Brian Gaynor: Charities in the dark over Heatley's promise

The liquidation of eVentures, Craig Heatley's technology company, has been completed, with shareholders receiving a total distribution of 35.14c a share.

The wind-up has been achieved in an expedient and professional manner, but the big question is who is benefiting from Heatley's promise to donate $7.6 million to children's charities.

eVentures was listed on the Stock Exchange on May 9, 2000, following the issue of 35 million shares to the public at 60c each.

Telecom, Todd Corporation and The Warehouse also purchased 5 million shares each at 60c but Heatley acquired 40 million shares at just 15c and eVentures Partnership (a United States joint venture that included the Japanese company Softbank) bought 160 million shares at the same price.

Thus eVentures, which was chaired by Heatley, had 250 million shares on issue and a cash asset backing of 24c a share.

In early 2001 Heatley resigned from the board to take a two-year sabbatical overseas.

Sir Roderick Deane replaced him as chairman.

A few months later the company was thrown into turmoil when eVentures Partnership announced it had agreed to sell its 160 million shares to Heatley in a price range between 14c and 16.8c.

The board was opposed to the move, Deane resigned and was replaced as chairman by Heatley, who was then living overseas.

Heatley agreed to on-sell the 160 million shares to the company at his purchase price of 14c. These were then cancelled, the total number of shares fell from 250 million to 90 million and the net asset backing rose from 21c to 34c a share.

eVentures could not identify any profitable technology businesses and on August 21 last year shareholders approved the company's liquidation.

As part of the arrangement, Heatley agreed to purchase 1,923,000 eVentures shares at 60c each from shareholders who bought fewer than 10,000 shares in the original float and still held their shares.

The first distribution of 29.5c a share was made on October 17 and the final 5.64c, giving a total of 35.14c a share, was made this month.

Heatley made a profit of $8.1 million on his 40 million shares but after taking into account his buy-back of 1.9 million shares from small investors, he is left with a net profit of $7.6 million. Telecom, Todd Communications, The Warehouse, eVentures Partnership and original retail investors, who had bought more than 10,000 shares, all lost money on the venture.

In a goodwill gesture, Heatley announced 12 months ago that he would set up a trust to distribute his profit to children's charities.

He would neither confirm nor deny that any of this money had been distributed but said he was in the process of establishing a foundation for this purpose.

Charities will be banging on Heatley's door in the hope of obtaining their share of his windfall eVentures profit.

TrustPower


TrustPower's buyback issue has raised a huge number of matters in relation to the Takeovers Code and the Takeovers Panel's decision-making process.

But it has also raised the question of why one of our major electricity generators is repaying capital to shareholders when there is a looming electricity crisis and a desperate need for more investment in generation capacity.

On Monday TrustPower said it had received acceptances under its buyback offer for 41.2 million shares at $3.70 each, a total of $152.4 million.

TrustPower has a strong balance sheet but the buyback will reduce its total shareholders' equity from $567.7 million to $415.3 million and its ratio of shareholders' equity to total assets from 66 per cent to 48 per cent.

TrustPower is the country's second largest independent generator of electricity and, according to the 2002 annual report, it had identified several potential generation developments in New Zealand. These included wind generation, enhancements of existing hydro schemes and geothermal developments.

So why is the company not using its strong balance sheet to make these investments instead of repaying capital to shareholders? Have the interests of the major shareholders been put ahead of the company's investment strategy?

The Australian Gas Light Company (AGL), which owned 40.6 million TrustPower shares and convertible notes (20.47 per cent of the company) wanted to get out and there were three main ways this could have been achieved:

* It could have sold its holding to institutional investors. This was a viable option as AGL was willing to accept the buyback price of $3.70 compared with a market price of $4.05 at the time the arrangement was announced. But under this strategy the Infratil/Alliant joint shareholding would have remained at 46.8 per cent.

* AGL could have sold its shares and notes to Infratil/Alliant but this would have been costly for the Infratil/Alliant consortium as it would have had to make an offer to all shareholders under the Takeovers Code.

* Under the share buy-back AGL has accepted in respect of all of its holding and the Infratil/Alliant consortium has raised its stake from 46.8 to 58.7 per cent without spending a penny. This is obviously the best option for Infratil/Alliant.

But the big question remains unanswered: why is TrustPower paying back $152.4 million to shareholders, with $150.1 million or 98.5 per cent going to an Australian company, when there is a desperate need for more investment in New Zealand's electricity generation?

Trans Tasman Properties


The arrival of Trans Tasman Properties' annual report is one of the lowlights of the investment year and the December 2002 year edition is no exception.

The company's net asset backing per share has now fallen for six straight years and it hasn't paid a dividend since 1998, yet the same individuals remain at the top.

The directors have discontinued the operational summary and comparative statistics traditionally contained on page one.

This may be a signal that they are now totally embarrassed by the company's dismal performance.

The following statistics summarise the performance of Trans Tasman Properties since it was formed in late 1995: it has reported losses in four of the seven years and combined losses of $57.3 million over the period; net asset backing per share has fallen from 97c to 55c; its share price has dropped from 74c to 25c and the number of shareholders has fallen in six of the seven years and from 17,490 to 5500 over the period.

The latest annual report contains a two-page analysis of the company's December 2002 year performance compared with forecasts contained in an April 2001 information memorandum and investment statement.

The company achieved net earnings for the year of $200,000 compared with a forecast of $20.4 million and its net asset backing is 55c instead of a predicted 61.5c.

The major item of business at the annual meeting in Auckland on May 22 is the re-election of Don Fletcher and Carl Peterson as directors.

Fletcher has been managing director of the group since it was formed in late 1995 - he has received $4.1 million for this role - and he has also been chairman since April 2000. Peterson was appointed in June 2000.

The other three directors are Lu Wing Chi, whose Hong Kong-based Sea Holding controls 55.2 per cent of the property group, Rodney Hodge, the company's longstanding secretary and financial controller, and John Ferner, whose law firm has been paid $955,000 by Trans Tasman over the past 30 months. Lu and Hodge have been involved since the 1995 merger and Ferner was appointed in June 2000.

It is frightening to contemplate that the company will continue to be run in the same old way by the same individuals for years to come.

If the situation doesn't change soon, most remaining minority shareholders will sell out and Lu will be able to buy the remainder of the company - which has total assets of $895 million - for the proverbial song.

* Email Brian Gaynor