Little hope for takeover bid

Vector's takeover attempt of gas pipeline company NGC closes today with little prospect of the Auckland energy network company winning total control of its target.

NGC's directors recommended shareholders accept the $2.91 deal, saying it was fair value, but the share price has stayed stubbornly above $3, closing yesterday up 3c at $3.10.

While some advertisements warning of the deadline expiry have run in newspapers, Vector has not been aggressively pushing the merits of its offer. Nor has it said how many shareholders have taken up its below-market offer.

Vector already has 66 per cent of the company and has been trying to convince investors that it would be quite happy to sit at that level of ownership.

It needs to buy 90 per cent of NGC's shares to compulsorily acquire the rest from hold-out shareholders, before fully merging, then delisting the company.

Any NGC shareholder accepting the Vector offer would have to be keen on losing money, since they have been able to sell their shares on the market for more than $2.91. The NGC share price has not been as low as $2.91 since September last year.

Since Vector agreed to buy Australian Gas Light's (AGL) 66 per cent stake in NGC last October, the share price has been well above $3, recently hovering between $3.05 and $3.10 each.

One reason many are not accepting the Vector offer is the prospect of a sweetener being offered in any subsequent takeover bid. Vector has already tried to offer NGC shareholders preference rights in a $500 million initial public offering (IPO) of shares later this year, to fund its bid.

The question will be how much more value investors will put on a fully-merged Vector/NGC as opposed to a Vector with a 66 per cent-owned subsidiary.

NGC shareholders can now sit back and wait, hoping for a better offer. This could be preference rights in the IPO, or a scrip offer with payment in Vector shares, once it lists on the stock exchange later this year.

A Vector spokeswoman said yesterday the company was not planning to make any announcement until Monday. The company has not said how many, if any, acceptances for its offer have been received.

Vector's takeover bid has not been all smooth sailing, with two run-ins with the Takeovers Panel so far. It was told it was not allowed to offer NGC shareholders preference rights in the IPO because it was not offering the same to AGL.

Vector's IPO is widely seen as a hot investment this year, with supply of new shares expected to be tight. A little under 25 per cent of the company is being floated by its owners, the Auckland Energy Consumer Trust. The trust owns Vector on behalf of power users in Auckland City, Manukau City and Papakura.

Three of the five trustees opposed the partial privatisation, but thanks to a court ruling banning trustee John Collinge from voting, chairman Warren Kyd used a casting vote to get the deal approved.

The trust pays out dividends from Vector's profits each year.

Company chairman Michael Stiassny said that buying NGC would be "exceedingly beneficial" to Vector's beneficiaries. Dividends - the most recent was $170 a household - would rise and the company would be worth much more. Some projections estimate dividends may nearly double to $300 if Vector gains full control of NGC.