Merger or takeover - what's in a word?

Terry Peabody

Merger, takeover - it's all semantics according to Transpacific Industries executive chairman Terry Peabody.

Peabody was in Auckland yesterday to meet institutional investors and smooth reaction that has labelled the proposed merger with Waste Management a takeover in disguise.

Any time two companies got together one had to pay for the other, Peabody said.

"As far as I'm concerned it's an amalgamation. We are merging the people, we are going to merge the facilities," he said. "It truly isn't going to be handled like a takeover. That's not the intent of it."

If Waste Management gets 75 per cent approval from its shareholders the merger is expected to be completed by June - soon after which the new entity would list on the NZX.

Had the deal been constructed under the Takeovers Code then support from 90 per cent of shareholders would have been needed.

Waste Management's Kiwi shareholders had a "magnificent opportunity" to cash in and reinvest in the proposed listing, Peabody said. "So you're not losing a company, you're gaining a bigger company and that's the message I'm trying to get through."

The application to list had already been filed, he added.

"People can take this very handsome profit and turnaround and buy Transpacific shares on the New Zealand Exchange."

Transpacific is offering Waste Management shareholders $8.642 in cash a share, which is the agreed price of $8.80 minus a recent dividend of 15.8c a share.

The deal represented a 38 per cent premium over the three month volume-weighted average price of the shares up to March 23, Peabody said.

Market practice was generally to make an offer of less than a 20 per cent premium, he added.

"This is by far the highest multiple we've ever paid for a company."

The offer was set high to ensure the merger progressed quickly with the potential acquisition of Cleanaway - Australia's largest waste disposal business - waiting in the wings.

The NZX listing will take place following the resolution of the Cleanaway transaction by the end of June, when the company will know how much equity to raise.

The merger talks with Waste Management began only a month ago and had been intensive but friendly, Peabody said. Both companies agreed that merging was advantageous.

"So then it really came down to [the fact] they kept wanting us to pay a much higher price than we wished to."

The combined business would employ about 4000 people and run 2500 trucks with the ability to compete in all aspects of the waste market.

The merger is expected to generate A$30 million ($35.4 million) in synergy benefits for Transpacific with earnings per share forecast to increase by 20 per cent in 2007.

The addition of Cleanaway would enable an international expansion beyond the capabilities of the individual companies, Peabody said.

"Once we've done that then the opportunity throughout Asia will be extraordinary."