PGC lift expected as bank details revealed

Pyne Gould Corporation shares are expected to be keenly sought in coming days after it was revealed yesterday the new Heartland Bank shares would go mainly to PGC shareholders.

PGC said it intended to distribute directly to its shareholders the majority of its 72% stake in Building Society Holdings - the Heartland Bank's official company name - should the merger between Marac, CBS Canterbury and Southern Cross Building Society proceed.

A small stake in Building Society Holdings would separately be placed by PGC to investors at or around the same time as the distribution, PGC chairman Bruce Irvine said.

"PGC is in the process of determining the final split between the distribution and the placement which will be sized in order to maximise value for PGC shareholders."

Craigs Investment Partners broker Chris Timms said the news was good for existing PGC shareholders.

Firstly, PGC shares were likely to quickly rise in value as investors realised the only certain way to get bank shares was through holding PGC shares.

Secondly, after shares were strongly diluted through a recapitalisation, it was a chance to recoup some lost value.

"A very small placement will be made to the general market. The only way you can get the Heartland Bank shares is through buying PGC shares."

Mr Timms expected the bank shares to be tightly held by PGC shareholders as most were long-time supporters of the company.

If the bank was listed on the NZX-50, institutions with a mandate to hold a certain percentage of top 50 companies would need to buy the shares, maintaining the upward pressure on the price.

The new bank was not raising capital as it did not need the cash. Marac was debt free and the other companies had strong balance sheets, he said.

Mr Irvine said PGC intended to implement the distribution as soon as practicable following the proposed listing of Building Society Holdings, scheduled for early February. Final timing would depend on the documentary and regulatory approval processes.

"We have reviewed all our options in relation to Building Society Holdings and determined that an in specie distribution and placement of our 72% shareholding is the best option to maximise value for PGC shareholders.

"It puts ownership directly in the hands of our shareholders and investors and will promote liquidity and price discovery and maximise likelihood of NZX-50 index inclusion."

He said the distribution and placement would mean the Building Society Holdings shares would be widely held by a broad range of investors with no single dominant shareholder.

PGC chief executive Jeff Greenslade was undertaking a strategic review of the company, with First NZ Capital engaged as a financial adviser.

Mr Greenslade said the review was ongoing with PGC considering its options in respect to its other assets. Further announcements would be made after the review.

Mr Greenslade, chief financial officer Sean Kam and general counsel Michael Jonas would continue to perform their management obligations to PGC until the distribution and placement and the publication of PGC's mid-year accounts. After that, they would work full time for Building Society Holdings.

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