Councils chew on offer for United

By CHRIS DANIELS energy writer

Three of Auckland's local councils have met privately to consider the sale of their $160 million stake in lines company UnitedNetworks.

At three separate meetings yesterday, the Waitakere, North Shore and Rodney councils discussed whether to accept a takeover offer from neighbouring lines company Vector for their 10.7 per cent stake.

Acceptance of the offer and sale of the 16.2 million shares would bring the councils a windfall payout of $160.4 million.

They have decided to share out any gains according to population. North Shore City would receive the lion's share - $71 million. Waitakere City takes $59 million and Rodney District $29 million.

A little under $9 million of this payout will, however, be deducted to pay for powerline undergrounding - previously paid for by the charitable trust that owned the shares on the councils' behalf.

The councils are working towards a unanimous decision on whether to accept the offer.

UnitedNetworks' independent directors and valuers Grant Samuel have endorsed the Vector bid, which offers $9.90 per share.

Vector's takeover of UnitedNetworks was prompted by the decision of its 70.2 per cent owner, US energy giant Aquila, to leave its New Zealand investment.

Missouri firm Aquila is due to announce today that it has approval from its banks to accept the Vector offer, after which the sale of its shares will become unconditional.

UnitedNetworks' smaller shareholders have been urged not to waste any time accepting the offer, because although Vector says it wants to buy the company outright, its takeover is conditional on reaching only 70.2 per cent ownership - exactly the Aquila stake.

This means that once the offer closes, Vector may simply use the "creep" provisions of the Takeovers Code, which allow it to buy up to 5 per cent of the company on the open market once a further 12 months have passed.

Vector has already been buying up UnitedNetworks shares on the stock exchange, last week announcing it had already bought 4.79 per cent of the company.

If the councils agree to sell their stake, then its 10.7 per cent, plus the Aquila stake and those shares already bought by Vector, add up to just over 85 per cent.

Once Vector reaches 90 per cent ownership, it must compulsorily acquire all remaining shares.

This would leave small shareholders vulnerable to missing out on the $9.90 a share offer, which is due to close on October 23.

A Vector spokeswoman said yesterday that the company sent out takeover documents to all UnitedNetworks shareholders.

The company did not wish to say anything beyond that, nor would it give any indication of how many acceptances it had already received.