Council agreed to ratio change

By CHRIS DANIELS


A secret letter in the Powerco takeover deal shows the New Plymouth District Council explicitly agreed to the terms it now disputes.

A "side letter" to an agreement to sell to Prime Infrastructure, of Australia, indicated the ratio of cash and bonds in the payment could be altered.

That letter was not disclosed when the August 6 lock-in agreement for the deal was sent to the stock exchange.

But details of the letter - and its reference to the possibility of scaling - have leaked.

The agreement seems to sink any chance of the council getting the amount of cash it was after.

A flood of Powerco shares again changed hands yesterday - 32.9 million, worth nearly $68 million.

Prime will next week post a $2.15 per share takeover offer to shareholders, with payment in cash and bonds. The shares yesterday closed trading at $2.10.

The New Plymouth District Council, which this week said its cash payment would not be subject to the scaling like other New Zealand shareholders, has gone quiet, with chief executive Rodger Kerr-Newell no longer commenting.

The size of the cash component of the $364 million cash-and-bonds payment to the council and two regional trusts is threatened by Powerco shares flooding across the Tasman - where holders are to be paid in cash only.

A Takeovers Panel waiver allowing a cash-only offer to foreign shareholders led to the movement.

The more shareholders are paid in cash, the less is in the pool for the council and two smaller community trusts, which last month agreed to sell their 53.6 per cent stake to Prime.

One New Zealand fund manager said much of yesterday's trading in Powerco shares was overseas hedge funds bailing out after suggestions the Prime takeover deal might collapse entirely.

Senior executive for the Takeovers Panel Kerry Morrell said the fact that the offer had not been posted meant it had yet to be formally made.

Prime had given notice only that it was about to make the offer, which meant the terms could change.

Once a takeover offer is formal, a bidder can do little to change it.

Under the code, a bidder can only increase the price being offered or extend the deadline for shareholders to accept.

Despite the huge change in the make-up of Powerco's shareholding in the past week, a spokeswoman for the company said the mailout - due to begin on Monday - was proceeding as planned.