Prime charm offensive aiming to woo Powerco shareholders

By CHRIS DANIELS

CHRIS CHAPMAN, head of Australian investment fund Prime Infrastructure, is schmoozing his way through New Zealand, on a mission to convince Powerco shareholders to sell their stakes in the Taranaki lines company.

Prime's takeover offer will be sent to Powerco shareholders at the end of the month, and while Chapman is constrained from hyping the offer before then, he has spent the past week raising the profile of Prime - a company he says has lots of money and a good track record.

He says his trip through the nation has taught him a few things.

"The fascinating and helpful thing for me this week has been the diversity of feedback in the sense of the community that Powerco represents," he said. The "quality of its communication" had to be on the money.

"You've got to build the awareness of who is Prime Infrastructure and what is it we do."

Some shareholders would accept the offer immediately, while others may have been given their shares by a grandmother.

"This is not a pure, retail-focused, front-end financial offer, this is an offer that needs to appeal to people for different reasons, on different levels."

Chapman has been emphasising that Prime will leave Powerco to run as normal, with its headquarters in New Plymouth and no staff cuts.

Some Taranaki residents are unhappy at the decision of their local district council to sell its Powerco shares to Prime, saying it got a raw deal. The nature of the offer - with some cash and the rest in bonds, is also attracting questions from analysts.

The $2.15 offer is at a premium to the market price for Powerco shares, which are trading at around the $2.05 mark.

Business Herald commentator Brian Gaynor said the debt securities being offered as part-payment by Prime "make our existing junk bonds look like Prime securities".

The indicative 8.5 per cent interest rate being offered was "far too low for an extremely high-risk security".

The bonds are not rated by any credit agency, are unsecured and subordinate, and have no fixed redemption or conversion rate.

All shareholders will be offered the same deal, but can choose to be paid in cash, converting securities or a 62.5 per cent cash and 37.5 per cent securities mix.

If everyone asks for cash, there will be some scaling.

Chapman said Prime would not be increasing its offer for 12 months and that it would be comfortable sitting at a shareholding of less than the 90 per cent sought. Prime is due to list on the NZX before the end of this month.