NZ stocks: Suitors tipped to sweeten market

By ELLEN READ markets writer

Takeover activity will dominate the sharemarket this week with suitors courting several New Zealand companies.

Brokers said the weak New Zealand dollar makes companies here attractive, cheap targets.

Two of the targets - Frucor Beverages and Contact Energy - hit highs above the takeover bid prices last week and brokers said further gains were possible.

Frucor's share price ended the week at $2.46, well above the $2.35-a-share bid price of Groupe Danone, suggesting the French giant has undervalued the company or that another bidder is in the wings.

Danone, the world's biggest bottled-water company, is making a cash offer for all of Frucor, valuing it at $294 million.

Frucor will hold its annual meeting on Thursday.

Contact shares closed at $4.05 on Friday, also higher than the price offered by its would-be purchaser.

Contact's 51 per cent owner, California-based Edison Mission, is offering $3.85 a share cash for 100 per cent ownership. Brokers said market speculation of higher valuations of Contact plus a decision by Genesis Energy to lift power prices and its talk about the high cost of building new power plants saw investors drive Contact's share price higher.

Ownership of New Zealand media group Wilson & Horton - publisher of the Herald - is also under review. Owner Independent News and Media is considering the sale of W&H to sister company APN News & Media in Australia.

Also unresolved is the bid by Eric Watson's Cullen Investments to acquire the rest of Pacific Retail Group. After bidding $1.76 a share for the 32 per cent of PRG it does not already own, Cullen has watched PRG's share price move above its offer price.

An announcement is likely from Waste Management after two large trades, totalling 8.3 million shares or 9 per cent of the company, went through pre-market on Friday. They changed hands at $2.50 each.

Waste Management's share register is dominated by institutions and one of them is likely to be the seller, brokers said.

Shareholders at casino operator Sky City's annual meeting tomorrow will want answers about its $19 million investment in troubled Force Corporation. Sky City paid 25c a share in February for 50.2 per cent and the shares have now dropped to less than 10c.

On Friday, market darling Fisher & Paykel will release its first-half result. The company's share price has skyrocketed this year amid plans to separate its healthcare and appliance divisions.

Overall, the New Zealand sharemarket rose last week as global equities markets returned to levels not seen since last month's terrorist attacks.

The NZSE-40 closed at 1935 on Friday, but despite having gained 2.4 per cent during the week as corporate activity boosted prices and turnover, it is still 1.5 per cent lower than before the September United States attacks.

Brokers said though a strong global recovery was still some time away, people were feeling more confident about investing.

Jason Wong of Credit Suisse First Boston said that while there were clear signs the attacks had had an economic impact on New Zealand which was likely to continue, the country was better placed than many others to pull through a period of economic weakness.

A survey of listed companies showed those directly involved in the tourism industry appeared to have been significantly affected while the majority of companies did not appear to have seen any material change in business.

"This seems a little odd, as the economic indicators released to date do show a material impact on activity in September," Mr Wong said.

But this could be because of a couple of factors, he said. First, company managements might well be focusing on year-on-year comparisons, which should still be healthy given strong growth this year.

Second, it might not yet be obvious that individual businesses had been materially affected.