By Mark Reynolds
Takapuna-based electricity lines company United Networks is issuing new shares to try to make itself more attractive and available to investors.
United - formerly Power New Zealand - will issue 12.6 million new shares to institutional investors to boost turnover in its stock.
Chief executive Don Bacon said existing shareholders
in the company held onto their scrip tightly, and this had hampered the market's ability to value the shares.
"We have an obligation to shareholders to maximise their value on the market and extra liquidity will bring about some enhancement in price," Mr Bacon said.
The shares will be issued to institutions at $6.25 each, raising more than $78 million. The money will be used to repay some of United's $1 billion in debt, most of which was taken on when it extended its lines business to Wellington and the Bay of Plenty last year.
Mr Bacon said institutional investors wanted to buy shares in the company because of its size and dominance of the power lines business in New Zealand.
"We are the 12th-largest company on the stock exchange, yet the institutions cannot buy stock in us because our shares are so tightly held," he said. "This issue will free up some stock for them and allow the market to put a better value on us."
The company estimates that less than 3 per cent of its shares are available to trade freely, with just 1 per cent held by institutional investors like banks, insurance firms and superannuation funds. About 79 per cent of the company is held by Utilicorp of the United States with a further 11 per cent tied up through the Power New Zealand Shareholders Society.
The new share issue will represent about 8 per cent of the company's expanded capital.
Mr Bacon said he expected institutional shareholders to strongly support the issue, especially because the company was performing well financially.
The group's net profit was forecast to be $189.8 million for the 12 months to the end of December this year, rising to $107.1 million the following year.
The company is in the process of changing its balance date from March 31 to December 31. Mr Bacon noted that in the five months to the end of August the group's net profit had been $52.9 million.
Following the announcement early yesterday, the company's shares closed unchanged at $6. Trading volume was light.
