat Group shares were down a cent to 197. It was reported this morning that the company had sold its A$13 million ($14.45 million) stake in Tasmanian Perpetual Trustees to Trust Company of Australia.

Textiles and apparel company Pod was down 14c to 105 after saying a softer mid year sales period had led it to cut its full year profit forecast.

The company, 25 per cent owned by Christchurch businessman George Gould, said its June year net surplus after tax but before goodwill amortisation would be between $3.2 million and $3.6 million -- down from the $4 million it predicted in February.

Other early moves included: Carter Holt Harvey down 4c to 214, Fletcher Building up 5c to 694, Mainfreight down 5c to 286, Steel & Tube Holdings down 5c to 470, and Waste Management up 5c to 660.

There were 39 rises and 27 falls among the 119 stocks traded and total turnover was worth $37.37 million.

- NZPA