Powerco deal gives the cash

By CHRIS DANIELS and NZPA

Powerco's majority owners have won a face-saving deal for payment in cash and bonds by Australia's Prime Infrastructure for their stake in the lines company.

But the agreement was reached only after the shareholders shifted their combined 53.6 per cent to Australia in an attempt to ensure they received a cash payment for their shares.

The New Plymouth District Council and the Taranaki Electricity and Powerco Wanganui trusts had agreed to sell their 53 per cent share in Powerco to Prime for $364 million.

The local bodies were to receive 62.5 per cent of the deal in cash and the rest in bonds, which some say are high risk.

But the deal was thrown into disarray last week after minority shareholders opted to sell in Australia for cash, rather than accepting a shares-bonds package offered by Prime.

It was thought this would reduce Prime's pool of cash to pay New Zealand investors, including the local bodies.

The minority shareholders were taking advantage of a Takeovers Panel ruling that allowed overseas Powerco shareholders to receive cash instead of bonds.

It now emerges the New Plymouth council and the two trusts this month joined the rush overseas, registering their shares with a company named Commsec ECM in the heart of Sydney's financial district.

But yesterday, just as the new face-saving deal was revealed, the address on the Powerco share registry was changed back to a New Zealand, suggesting the shareholders had changed their minds.

The new deal has been organised by the firm that brokered the sale of the council's shares, PricewaterhouseCoopers.

The firm has found an unnamed broker willing to buy any extra bonds at face value, once a takeover deal is done.

The bonds are unsecured, subordinated and have no fixed redemption or conversion date. They pay an interest rate of 8.5 per cent.

Prime, the council and trusts and PricewaterhouseCoopers say the value of the bonds has been misrepresented and that they are good secure investments, undeserving of recent bad press.

New Plymouth Mayor Peter Tennent, an enthusiastic supporter of the Powerco sale, yesterday said the council's advisers had been "vindicated" by the latest deal and he thanked PricewaterhouseCoopers and Prime for "getting us to the end of what has been a very challenging few weeks".

Community opposition to the Powerco sale has been growing as it appeared the council would not be getting as good a deal as it promised.

Local body elections have provided an added political element to the sales controversy.

Some opponents, including the New Plymouth Chamber of Commerce, have opposed the sale, describing Powerco as the "goose that laid the golden eggs".

Powerco shares closed yesterday down 2c at $2.08.

Foreign hedge funds were being touted as the big buyers over past weeks, taking advantage of the gap between market prices and the $2.15 cash paid by Prime.

The formal takeover notice is being posted to all Powerco shareholders this week, followed by advice from independent adviser Grant Samuel and Associates.

Powerco's directors will also advise shareholders on whether to accept the takeover.

Shareholders have until early next month to accept or reject the Prime offer.

The Powerco saga

April: The New Plymouth District Council decides to sell its Powerco shares. It is later joined by two community trusts, taking the stake on sale up to 53.6 per cent.

August : Australia's Prime Infrastructure's offer of $2.15 a share, paid in a mix of cash and bonds, is accepted by the trusts.

September: The Takeovers Panel grants a waiver to Prime, allowing it to pay cash-only to overseas shareholders. Move opens floodgates and many Powerco shares are sold overseas.

Last week: The New Plymouth District Council transfers ownership of its Powerco shares to the Sydney address of Commsec, a sharetrading division of Commonwealth Bank.

Yesterday: Council and trusts shift shares back to Taranaki. PricewaterhouseCoopers agrees to sell any extra Prime bonds the council and trusts may be left with after the takeover.