NZX offer for Aussie exchange ruled fair

Photo / Richard Robinson

PricewaterhouseCoopers says NZX's offer to take control of second-tier Australian equity market operator NSX - at a 38 per cent discount to its current price - is "fair and reasonable" given the company's record of incurring losses and the prospect of more to come.

NZX is proposing to buy sufficient new shares in Melbourne-based NSX at A15c each to give it 50.1 per cent of the company for a total consideration of A$11.78 million. NSX's ASX listed shares closed at A24.5c yesterday.

If its offer - which has the backing of NSX's current board - succeeds, NZX has a five-part strategy to "materially grow" NSX and its value.

It says it will cut costs, develop a transtasman small cap market, provide a cost-effective Australian listing platform for large cap NZX-listed firms, develop a listed debt market and also improve NSX's regulatory regime by introducing its own "sophisticated surveillance and supervisory capabilities".

NSX yesterday released a notice of meeting notifying shareholders of a vote on NZX's proposal and a necessary amendment to the company's constitution to remove a 15 per cent shareholding cap, to be held on June 19.

Attached was PWC's "Independent Expert's Report" which found NZX's offer "in the absence of a more favourable proposal, is fair and reasonable to NSX's non-associated shareholders".

PWC assessed NSX's value on a "controlling basis" to be between A7c and A8.3c a share using a "net assets valuation methodology applicable in cases where a company has a history of loss making, is likely to continue making losses in the immediate future but remains a going concern".

PWC said existing shareholders, which include Guinness Peat Group and Australian interest rate swaps market operator Brian Price, had the opportunity to share in any improvement in operating performance and enhanced growth prospects as a result of the proposal.

However Price yesterday said he was not convinced PWC was well qualified to appraise NSX's business or prospects.

Furthermore he believed NSX's current board should be "extraordinarily embarrassed" by presenting PWC's report which was negative about the company's recent performance in recent years "when they've been the stewards of the company".

Price is part of what he says is a majority of shareholders in the company who are seeking to remove the current board and replace them with their own representatives.

The shareholders are involved in court action to decide which of two extraordinary general meetings, one called by Price's group scheduled for next Thursday, and the other by the current directors scheduled for the day before, is the valid one at which the vote to oust the current board will be held.

Price told the Business Herald that should his group succeed in their bid to oust the present board, the new directors would take a less hasty approach to NZX's offer.