Vector's NGC bid 'too cheap'

Auckland powerlines group Vector's $1.3 billion takeover bid for NGC has been dismissed as too cheap by market experts.

Goldman Sachs JBWere analyst Peter Sigley said the offer of $2.91 a share was not compelling but that an offer of $3.06 to $3.32 would gain traction.

Fund managers have also labelled the offer as too low.

Their likely rejection is in stark opposition to advice given to NGC's independent directors by independent valuer Grant Samuel.

It said last week NGC was worth $2.50 to $2.76 a share.

Vector agreed to buy Australian Gas Light's (AGL) 66 per cent stake in NGC in October. This was the trigger for a full takeover bid and the first step towards a flotation of Vector.

NGC shares closed the day steady at $2.97.

Fund managers and Sigley say the Vector offer does not reflect the estimated $159 million to $177 million costs savings and benefits Vector will realise from the merger. They want a greater share of these.

They questioned the independent directors' recommendation of the bid to shareholders.

"I think the offer of $2.91 is absolutely ridiculous," one fund manager said.

Investors also believe Vector's since-withdrawn offer of preferential rights to its shares in its forthcoming flotation indicates it is willing to pay more.

Those preferential rights were excluded from the offer last month after the Takeovers Panel ruled they breached takeover rules.

They added Vector had done "exceptionally well" to gain AGL's shareholding.

NGC reported sales of $455.7 million for the year ended June 30, 2004, and net profit after tax of $84.5 million.

NGC forecast sales in 2005 of $468.3 million and profit of $81.5 million.

The independent NGC directors say the $2.91 offer includes a significant share of the merger benefits.