Growing doubt over Vector bid

With less than two weeks to run, Vector's $1.3 billion takeover bid for NGC looks increasingly unlikely to succeed.

The Auckland-based energy network company's offer of $2.91 a share for the gas pipelines group closes on February 4. However, NGC's shares have traded as high as $3.19 since the offer was made in October, and still remain above the offer price. They closed at $3.09 last night.

Anyone comfortable with selling their stake in the gas pipelines company could get a better deal selling on the market.

Vector bought 66 per cent of NGC from Australian Gas Light (AGL) and wants to buy the rest from smaller shareholders. 

One reason many are not accepting the Vector offer is the prospect of a sweetener being offered in any subsequent takeover bid. Vector has already tried to offer NGC shareholders preference rights in a $500 million initial public offering (IPO) of shares later this year, to fund its bid.

However, the Takeovers Panel barred it from making this offer, since it was not extending it to former shareholder AGL.

Anyone holding out and refusing to sell their shares can afford to sit back and wait. They may get a better offer soon, or simply have their shares compulsorily acquired at $2.91 should Vector reach the 90 per cent threshold.

"Creep" provisions of the Takeovers Code allow the holder of between 50 per cent and 90 per cent of a company to purchase up to 5 per cent of its voting rights in a 12-month period without making a formal offer. Some analysts say Vector should be offering a higher price for the NGC shares, due to the great benefits that will come from having a fully merged company.

NGC's independent directors recommended shareholders accept the Vector offer, but did point out that they could sell on market, for a better price.

Independent valuer Grant Samuel valued the company's shares at between $2.50 to $2.76 each.

The same NGC directors did warn that shareholders holding out for payment in Vector scrip rather than cash should be wary, since there may not be enough shares available for it to offer, once they have been given out in the IPO.

Vector, which is expected to launch its IPO in the middle of this year, may not offer its shares in the next NGC takeover offer, but cash and a special deal in its share offering. Its original plan was to offer a 5 per cent discount on new Vector shares, and the right to buy a minimum of $500 worth of the new shares for every $1000 of NGC shares sold.