The Trans Tasman Properties annual meeting produced several developments. One or two gave cause for optimism but there were indications that the company would continue to be run in the same old way.
On the positive side, executive chairman Don Fletcher was upbeat about the future. In his formal address, he
said "debt levels have been considerably reduced" and "the group is now soundly placed, holding good assets in its portfolios on both sides of the Tasman and funding lines that provide additional capacity, enabling new investment opportunities to be considered".
Fletcher reiterated these views several times and was encouraged by the offer for two Australian properties, 345 and 363 George St, Sydney. These properties, which have a combined independent value of $385 million, represent about 80 per cent of Australian Growth Properties' total assets.
The company is 50.1 per cent owned by Trans Tasman Properties.
But there were several issues that indicated nothing has changed as far as the governance of the New Zealand company is concerned. These include:
* Controlling shareholder Lu Wing Chi, who owns 55.2 per cent of the company, did not attend the meeting. Lu has never attended an annual meeting.
* The two independent directors do not own Trans Tasman Properties shares. When asked to demonstrate their confidence by purchasing shares, they said they were concerned about "being sued" and by "insider-trading issues".
* Fletcher told shareholders they had the ability to remove him and Carl Peterson, the two directors standing for re-election. The executive chairman made this comment several times even though he is a director of Lu's company, with its controlling interest, and must have had some influence over the voting of these shares.
As far as the elections were concerned, 62 million shares were voted against Fletcher and 34.2 million in support - excluding the 328.1 million voted by Lu in support.
On the same basis, 59.8 million shares were voted against Peterson and 36.4 million in his favour.
At last year's meeting, 61.1 million shares voted against Lu and 60.5 million minority shares in favour of his re-election, while 46.6 million voted against fellow director John Ferner and 69.1 million in support.
These figures clearly demonstrate that opposition to the Trans Tasman Properties board has grown over the past 12 months.
News & Media NZ News & Media New Zealand's cumulative exchangeable preference share offer, which is being extensively advertised, is a highly unusual security as far as the New Zealand market is concerned.
Essentially it is an Irish company raising money in this country to partly fund its New Zealand acquisition.
The exchangeable shares have their origins in the takeover of Wilson & Horton, publisher of the New Zealand Herald, by Dublin-based media group Independent News & Media.
Wilson & Horton shareholders were offered two alternatives in 1996: $11 cash or the equivalent in the form of exchangeable preference shares (for every ordinary share Wilson & Horton shareholders were offered 1.375 exchangeable shares worth $8 each).
The exchangeable shares were issued by Independent Press Communications, a fully-owned subsidiary of the listed Irish group.
They can be converted into $8 cash or 2.2194 Independent News & Media shares for every exchangeable share, at the holder's option, on November 30 this year.
A total of 22.7 million exchangeable shares, worth $181.8 million, were issued.
The shares have paid a dividend of 5 per cent a year (40c) fully imputed.
Essentially these were vendor loans with an equity content that has become unattractive (at Independent News & Media's current share price the share conversion option is worth only $6.50 compared with the cash conversion option of $8).
The main objective of the present issue is to encourage existing exchangeable preference shareholders to roll over their investment. They are being offered two new exchangeable shares worth $4 for every existing $8 share.
The new shares are offering a minimum dividend rate of 8.75 per cent a year (35c) compared with 5 per cent on the existing shares, but the latter payment is tax-free whereas there is not expected to be any material imputation credits available for the new shares.
(The dividend rate can be raised above 8.75 per cent if demand for the new exchangeable shares is lower than expected, but the final dividend rate may not be determined until June 5, two days after the offer to existing exchangeable shareholders closes.)
For investors on a marginal tax rate of 33 per cent, the net dividend rate on the shares is 5.86 per cent, and for those on a 39 per cent marginal rate, the dividend rate is 5.34 per cent.
The dividend rate on the new shares is slightly higher but the Dublin parent, which is the ultimate guarantor of the exchangeable shares, had a stronger balance sheet five years ago.
Independent News & Media had total shareholder equity and minority interests of €817 million and an interest-bearing debt-to-equity/minority interests ratio of 1.3 as at last December 31.
This compares with shareholders' equity/minority interests of €1024 million and a debt-to-equity/minority interests ratio of 0.58 at the end of 1997.
A recent rights issue and the proposed sale of its British regional newspaper business reduces the present debt-to-equity/minority interests ratio to 0.91.
Investors will have to judge this investment on the basis of the dividend rate being offered commensurate with the risk (neither News & Media NZ nor its Dublin parent has a credit rating).
The equity conversion option - one for one into Independent News & Media ordinary shares on November 30, 2007 - looks relatively unattractive at this stage (these ordinary shares are worth $2.93 at present compared with the subscription price of $4 for the new exchangeable shares).
ABN Amro Rothschild and ASB Securities are underwriting the issue up to an aggregate issue amount of $200 million but additional over-subscriptions of up to $50 million will be accepted.
Tranz Rail The following comment in Saturday's column about Tranz Rail, RailAmerica and Toll Holdings was incorrect:
"RailAmerica's first mistake was to notify its intention to make an offer before buying any shares. This placed it on the back foot because it was bound by the Takeovers Code and could no longer purchase shares above or below 75c or on-market."
RailAmerica was not prevented by the code from buying up to 20 per cent of Tranz Rail at any price just because it had given notice of its intention to make a takeover offer. The restriction on trading only applies once the offer is actually made.
Unlike the Australian code, there is no pricing rule for a takeover offer in this country. Thus RailAmerica could have bought up to 20 per cent of Tranz Rail on-market at, say, 90c after giving notice of its intention to make an offer but before making the actual offer. It could then have proceeded with its offer at 75c.
Another development in relation to Tranz Rail is that any asset sale to Toll Holdings will require shareholder approval because the Australian company is a substantial security-holder and a related party under Listing Rule 9.2.3.
Toll and its associates could not vote unless the Market Surveillance Panel decided to grant a waiver - a distinct possibility based on experience.
* Email Brian Gaynor
<i>Brian Gaynor:</i> Trans Tasman cuts debt if not disquiet
The Trans Tasman Properties annual meeting produced several developments. One or two gave cause for optimism but there were indications that the company would continue to be run in the same old way.
On the positive side, executive chairman Don Fletcher was upbeat about the future. In his formal address, he
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