Stock takes: Keeping it in the family

Michael Hill's family want to increase their stake in the business. Photo / Brett Phibbs

The Hill family's announcement this week that they want to consolidate their stake in jewellery retailer Michael Hill International, increasing it from 48 per cent to 50.1 per cent, has come as a pleasant but confusing surprise to investors.

The move to increase the stake, which requires an exemption from the Takeovers Code and shareholder approval, seems strange, given it will not give the family any more power.

At 48 per cent, they would be able to stop any potential takeover offers from being successful.

Even they have struggled to justify the reasons behind it.

One fund manager suggested maybe it was because 50.1 per cent just had a nice ring to it.

But the decision by the family to put more money in the business has pleased investors - and is being viewed as a vote of confidence in the business.

The company is so tightly held by family and people associated with the business that it is traded thinly and doesn't get much in the way of analyst coverage, either.

Shares closed up 1c yesterday at 69c.



CLEARING HOUSE DRAMA

The NZX has been quick to point the finger at Pulse Utilities over a missed payment which led it to freeze payments to all generators on the electricity trading market on Friday.

But it has failed to address the question of why a small $700,000 payment should stop about $250 million being paid out to market participants.

Pulse has denied missing the payment cut-off on Friday, although it has admitted to a breach on Tuesday but it's just a side issue to the fact something went very wrong with the NZX's energy clearing system.

The NZX has said it is working with the Electricity Commission on a review of its processes but an outcome of any review is likely to be weeks away.

The debacle could not have come at a worse time for the NZX which yesterday announced the launch date for its dairy futures market and is just over a week away from starting its stock market clearing house on September 6.

The NZX closed down 1c yesterday at $1.39.

MYSTERIOUS PLAYER

New Zealand Farming Systems Uruguay has been secretive about the third party it is in talks with over providing a potential capital injection.

The party is thought to be an international group rumoured to be either a Uruguayan pension fund or Asian fund manager possibly associated with Singaporean firm Duxton Asset Management.

Duxton specialises in agricultural asset management and also has a focus on asset management in emerging markets. Sources close to NZSFU have refused to confirm or deny the rumours.

The capital raising option already has strong opposition from takeover bidder Olam International which has said it would vote against it if the board put it to shareholders.

ACC, which had about 7 per cent, has also shown it wasn't keen on the capital raising concept by accepting the Olam's higher offer of 70c per share early in the piece.

All eyes are now on whether Union Agriculture Group will come back with a higher counter bid.

Communication issues and time differences are being blamed for their slow response although the delay has lent confidence to the Olam bid.

NZSFU shares closed steady yesterday at 72c.

SURPRISE ADMISSION

Meanwhile, in a surprise move NZFSU chairman John Parker put his hand up this week to his part in overestimating the prospects of the NZX-listed company.

Parker says no one has argued about the concept of NZ Farming Systems, which was set up by PGG Wrightson to develop dairy farm operations in Uruguay. "We've seen no evidence that suggests other than that dairying in Uruguay can rival that of New Zealand with a lower cost structure."

However, Parker says the initial projections derived from PGG Wrightson's experience of growing feed in Uruguay had been overly optimistic.

"If you want to know what really pisses me off - I signed that prospectus, too, and so I've got to accept fault on that," he says.

"The important point is that with upgraded management and with funding this business is really ready to deliver and improvement can be pretty rapid."

The company needs to raise about US$60 million to complete the development.

YELLOW DEAL CLOSER

Stock Takes understands the offer period has closed for bids on the Yellow Pages Group.

Around four or five parties are thought to have been serious bidders although no local contenders are expected to be among them.

Private equity players are expected to be the most likely buyers but will likely drive a hard bargain.

The business is seen to be a good cash producer despite the huge debt weight around its neck.

It will be interesting to see how much of a loss the banks are prepared to take just to get the business off their books.

TIPPING POINT

Today is the deadline New Zealand investors have given to Guinness Peat Group to decide whether to take up its proposals.

Stock Takes understands local investors have demanded GPG directors Gary Weiss and Ron Langley resign from the board and are replaced by four independent directors.

They also want the proposal to split the Australian assets from the agenda.

The board, chaired by Sir Ron Brierley, must make a call on whether it will listen to the demands although the reality is they don't have much choice.

If local shareholders don't get what they want they have enough combined voting power to call a special meeting to vote directors off the board.

It will be interesting to see who caves in first and if the directors will go voluntarily or have to be pushed out of the company.

LOST IN TRANSLATION

Fisher and Paykel Appliances has admitted part of the reason for its decision to swap out one of its Haier directors was because of translation challenges.

Jack Zhou stepped down in July to be replaced by Philip Carmichael. At the time F&P said it was because Zhou had been promoted to executive director of Haier Electronics Group.

But this week Carmichael said board meetings had been tough to run through a translator.

"Most international boards are not used to having other people [ie a translator] in the board room besides a translator during meetings.

"It's just usually not done, so that was part of the aspect."

A spokesman for F&P said having to use a translator all the time had made meetings a lot longer and sometimes the conversation became a bit "lost in translation".

It made sense for the American-born Carmichael to take over as he speaks fluent English as well as Mandarin, and as the Asia Pacific representative for Haier was going to be in town more often. F&P shares closed down 2c yesterday at 51c.

HULJICH BUILDS TEAM

Controversial KiwiSaver provider Huljich Wealth Management has appointed fund manager Mark Ford to its executive team - the first time it has hired someone with extensive experience in the asset management area since the company was set up by Don Brash, John Banks and the wealthy Huljich family.

Ford comes from BNZ, which he joined in 2008 after setting up boutique fund manager Mint Asset Management in 2006.

He was previously head of institutional funds at ING.

Chief executive Don Brash said Ford would not be taking over the investment management from him but would have "major input" in the process.

Brash took over the top role this year after former boss Peter Huljich admitting to "topping-up" the firm's KiwiSaver funds.

Brash, who has in the past acknowledged his lack of asset management experience, said Ford would add "substantial depth" to the firm's investment decision-making team.