Mainfreight bid rests on valuation

By PAM GRAHAM

The success of Mainfreight's bid to bulk up by taking over rival Owens Group will swing on the independent valuation and choices made by Owens family members and AMP Henderson.

AMP, the only major institutional shareholder, with about 10 per cent of the company, said yesterday that the $1.03-a-share offer was a bit light.

"But it's hard to make a call because the level of disclosure from Owens has not been very high," said spokesman Nat Vallabh.

He values Owens "north of $1.20", but added, "I can't hang my hat and say I believe the $1.20."

AMP will wait for the independent report to clarify price.

The report writer has yet to be named and Mainfreight is using Grant Samuel, the usual provider of such reports, as an adviser.

Owens, which acknowledged the bid yesterday, said independent advice would be provided and the company would act in the interests of shareholders.

Managing director David Ritchie said Owens Group had not sought Mainfreight's offer and there had been no discussions between the two beforehand.

Owens hinted about its own expansion plans after selling its Hirepool business to focus on transport. Mainfreight has questioned Owens' ability to pursue that strategy, but Vallabh said he had high regard for Ritchie.

Owens family members are believed to own between 30 and 35 per cent of the company, much of which is held through trusts.

Mainfreight has 15.5 per cent after picking up some shares from family members. Buying out the rest of Owens will cost Mainfreight $49.2 million. Its offer values Owens around $57 million.

Mainfreight got a waiver from the stock exchange from a rule requiring shareholder approval for major transactions.

Both companies have revenue at just over $400 million a year, but Mainfreight makes more profit. With Australia's Toll Holdings expanding in New Zealand after its hostile bid for Tranz Rail, Mainfreight is playing a nationalist card.

"With a lot of hard work we may well be able to create a strong New Zealand-owned transport company here," managing director Don Braid said. "And I think it's important for the shareholders of Owens to think about this company remaining in the hands of Kiwis."

The bid, if successful, will remove another company from the stock market because it is conditional on 90 per cent acceptance, triggering compulsory acquisition of remaining shares and delisting.

"We think $1.03 is a very fair price for this business and the problems it is going to encounter without the Hirepool assistance," Braid said.

Owens shares closed yesterday at $1.04.

One analyst said transport markets everywhere were being carved up by a few big companies more able to invest in technology and play across the whole supply chain, with the rest held by small companies.

Said Braid: "There is a bit of rationalisation going on and the better performers are starting to rise to the top of the jar.

"This gives us a stronger home base."

Analysts said Mainfreight would get synergies from merging with Owens and probably sell some assets, such as container parks and shipping agencies.