Staged index entry will ease Vector's way

Plenty of new Vector shares should be there for whoever wants them come Monday morning, says the New Zealand Stock Exchange.

Vector shares will start trading on the exchange next week after its successful takeover of gas transmission and wholesaling company NGC and a $592 million initial public offering.

All remaining NGC shares are now being compulsorily acquired and the Wellington-based company will be delisted.

The shares are expected to be thinly spread across 45,000 investors, including former NGC shareholders, Vector capital bondholders and power users in Auckland City, Manukau City and most of Papakura.

Of the $592 million of shares being issued, $380 million are going to NGC shareholders, $140 million to capital bondholders and $72 million to Auckland Energy Consumer Trust beneficiaries.

If there are 45,000 beneficiary shareholders, each would get $1600 of new Vector shares.

James Lindsay, of Tyndall Investment Management, said he did not expect many problems with liquidity of Vector shares on Monday.

Big funds and institutional investors had been able to buy into Vector through buying NGC shares or Vector capital bonds.

Large numbers of NGC shares were still changing hands yesterday, after the close of the Vector takeover offer, because they would be compulsorily acquired - paid for in new Vector shares and cash.

 

NZX chief executive Mark Weldon said it had been decided to put Vector shares into the NZX50 index in two tranches, to ensure there were no problems for fund managers wanting to buy them.

"Because there was no real liquidity available to the public pool, it would have created artificial price pressure on the stock to put the whole of the stock in the index at one time," he said.

"You don't want the index to drive any type of trading patterns that are not in the best interests of true pricing for value, which is what a market should do."

Index managers and passive managers, who track the NZX50 index closely, have to buy up shares according to their presence in the index.

There should be no problems for fund managers wanting to buy the shares up to the level Vector will be represented in the index.

Weldon said he was not worried about liquidity levels.

"We think it will be a very sought-after stock for a lot of people's portfolios. We think it will attract a lot of analysts' attention, a lot of attention from offshore.

"We think it will be very liquid and are very confident that putting it in the tranche way that we are in the index will create absolutely no artificial pressure in liquidity."

Weldon said he had heard of a substantial appetite for the shares from AECT income beneficiaries.

"You like to see people take up those opportunities, and you like to see them have implicit faith in putting their money into capital assets. That's good and important."

Many new Vector shareholders would be first-time investors.

"We would hope they have a good experience."