Vector's NGC bid in strife again

Vector's troubled bid for NGC has again run foul of the Takeovers Panel, which says its offer breaks the rules requiring fair treatment for all shareholders.

The Auckland-based powerlines company has agreed to buy 66 per cent of the gas transmission and energy metering company NGC from its Australian parent, Australian Gas Light (AGL).

Vector is offering $2.91 for each NGC share, but sweetening the deal with preferential rights in its planned initial public offering (IPO), which could raise anywhere between $500 million and $650 million.

The panel has rejected this, saying it must also be offered to AGL, not just the small shareholders.

Vector is furious at the decision, since AGL was offered - and did not want - the entitlement.

"We find it difficult to understand the decision, given that AGL had waived its right to preferential entitlement," said a company spokeswoman.

But the offer, which is also subject to Commerce Commission approvals, would still go ahead.

At the heart of this latest dispute is the principle that all shareholders must be treated the same in any takeover deal. Last month, Vector asked for permission to buy AGL's holding company, rather than all its individual NGC shares.

The panel refused this too, saying it would have given special treatment to AGL - which wanted to avoid a big tax bill - so Vector later agreed to buy the shares directly.

Preferential rights in the Vector IPO may be a factor behind the NGC share price remaining well above the $2.91 being offered in the takeover. NGC shares closed down one cent at $3.14 yesterday.

Anyone selling into the Vector takeover was to have been given a 5 per cent discount in Vector's IPO, along with the right to buy a minimum of $500-worth of the new shares for every $1000 of NGC shares sold.

These preferential rights are not tradeable on any open market, but would give the owner an opening to take part in what some are touting as the hot IPO of 2005.

Vector has also said it would offer special treatment to the income beneficiaries in its home area of Auckland City, Manukau City and most of Papakura.

Vector bond holders are also getting preference, with a 2.5 per cent discount on the IPO price.

THE LOWDOWN

Vector is the largest powerlines company in New Zealand and is owned by Auckland power users. It also has gas transmission pipes and a fibre-optic communications network.

Last month, it agreed to buy 66 per cent of gas transmission company NGC from Australian energy company AGL, triggering a $1.3 billion full takeover offer.

Vector is paying for the takeover by floating 24.9 per cent of itself and listing on the stock exchange.

To promote the takeover offer to NGC shareholders, Vector has offered preferential rights in the float in exchange for their shares.

The Takeovers Panel says it cannot do this, since small shareholders are getting a different offer from AGL.

Vector says this makes no sense, since AGL was offered the same thing, but did not want it.