Finance company scuttles float plan

Allan Hubbard

South Canterbury Finance, owned by media-shy businessman Allan Hubbard, has backed away from its $280 million sharemarket float, saying it prefers life out of the public eye.

It also said Reserve Bank warnings of a downturn in the economy, an overheated housing market and the vulnerability of finance companies to these developments had influenced its decision.

South Canterbury chief executive Lachie McLeod said the Reserve Bank warnings, made on the same day as South Canterbury disclosed its float plans, were not the "main driver". The bank said the property market was overheated, and pencilled in another rate rise next month - a move that will limit the growth of all finance companies.

"We are media-shy and we wish to remain that way," McLeod said "It is a different operation when you are looking after investors. My managers are fantastic and their focus would be lifted to governance issues."

McLeod said the path towards a float had flushed out a number of undisclosed "not previously available opportunities" to fund growth. These needed to be examined.

He declined to elaborate, but said South Canterbury Finance was not considering any offers from trade buyers.

"There is no body waiting in the wings. We are determined to ensure the company's continued expansion and profitability in the future, while remaining a private company."

The 80-year-old South Canterbury was due to approach prospective investors this week and launch the formal float process as soon as next week.

Hubbard, 77, one of the South Island's wealthiest men with an estimated $400 million fortune, according to the National Business Review's Rich List, was planning to sell up to 75 per cent of the business to the public.

Setting aside the Reserve Bank's warning, South Canterbury had a lot going for it. Just last week, Pacific Retail Group sold its finance arm to American firm GE for a rich $145 million. This sale implied a value for South Canterbury higher than the top-end $280 million estimated when it disclosed the float plan.

Meanwhile, Hubbard's wealth and his reputation for parsimony - he still drives an ancient VW Beetle - should have helped to ensure strong demand.

Observers said the prospects of a weak market in the shares after the float could have been the key reason for stepping back.

"Hubbard is the sort of guy who would not want to go out and see the share price fall sharply," said one investment banker.

Hubbard said yesterday that he had taken the decision with the unanimous support of the board. South Canterbury's best interest were served as a private company.

"The interest in South Canterbury Finance considerably exceeded our expectations," he said.

NZX boss Mark Weldon, who is fighting against a raft of departures from the sharemarket, was disappointed by South Canterbury's decision.

"It would have been a good chance for investors to buy into a well-known New Zealand brand," Weldon said.

"A lot of interest and excitement had been expressed about the opportunity to invest in South Canterbury Finance."

The financier's profit increased from $5.8 million to $30.2 million in the year to June. It said yesterday that next year's earnings should exceed this.

Total assets topped $1 billion for the first time, making it the country's second-biggest consumer finance company after bank-owned UDC.

Sinking feeling

* November 2 South Canterbury Finance discloses plans to float.

* Reserve Bank Governor Alan Bollard rains on its parade, warning about the state of the economy.

November 17

Pacific Retail Finance sold to GE for $145 million, setting a high benchmark for South Canterbury.

November 21

South Canterbury says its interests are served by staying private.