Continuous Disclosure: Ownership shake-up for big broker, tight ship for Napier Port float

Ownership of Craigs Investment Partners is up in the air after Deutsche Bank announced a big shake-up of its operations this week. Photo / Joel Ford

Continuous Disclosure is a market news column, including analysis and opinion. Edited by Duncan Bridgeman, Tamsyn Parker and Jamie Gray. In today's edition:

• Ownership shake-up for broker Craigs?
• Napier Port float will be tight ship
• Fizzling out: What future for NZ Oil & Gas?

The future ownership of major New Zealand broker Craigs Investment Partners is up in the air in the wake of Deutsche Bank's decision to shake up its global business.

Germany's biggest bank announced this week it will close its equities division, cut €6 billion ($10.1b) of costs and axe 18,000 jobs globally.

Deutsche closed its New Zealand operation as part of a global overhaul in 2015 but owns 49.9 per cent of Craigs Investment Partners which in turn owns 50 per cent of Wilsons in Australia.

The bank's pull back has sparked questions over whether it will also sell its stake in the Craigs business, which it bought in 2010.

Frank Aldridge, managing director of Craigs, said "no discussions have been had to date" with Deutsche over the sale of the stake.

"If they decide to exit then we would engage in dialogue with them," he said. That could see the business become wholly owned by the local partners again.

Aldridge said it had enjoyed a good working relationship with Deutsche Bank and had worked closely with the company on the investment banking side of its business and corporate finance.

The two firms operate as separate businesses, with the investment banking arm, Deutsche Craigs, a 100 per cent owned subsidiary of Craigs.

But with the bank pulling out of its equity operations it will leave some gaps for Craigs which Aldridge said it would have to plug.

Aldridge confirmed it had been approached by some investment banking parties proposing a strategic alliance with Craigs which would enable the group to continue to participate in major dual-listed IPOs in Australia and New Zealand.

"Just because of some of the noise this week there have been some phone calls," he said.

But it was too soon to confirm who had approached it and what that could lead to.

While it would provide a potential Australasian foothold for a global investment bank it is probably less of a concern for Craigs, whose business is 80 per cent generated through its private wealth arm.

Craigs also uses Deutsche Bank to distribute its New Zealand research and as one of its data sources for companies not listed in New Zealand.

Mark Lister, head of private wealth research, said it could easily change to distribute its research through another platform if it needed to.

"As far as our research on stocks outside New Zealand goes, we use DB research but only as one of our data sources, nothing more.

"We have our own in-house team making decisions on Australian stocks and global stocks, and we have our own recommendations, rather than using anyone else's.

Aldridge said it was business as usual for Craigs and Wilsons Australia.

Hawke's Bay residents, port employees and some iwi are being given priority in the Napier Port float. Photo / Paul Taylor

Napier Port float will be tight ship

The structure of Napier Ports widely anticipated sharemarket float could see only a small number of shares available to the general public.

But rather than being down on the concept, investor advocates have welcomed it and say more companies should follow suit.

Around $200 million of the $450m to $500m initial public offer is expected to be free float, with the Hawke's Bay Regional Council retaining 55 per cent.

With priority being given to Hawke's Bay residents, certain iwi and Napier Port employees, it is expected that only $100m will be available for institutions and the general public.

Michael Midgley, chief executive of the NZ Shareholders Association, said: "Giving employees and locals first go is the right thing to do."

He said the secondary market would give others the chance to buy in.

But Chris Gaskin at Devon Funds Management suggested even that might be a tight market.

"My guess would be that local investors and employees would be more likely to hold the shares for a long period of time. This could mean the share price is very stable after listing as no one sells."

He also welcomed the move to prioritise locals and employees.

"Employee ownership is a great thing for company culture. I think, from memory, something like 90 per cent of Port of Tauranga employees own shares in the business, and clearly this has been a good thing for that port.

"We would like to see more employees, especially CEOs!, paid in long-term company shares."

Midgley said its focus was on how well Napier Port performed under the new structure.

"We wait to see if it becomes a Port of Tauranga and whether the council leaves management to manage rather than emulate another port."

The IPO is set down for July 15, with an NZX listing expected in August.

The Tui oil production facility. Photo / Rob Tucker

Fizzling out?

After nearly 38 years as a listed company, New Zealand Oil and Gas looks set to leave the sharemarket after a takeover offer from its majority shareholder.

On Wednesday, Singapore-based OG Oil & Gas, which already owns 70 per cent of NZOG, announced it would offer 62 cents per share to buy out the rest of the company - a 25 per cent premium to the trading price.

NZOG shares have steadily declined in the last two years from 77c a share in October 2017 to a low point of 47c a share in March this year.

Castle Point Fund manager Stephen Bennie said it appeared the decision by the Government last year to not open up further off-shore acreage for exploration ended up being the final straw for the majority owners.

"It looks like they might be closing up shop, as the takeout bid is priced around the level of cash held by the company. Basically that implies they, and the independent directors, no longer see the business as a going concern."

The NZOG board is recommending the offer, subject to confirmation the 62-cent offer prices it within or above the independent valuation yet to be determined by Northington Partners.

NZOG has a 4 per cent stake in the Kupe gas field and a 5 per cent interest in the Maari oil field through its Cue Energy subsidiary.

It also has major stakes in the Clipper and Toroa exploration permits off the South Island and a 15 per cent direct interest in the Ironbark project off north-western Australia.

Drilling of the prospect by the BP-led venture is scheduled for late 2020. Cue also has a 21.5 per cent stake in that venture.

NZOG shareholders will vote on the transaction at a special meeting expected in September 2019, the company said in its announcement.

Bennie said the situation was also another example of a worrying trend for the NZX and New Zealand investors.

"Less listed companies means less opportunities for investors."

NZOG shares closed on 60.5 cents yesterday.