Port mega-merger 'must benefit NZ'

Ports of Auckland (L) and Tauranga.

Ports of Auckland and Port of Tauranga will have to prove that joining forces is in the country's best interest if a mega-merger is to proceed, the Tauranga port's chairman says.

John Parker conceded yesterday the chances of the two ports satisfying the Commerce Act, local Government and central Government were slim unless they could show the plan would benefit New Zealand and still be competitive.

But he said he had had a "degree of sympathy" from the Government over the company's plans.

The country needed fewer ports because shipping lines were consolidating, ships were getting bigger and did not need to make so many calls.

"We can make huge improvements in New Zealand's supply chain by doing this, by taking traffic off the road, using coastal shipping (that would feed the hub port) and reducing CO2 emissions."

Analysts said the merger, which would give the combined port company operation a dominant slice share of the cargo shipping market, might need a special act of parliament to avoid being derailed by the Commerce Commission.

NZ First Capital Analyst Robert Bode said: "For this (super port) to occur, you would need to put an appropriate regulatory framework in place, and specific legislation around the sea-ports."

The merger plans were announced just days before international shipping giant Maersk was due to say which of the ports was to win its exclusive business.

Parker denied that the merger was driven by concerns about the Maersk decision, saying the two ports had been discussing co-operating for several years but had only started working on the details of the merger in the past few weeks.

Tauranga had been widely tipped to win all or most of Maersk's North Island business to the detriment of Auckland.

The merger will create a port that will dominate the sector and act as a regional "super hub", drawing feeder services from Australian eastern seaboard ports.

Parker said the details of the two ports' operations had not been worked out but the "obvious vehicle" would be NZX-listed Tauranga.

That would bring it close to being in the top-10 listed companies and the new entity would be re-branded along the lines of "Port of New Zealand".

Tauranga's shares jumped nearly 20 per cent yesterday to close at $6.02 on the news.

Parker said the "super hub" would also ensure the two ports stayed in local hands.

Earlier this year, the country got a taste of global consolidation in the sector when Hong Kong's Hutchison Port Holdings made a failed bid to take a 50 per cent stake in Lyttelton Port.

Parker said if the super port did not go ahead there was a real danger of larger vessels only calling into Australia and missing out New Zealand ports.

Auckland chief executive Geoff Vazey said the operations of the two ports would not change immediately and the focus would be on investing capital between the two facilities.

Merging the ports would give the country a world-class port and contribute to the development of a top-quality supply chain for getting exports and imports to and from world markets.

Bode said traders would initially be a "bit fearful" the merged entity could lead to inefficiencies and higher pricing. This was because the major shipping lines had significant bargaining power.

Industry observers said Otago and Lyttelton might now consider a merger as well.

Macquarie Equities investment director Arthur Lim said both ports would be winners from this merger because it would stop Maersk playing the two off against each other.

Maersk New Zealand managing director Tony Gibson said whether the proposal assisted or threatened its business remained to be seen.


IN HARBOUR

Ports of Auckland

* Established in early 1840s.

* Handles 50 per cent of the North Island container trade and 38 per cent of all container trade.

* Claims to operate the largest inland port network and its most sophisticated rail-exchange facility.

* Net profit after tax in 2005 was $21.7 million, up slightly from 2004.

* No longer listed on the sharemarket, it is 100 per cent owned by Auckland Regional Holdings.

Port of Tauranga

* Established in 1860s.

* Has a total of 15 vessel berths.

* Net profit for the year to June 30 was $31 million, a 7.8 per cent decline compared with previous year.