By BRIAN GAYNOR



Why did Ralph Norris put his hand up for the top job at Air New Zealand? It was a very strange decision, considering that he had just retired as chief executive of ASB Bank and was becoming one of the most sought-after directors in New Zealand.



When Mr Norris was appointed chief executive of ASB, it was a regional bank operating in Auckland and Northland with assets of $4 billion, an annual profit of $35 million and a customer base of 500,000.



When he retired over 10 years later, in September 2001, the bank was operating nationwide, had $20 billion of assets, an annual profit of $184 million and more than 900,000 customers.

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These figures clearly show that he is one of the country's best chief executives.



But Air New Zealand is a totally different matter, and there are a number of reasons why he may regret his decision:



* Mr Norris made a conscious decision to leave the executive ranks and become a fulltime director. It seems strange that he would want to jump back in again after only four months.



* He becomes chief executive of an airline that is Government controlled, yet as chairman of the Business Roundtable he totally opposed state ownership.



* Air New Zealand will be subject to considerable public and political scrutiny. In a similar situation in the early 1990s, the chief executive of the Bank of New Zealand was put under enormous pressure by shareholders, politicians and the public.



* As Mr Norris has a very good reputation, there is a greater chance that it will be tarnished rather than embellished by his involvement with the national carrier, particularly as he has no airline management experience.



* If Air New Zealand fails to fire under Mr Norris' stewardship, the other directors will be criticised because it is extremely unorthodox for a board to appoint one of its own as chief executive.



* Finally, Mr Norris was being aggressively courted as the next chairman of the New Zealand Stock Exchange. As he is ideally suited for that position, the exchange is a big loser from his decision to re-enter the executive ranks.



The unlisted market


Klaus Sorenson is in hot water with Bill Foster of the Stock Exchange after he released a Pharma Zen statement saying Pharma Zen shares trade on the NZSE unlisted market.



The problem is that the NZSE does not want to be associated with the unlisted market, even though it is run through the exchange's electronic trading system. Mr Foster believes that this association could negatively affect the NZSE's brand image.



Mr Sorenson is in trouble because he is the NZSE's number one spin-doctor and he should have known better than to associate an unlisted company with the NZSE.



The unlisted market is very confusing. It is a facility to trade shares through the exchange's system, but companies are not subject to the rules and disclosure requirements of the NZSE. In other words unlisted companies are unregulated and extremely risky.



Wilson Neill illustrates the worst excess of the unlisted market, but Kirkcaldie & Stains set high standards and successfully migrated to the NZSE's main board.



The NZSE should end the confusion and adopt a more realistic stance towards the unlisted market. It should either establish a set of rudimentary disclosure rules for these companies or close the facility.



If Klaus Sorenson is confused about the relationship between the unlisted market and the NZSE, what hope is there for ordinary investors?



Fisher & Paykel


The sharp decline in Fisher & Paykel Healthcare's share price is a stark reminder of the vicissitudes of overseas investors and the difficulty of valuing companies.



When Fisher & Paykel was split last year, existing shareholders received 60 per cent of Healthcare, 20 per cent went to Fisher & Paykel Appliances and the remaining 20 per cent was sold to overseas investors.



The sale to foreign institutions was extremely contentious because the proceeds were distributed to former Fisher & Paykel shareholders, and local institutions believed the sale price was too low.



Deloitte Corporate Finance valued Healthcare at between $10.30 and $12.30 a share. After applying a 15 per cent discount, the independent adviser estimated that the public offer price in the US should be between $8.96 and $10.70 a share (all US share prices have beenadjusted to NZSE prices).



Several institutions were extremely critical of Deloitte's analysis. They argued that the valuation was seriously flawed and substantially underestimated Healthcare's value.



Fisher & Paykel set the indicative initial public offering range between $9.60 and $10.90 with 17.6 million existing shares and 2.64 million new shares sold at the equivalent of $10.90. The first round in the argument went to the institutions as Fisher & Paykel's share price rose to a high of $18.75 and US investors were sitting on big profits.



But the dispute turned in Deloitte's favour last Thursday, when Healthcare announced its result for the December quarter.



Net profit for the three months ended December was $14.1 million, or 28 per cent ahead of the same quarter last year, but analysts were disappointed with the figures and most reduced their 2002 and 2003 March year forecasts.



Since the announcement, Healthcare's share price has fallen $3.51 to $10.55 and some 21 million shares have been traded on the Nasdaq (5.0m shares), ASX (4.5m) and NZSE (11.9m). This represents 21 per cent of the group's capital.



Healthcare's share price decline should bottom out around these levels as the company's market value is at the lower end of Deloitte's valuation; domestic institutions believe Deloitte substantially undervalued the company; and most of the aggressive overseas selling should have run its course.



Sky Network Television


The transfer of tax losses from Sky TV to Independent Newspapers has raised a number of eyebrows. There are two reasons:



* Sky TV announced its intention to transfer tax losses to INL on October 12, but no specific details have been announced by Sky.



* INL owns 66 per cent of Sky and is a related party under Stock Exchange rules. Under the shareholder funds test in Listing Rule 9.2, Sky should have called a shareholders' meeting to approve the transaction but has been granted a waiver from the Stock Exchange.



Sky will receive cash compensation from INL when it is finally in a tax-paying position, and the deal will allow Sky's directors to declare a fully imputed dividend. This sounds fairly encouraging, but Sky shareholders should have been given far more details of the transaction.



Disclosure of interests: Brian Gaynor is a Fisher & Paykel Healthcare shareholder.



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