Investors cool on Force bid

By SIMON HENDERY

Investors and analysts reacted sceptically yesterday to Sky City's takeover bid for struggling Force Corporation.

Sky City's $38.7 million punt for full control of the cinema and property company was seen by analysts as a speculative bid at a discount price.

And many questioned the wisdom of the transtasman casino operator muscling in on the movie business.

Sky City shares fell 4 per cent during the day, ending a strong upward run over the past four months.

The 25c a share offer - 2c below Tuesday's closing price - is conditional on Sky City acquiring the 50.2 per cent stake controlled by Force chairman Peter Francis.

Mr Francis did not return calls from the Business Herald yesterday but it is understood he has been trying for 18 months to broker a deal to reduce his Force holding.

Force company secretary Peter Holdaway said Mr Francis' investment vehicle, Francis Securities, was considering its position on the offer.

Force owns 50 per cent of Village Force Cinemas, and the flagship Imax Entertainment Centre in central Auckland.

The company lost $7 million last year as investments in New Zealand, Fiji and Argentina failed to deliver.

Planned mergers with internet company ihug and the Hoyts cinema chain were abandoned and the company had to come to the rescue of the Imax centre's Planet Hollywood restaurant.

It was also forced to take legal action against Australian-based MTM Entertainment Trust over the aborted sale of the Queen St entertainment centre.

Sky City chief executive Evan Davies said last night that the sharemarket's reaction to the takeover offer was surprising since his company had a proven record in the entertainment industry.

"We see an opportunity inherent in the Force business to grow our customer base. We see this as on-going expansion of our core entertainment activity."

Force shareholders include Disney-linked Californian investment company Shamrock Holdings (15 per cent) and funds manager AXA New Zealand (6.7 per cent).

Analyst James Miller, of ABN Amro, said he would not be surprised if Sky City were prepared to raise its offer.

"It strikes me as an opportune bid. Given that there's no premium to market price, there's probably some room to move in it."

Robert Bode, of Credit Suisse First Boston, said the 25c bid was below the value his firm put on the company.

The market's negative reaction to the deal was probably driven by fear that if Sky City was successful, "they will have quite a bit on their hands," he said.

As well as its Auckland and Queenstown casinos, dining and entertainment operations, the company is refurbishing the formerly Government-run Adelaide casino, has a stake in building Hamilton's casino, and owns a third of Canberra bookmaker Canbet.

Mr Holdaway said the Force board was taking steps to appoint an independent appraiser to provide a report on the takeover offer for shareholders.

Sky City's offer is subject to a 15 working days "notice and pause" period. If agreement is reached with Francis Securities on or after March 8, the company will stand in the market for the remaining shares at 25c.

Sky City shares traded as high as $9.27 yesterday morning, but fell after the announcement. They closed down 37c at $8.85.

Force shares were down 1c to 26c.