Asian giant wants half of Lyttelton Port

Asian port giant Hutchison Port Holdings is making its first foray into New Zealand, with a bid to buy a half stake of Lyttelton Port and delist it from the stock exchange.

But for the deal to take effect, Christchurch City Holdings, which already owns a 69 per cent stake in the port, must succeed in its $2.10-a-share takeover bid for the rest of the port, which it also announced yesterday.

The bid values Lyttelton at $214 million and represents a 20 per cent premium to the stock's price before the announcement.

Hutchison will pay about $107 million for a 49.9 per cent share of Lyttelton. A unit of Hutchison Whampoa controlled by Li Ka-shing, one of the world's richest men, Hutchison has interests in 41 ports in 20 countries.

One analyst said Hutchison's move might foreshadow its interest in other New Zealand ports.

"I question whether Hutchison would have their eye on other port companies, particularly those held by local authorities who might want to release some cash as well," said the analyst, who asked not to be named.

Christchurch City said that once the takeover was complete, it would receive net proceeds of $41 million.

Paddy Austin, chairwoman of the Christchurch City investment arm which holds the port, said the deal would ensure that the port had control of its future in a competitive industry.

"I think it would be most inadvisable for us to try to continue to go it alone," said Austin.

"The international situation for ports is becoming increasingly difficult - very, very competitive. And, increasingly, ports are very much at the mercy of shipping lines."

Chief executive Bob Lineham said the deal gave Lyttelton more bargaining power when it came to negotiations with shipping companies. By playing ports off one another, shipping companies could drive down prices to unsustainable levels.

"We have seen in New Zealand already how the shipping lines have played various ports off one another, such as Auckland and Tauranga, Wellington and Napier."

Lineham stopped short of saying the deal could make Lyttelton a bigger rival to the large North Island ports of Auckland or Tauranga.

"We would expect that other ports will be looking to Lyttelton to see whether they can talk to partners we have brought on board," he said.

On completion of the deal, Christchurch City will retain control of the port and will appoint four of the seven directors.

Lineham said the initial idea for the partnership came from the port's planning division. Also, two of Hutchison's executive directors - Richard Pearson and Mark Jack - are New Zealanders.

Lyttelton Port shares rose 36c yesterday to close at $2.11.

THE STRATEGY

* Christchurch City Holdings owns 69 per cent of Lyttelton Port.

* It will pay $2.10 a share for the remainder of the shares.

* Once the takeover is complete, Hong Kong's Hutchison Port Holdings will buy a 49.9 per cent stake of the port.

* Christchurch City will retain control of the port.