Gaynor: Cup would have runneth over

By BRIAN GAYNOR

The loss of the Rugby World Cup will have a big impact on the economy both in terms of lost overseas earnings and the exposure of the country to potential visitors.

Major events are now big money spinners, as both Wellington and Melbourne have shown. The Auckland City Council is looking at building a $50 million-plus convention centre to attract overseas investors, yet we have thrown away the chance to host a major sporting event after spending huge sums of money upgrading stadiums in Auckland, Hamilton, Rotorua, Wellington and Christchurch.

The NZ Rugby Football Union claims that it did not sign the sub-hosting agreement because it faced a potential loss of $10 million. Yet the NZRFU has forecast a net profit of $11.1 million for the World Cup year, after a large distribution to provincial unions, and is expected to have accumulated funds of more than $35 million at the end of next year.

A study of the cruise industry by McDermott Fairgray illustrates the huge earnings capacity from overseas visitors. The 64 cruise-ship visits over the summer are expected to bring in $171 million, compared with the $198 million from wine exports in the year to last June.

If 48,800 elderly cruise-ship passengers can generate $171 million of foreign exchange for just 12-hour stays, what would 10,000-plus overseas rugby fans spend in New Zealand over five weeks?

The Rugby World Cup is not the first time that Australian rugby boss John O'Neill has shut out New Zealand.

O'Neill's first major problem after he took over as chief executive of State Bank of New South Wales was the collapse of Equiticorp and Chase Corporation, both of which had large loans from the State Bank. O'Neill quickly closed the bank's New Zealand lending operations, but that move pales into insignificance when compared with his slam dunk of New Zealand rugby.

NEWMARKET PROPERTY TRUST

Speaking of Chase Corporation, the proposed restructuring of Newmarket Property Trust will herald the return of Colin Reynolds to the sharemarket for the first time since Chase Corporation was delisted in September 1990.

Under the plan Symphony Investments, a fully owned subsidiary of Symphony Group, will buy the trust's management company, Newmarket Property Management, from Sovereign for an undisclosed sum.

Symphony will buy up to 19.9 per cent of Sovereign's shareholding in the listed trust at a price between 43c and 51.6c per unit and it will also sell two buildings to the trust for an undisclosed amount.

Symphony is owned by Reynolds (4.2 per cent), Robin Congreve (47.2 per cent), Peter Francis (1.4 per cent), James Yonge (23.6 per cent) and Oceania and Eastern Securities (23.6 per cent). Geoff Ricketts, Chris Mace and Congreve own Oceania and Eastern.

Not surprisingly the initial response to the restructuring was negative, as no specific details have been announced. Newmarket is up to its borrowing limits and the two buildings will have to be financed by a rights issue or the issue of shares to the vendors. The purchase price of the properties and the structure of the funding will have an important impact on investors' perception of the trust.

One of the features of the Newmarket Property Trust, and all trusts, is that it does not come under the auspices of the Takeovers Code. Thus, Symphony could buy a controlling stake without making an offer to all shareholders. This is a concern, because a number of Symphony's shareholders have not been noted for their generosity towards minority interests in the past.

Hopefully their attitude has changed and Symphony will inject some badly needed energy and growth potential into the poorly performing trust.

TRANS TASMAN PROPERTIES

The winds of change are blowing slowly through Trans Tasman Properties.

Last week the company announced it had entered conditional contracts for the sale of four Wellington buildings and "anticipated that the final purchase price will be close to book value for the properties". This is an important development because the net lettable area of the four buildings is 39,550 sq m, or 17.5 per cent of its total New Zealand lettable space.

If the company can obtain near book value on four of its five largest Wellington properties, then investors will have more confidence in the group's 58.7c a share net asset backing.

But the big worry is that Trans Tasman will spend the proceeds on major high-risk developments. The recently released annual report notes that the company has achieved an annualised return of more than 50 per cent on equity employed on its six-storey development in the Maritime Square, Auckland, the group's first New Zealand development for more than 10 years.

Trans Tasman is now looking at developing its properties in the Viaduct Harbour area and it is still planning a major office tower at 28 Shortland St.

Guinness Peat Group, which has a 2.9 per cent stake in Trans Tasman, is opposed to this strategy and is putting forward a shareholder resolution at the May 20 annual meeting calling for the group's liquidation. It is proposing that Tony Gibbs and Gary Weiss of GPG be appointed as liquidators.

With Hong Kong based Sea Holdings still firmly in the driver's seat and Don Fletcher as chairman and managing director (will he ever be made accountable for the group's dismal performance?) GPG's resolution will fail. But minority shareholders should support GPG as it will give Trans Tasman a clear message that it should return capital instead of adopting a high-risk development strategy.

PACIFIC RETAIL

Several Pacific Retail shareholders have asked why the company was allowed to make a takeover offer for Bendon without shareholder approval when such approval is required under Stock Exchange rules. The simple answer is that the exchange granted Pacific Retail a waiver from this requirement.

Under Listing Rule 9.1.1, an issuer must receive shareholder approval when it buys or sells an asset that changes the essential nature of the business of the issuer, or when the gross value of the purchase is more than 50 per cent of the lesser of the sharemarket value or gross value of assets of the issuer.

As the $1.90 a share Bendon offer represented 58.4 per cent of Pacific Retail's gross assets, the retail group should have sought shareholder approval before the takeover was initiated.

But the exchange granted a waiver because the matter was urgent (the Bendon board had endorsed the AMP/Hugh Venter offer), Eric Watson would have voted his controlling stake in favour of the acquisition and Pacific Retail's directors certified that the transaction was in the best interest of shareholders.

The waiver was conditional on Pacific Retail providing "further background information to shareholders in relation to the proposed transaction".

The information provided to shareholders was vague and insubstantial and fell well short of the requirement of an independent appraisal report.

If the Stock Exchange is going to grant waivers, it should make sure that the information provided to shareholders is substantive.

Pacific Retail shareholders at least deserved a Bendon-adjusted update of the profit forecasts contained in the Andersen independent appraisal report released in October.

* Disclosure of interest: Brian Gaynor is a Trans Tasman Properties and Pacific Retail shareholder.

* bgaynor@xtra.co.nz