Lyttelton rejects takeover proposal

Christchurch City and Hutchison Port Holdings were last night considering their options after their takeover bid for Lyttelton Port was rejected by the company's board.

The board unanimously rejected Christchurch City's $2.10 a share takeover offer yesterday after an independent valuation found the company was worth as much as 35c a share more.
Lyttelton Port's Target Company Statement contained a Crighton Anderson valuation which labelled Christchurch City's offer "not fair". It estimated the company's stand-alone value at $2.05 to $2.35 a share. Crighton Anderson also found the port's shares should carry an extra 10c a share premium value which it considered "an appropriate proportion of the additional value" available to Christchurch City and Hong Kong's Hutchison Port, the prospective partner in a restructured port operation.

That took Crichton Anderson's valuation of Lyttelton Port to a $2.15 to $2.45 range.

The market reacted positively to the news - bidding Lyttelton Port shares up 4c to a close of $2.19.

Several brokers have argued Christchurch City's offer is too low. Goldman Sachs JBWere has said it believed fair value for the shares is between $2.26 and $2.57 a share.

Christchurch City's plan is to secure 90 per cent of the port company, de-list it and then split the company into an asset-owning entity over which it would retain control, and an operating company which Hutchison Ports would control.

Christchurch City believes the involvement of Hutchison Ports, the world's biggest port operator, will give Lyttelton Port better bargaining power with shipping lines, better operating efficiencies and other benefits.

Last night, Christchurch City chairwoman Paddy Austin said her company "was in discussions with Hutchison Port Holdings about the report and will not be in a position to comment about our response" until later today.

This is the second major setback involving the deal for Christchurch City and Hutchison. Just over a week ago, rival Port Otago purchased a 10.1 per cent stake at $2.35 a share. As well as blocking Christchurch City's bid for 90 per cent of the company, Port Otago's purchase also put upward pressure on price expectations for Lyttelton Port shares.

Lyttelton Port chairman Barney Sundstrum said although the board believed Hutchison's involvement would bring "significant benefits" to the port "the directors need to evaluate whether this offer delivers fair value to shareholders".

"Clearly, the advice from Crighton Anderson is that the $2.10 a share offer is not a fair price."

Sundstrum also said the Target Company Statement highlighted other issues Lyttelton Port shareholders should consider.

They included the uncertainty created by Port Otago's purchase, the potential of downward pressure on Lyttelton Port's dividend policy if Christchurch City's bid failed and the potential for a revised deal possibly involving Port Otago which could see Lyttelton Port shares rise further.

On the other hand, Sundstrum said Port Otago's purchase might prevent the deal going through even in a revised form and Lyttelton Port shares could fall as a result.

He said none of Lyttelton Port's directors or senior officers intended selling into the Christchurch City offer.

THE BID

* Lyttelton Port's board has unanimously rejected Christchurch City Holdings' takeover offer.

* Independent valuer Crighton Anderson says Christchurch City's $2.10 a share offer is "not fair" - $2.30 is more like it.

* Christchurch City wants to secure 100 per cent of the port, delist it and sell a 49 per cent stake to Hong Kong giant Hutchison Port Holdings.