Christchurch City left to go it alone on port

Global ports giant Hutchison has stepped aside from its Lyttelton Port joint venture, leaving Christchurch City Holdings to pursue its takeover attempt alone.

The deal was effectively scuttled by Dunedin's Port Otago, which bought a 10.1 per cent blocking stake in Lyttelton Port this month. This meant Christchurch City Holdings, the investment arm of the city council, could not get to the crucial 90 per cent ownership level so it could acquire all the shares in the port.

Hutchison withdrew from its plan to buy half the port once it was taken over fully by Christchurch, but is still interested and could get involved again if Christchurch wins full control.

Christchurch is continuing with the takeover bid and increased its offer by 10c a share to $2.20 yesterday.

Chief executive Bob Lineham said there was every intention to revive the partnership once the takeover was sorted out. He was not concerned Hutchison might now be turning its attention to other potential investments in New Zealand.

The $2.20 price was fair and had been independently verified by advisers PriceWaterhouse and the port's directors - who now endorsed the price - had not been a pushover.

"We are not losing sight of our focus which is to bring in a good overseas partner to strengthen our port. We are not allowing Otago's maverick blocking mechanism to let us waver from our main objective," Lineham said.

"We are concerned that Port Otago doesn't have the best interests of Lyttelton at heart. We're not losing sight of our objective."

Port Otago chairman John Gilks said he welcomed Hutchison's withdrawal and wanted to pursue a partnership with Lyttelton.

"Port Otago is confident that an alternative proposal involving Port Otago and [Lyttelton Port] can be developed and would prove to be in the best interests of both companies."

Goldman Sachs JB Were analyst Marcus Curley said Hutchison had said "this is getting a little difficult, let's take our influence out of it - you guys try and sort out the takeover, then we'll come back and do the deal".

Christchurch could be seen as "being a bit cheeky" - if it had wanted to close the deal, it could have increased its offer price by more than just 10c a share.

"It's still fairly debatable how much success they'll see with the extra 10c."

Shares had "flooded in" to Port Otago when it offered $2.35.

Curley said lifting its offer by just 10c to $2.20 might only serve to drag the process out further.

Christchurch had planned to de-list Lyttelton Port and then sell a little under half to Hutchison, the world's largest port operator, with which it would run the port.

Yesterday's announcement to the NZX scuttled any suggestion of any three-way partnership.

"CCHL is firmly of the view that there is little prospect of any combination of LPC and POL [or their businesses] in the near to medium term."


Sector shake-up on hold

Hutchison Port Holdings' deep pockets and global operations triggered hopes of a shake-up of the port sector.

Goldman Sachs JBWere analyst Marcus Curley did not see yesterday's move as a sign that Hutchison was losing its appetite to invest in ports here - Lyttelton was an "initial interest".

Hutchison was supposed to help wring better returns from the historically underperforming port in what was effectively a joint venture.

Christchurch City Holdings would retain control of the physical assets while Hutchison looked after port operations; a model common overseas.

Other ports kept a wary eye on the deal as it had the potential to trigger a round of consolidation in a sector most commentators agreed was overdue.

Investment opportunities for the world's seaports do not come up often. ABN Amro analyst James Miller said this month that the ability to wring efficiencies from port operations could apply not only to Lyttelton's business.

"Having got in there, Lyttelton could easily be a vehicle for the new partners to trigger consolidation in the wider New Zealand market.

"I don't see them being just interested in the South Island and I don't see it stopping New Zealand wide either," he said.