CCHL set to take over LPC
Shares in Lyttelton Port Company shot up nearly 25 per cent yesterday after Christchurch City Council said it intended to buy the LPC shares it did not already own.
Christchurch City Holdings Ltd, the council's infrastructure arm, announced a lock-up agreement with Port Otago, a 15.48 per cent shareholder in Lyttelton Port. CCHL has long intended to take the port to full city ownership, and next week will launch a full takeover offer at $3.95 a share, costing it more than $65 million. It is also to pay a 20-cent dividend, giving existing shareholders $4.15 a share. There are about 770 shareholders in the port.
Shares in Lyttelton Port spiked on the offer, but volumes were light. The port shares closed 80 cents higher at $4.10 on the NZX.
One substantial shareholder in Lyttelton Port, Mike Daniel, yesterday questioned the trading sequence on the NZX, and said the exchange had not acted correctly.
Daniel, who holds more than 500,000 port shares and is a former chairman of North Port Corp, said Port Otago's "lock-up" agreement was announced to the market as part of a substantial shareholder notice at 2.24pm.
The shares then started to trade for around $3.30, before some in the market were aware of the even-higher takeover offer price.
He had called the NZX asking for a trading halt and to ask them to reverse the trades, but had been told this would not occur.
"It is appalling," he said of that decision.
The CCHL takeover announcement coincides with renewed discussion about the potential sale of council assets.
A report into the council's finances by corporate finance advisory firm Cameron Partners questions whether the council needs to continue to own all its commercial assets, saying that many millions of dollars could be raised by the partial sale of CCHL companies such as Christchurch Airport and Orion, an electricity lines provider.
The complete ownership of the port by CCHL would make it easier for a partial selldown of CCHL as an entity to boost the council's financial strength.
CCHL director Raf Manji said Mayor Lianne Dalziel had indicated a partial selldown was a possibility on Friday after the Cameron Partners report was released.
"From the city's perspective it helps our strategic objectives. What the mayor has signalled today is that we want to release up to $400 million from CCHL. Taking the port private alongside all our other commercial companies just gives us a lot more options."
Lyttelton Port has been in a process of reinstating some of its assets following damage to wharves and other assets during the 2010 and 2011 earthquakes.
CCHL said Port Otago had agreed to accept the takeover offer for Lyttelton port ordinary shares.
CCHL owns 79.57 per cent of the ordinary shares in Lyttelton and intends to make an offer for 100 per cent of the port. It will make a cash offer of $3.95 per ordinary Lyttelton port share.
In addition, Lyttelton port will pay a special dividend of 20 cents per share to existing shareholders, taking the total paid to shareholders to $4.15 a share.
It is expected that a formal takeover notice will be issued early next week.
Once the takeover offer process is complete, CCHL intends to move to the compulsory acquisition of shares under provisions in the Takeovers Code. Under the code once a takeover reaches a 90 per cent threshold of shares on issue, those behind the takeover can compulsorily acquire the remaining shares. "This acquisition will enable CCHL to have greater flexibility in its relationship with Lyttelton port," CCHL chief executive Bob Lineham said.
The port will be delisted under the plan.
Port Otago chief executive Geoff Plunket said the southern port would earth $65.7m from the offer for its shares and the dividend distribution, and that money would be used to retire debt, which totalled about $110m within the group. Port Otago bought the stake in 2006, when New Zealand ports were looking at potential mergers.
The merger discussions between the two South Island ports ended after the September 2010 earthquake
The agreement to sell the shares by Port Otago had been made easier because of an insurance payout to Lyttelton, that meant a clearer valuation on the Christchurch port.
But the sale of shares did not rule out a potential agreement between Lyttelton and Otago in the future, Plunket said.