George Kerr tries to buy Pyne Gould

Christchurch businessman George Kerr and associated interests yesterday launched an opportunistic bid for 100% of Pyne Gould Corporation at 33c a share.

But shareholders are being urged to wait for an independent report.

The PGC share price lifted from 27c before the offer, to 32c after the offer was sent to PGC directors.

In a letter to PGC shareholders, Mr Kerr made much of PGC's reported losses since 2009.

PGC had been transforming its core finance business and developing an asset management business, he said.

The transformation was completed on May 30 this year when PGC distributed directly to its shareholders the 216.6 million shares it held in Heartland Bank and cancelled 73.2% of the PGC shares on issue at that time.

As a result of loan losses, asset revaluations, the costs associated with the recapitalisation of Marac and the formation and subsequent distribution of Heartland shares, PGC had announced large losses in two of the past three years, including a $141.1 million loss for the financial year ended June 30, 2011, he said.

"Given these significant events, I believe it is now an appropriate time for PGC shareholders to re-evaluate the nature of PGC's residual businesses and their shareholding in PGC," Mr Kerr said.

Mr Kerr's Pyne Holdings Ltd holds 13.2% of PGC shares, United States-based Baker Street Capital holds 19.78% and other major shareholders hold 4.53% of PGC shares.

That 37.51% of the voting rights had accepted the offer.

Mr Kerr is the great-great-grandson of F. H. Pyne, who started one of PGC's founding businesses, Pyne and Co, in 1887.

Craigs Investment Partners broker Chris Timms urged shareholders to wait until the target document was released and an independent report was commissioned.

He noted that at balance date, the PGC net tangible asset (NTA) valuation was 60c a share but shares had traded "solidly" at 27c, more than 50% less than the NTA.

Mr Kerr saw value in the company and had launched the bid in expectation of a wide acceptance, Mr Timms said.

After reviewing the asset portfolio and considering the likely future capital requirements of the component businesses, Mr Kerr said he concluded the PGC of today had little in common with its earlier structure.

The recent investment by Baker Street Capital had brought another professional investor to PGC.

After the distribution of shares in Heartland, with Heartland recently indicating an intention to start paying dividends, the remaining assets in PGC were fundamentally different in nature, Mr Kerr said.

PGC was now a company more likely to reinvest its earnings in its assets with a "patient" horizon of seven years and beyond.

In order to optimise growth in asset values in that period, PGC might also require shareholders to contribute more capital as new investment opportunities in existing or new businesses presented themselves, Mr Kerr said.

With world sharemarkets again experiencing significant volatility, several of PGC's largest shareholders had substantially reduced their holdings in recent weeks.

"If you are an investor who requires a dividend yield, or who might not wish to contribute further cash to invest more substantially in PGC if the company requires more capital for investment, you may decide this is an appropriate time for you to sell your shares."


PGC's principal assets

• Property Assets, which holds a portfolio of impaired property assets from the restructuring of Marac.
• Real Estate Credit, which also holds impaired property assets from Marac.
• Residual 9.5% holding in PGG Wrightson.
• A 6% shareholding in Heartland.
• The management contract for Equity Partners Infrastructure Company.
• Torchlight Investment Group, which manages and invests in a portfolio of long-term assets.
• Perpetual Group.

dene.mackenzie@odt.co.nz

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