Shareholders Assoc sounds Haier warning

23:36, Oct 25 2012

The Shareholders Association has warned members considering Haier's Fisher & Paykel Appliances offer of the risks of being a minority shareholder.

Concerns about losing the iconic Kiwi company are "just sentiment", it said.

Haier now owns 55.86 per cent of FPA, according to its latest update to the NZX. The Chinese whiteware giant upped its original offer of $1.20 a share to $1.28 last week after a report by independent adviser Grant Samuel valued FPA at between $1.28 and $1.57.

That was enough to prompt several institutional shareholders, including ACC and AMP Capital, to sell and pushed Haier's shareholding above 50 per cent - Haier's minimum target.

The Association's chairman John Hawkins said in a letter to members that it could not by law give financial advice but wanted to set out some issues for them to consider.

Becoming minority shareholders could be risky if Haier did not get over 90 per cent which would trigger a full takeover, he said.

Directors appointed by large shareholders had an inherent conflict of interest, as they were supposed to act both in the best interests of the company but also in the best interests of their employer.

Haier could run FPA very differently to local owners, he said.

"They may or may not be concerned with achieving good dividends and/or capital growth. For example, Haier may be quite happy for FPA to effectively become a centre of research and development where profit is not the key objective."

Hawkins said the share price could fall once the takeover period finished, as there would be fewer shares available and less interest in them. FPA could also drop out of the NZX50, meaning a number of institutions would no longer be able to buy shares - reducing demand and price.

"Some people are concerned that they don't want to lose an iconic New Zealand company. In our view that is just sentiment and not a business decision."

Hawkins said some shareholders might be hanging on in the hope Haier would up its offer in future, but the likelihood of that was small as 'mopping up' bids would not need to include a premium for gaining control.

Those shareholders who felt FPA had a future as a listed company could sell at the takeover price and buy back shares at a lower price, he said.

Shareholders could also consider reducing rather than completely selling their stake. That would reduce future risk but still leave them exposed as minority shareholders.

Hawkins said FPA shareholders should seek advice from their financial adviser or share broker.

Those accepting the offer needed to have the forms in by 5pm on November 6.

Tower Investments, a minority shareholder, said this week it was still weighing up the offer.

Chief executive Sam Stubbs, who criticised Haier's original offer as "a steal", said it was disappointed Haier's second offer was right at the bottom of Grant Samuel's range, and would probably not decide whether to sell until on or just before November 6.