Port Otago chairman Dave Faulkner. Photo by Craig Baxter.
Port Otago will be looking for a ''premium'' when it
decides to sell its controversial 15.5% eight-year-old stake in
listed rival Lyttelton Port of Christchurch.
While Port Otago is stressing it can still sit on its
investment, at present worth about $47 million, it appears
the time may be right to broker a deal on a purchase that was
made for strategic reasons rather than financial rewards.
Despite denials at the time, the then $37 million purchase in
early 2006 was a strategic, successful ploy to block
Lyttelton Port of Christchurch (LPC) from being sold by its
75% shareholder, the Christchurch City Council, to an
international port operator.
Councillors of Port Otago's 100% owner, the Otago Regional
Council, heard last Wednesday the port company was
''evaluating'' its options on whether to sell the stake,
given LPC's share price has been buoyed by recent insurance
payouts of $382 million.
Port Otago chairman Dave Faulkner briefed the councillors,
saying the insurance payout and the subsequent resumption of
dividends at 2c per share were ''a little disappointing''.
''We have appointed consultants to assist us with the
[shareholding] review ... which is worth $47 million,'' Mr
LPC has paid Port Otago about $2.7 million in dividends prior
to the Canterbury earthquakes, which devastated LPC's
ORC councillor Michael Deaker labelled the LPC dividend as
''miserable'', asking Mr Faulkner whether the 15.5% stake had
a strategic purpose for Port Otago's operations in the South
Island or whether it should be viewed now as a ''return on
Mr Faulkner said there were several maritime issues going on
at the time the stake was purchased, including port operator
Hutchison's desire to own and manage LPC and the Government
talking of ''amalgamations'' of unnecessary port operations.
''Because of our stake, Hutchison don't have it [LPC]. It is
less strategic now; the reasons have changed. We've looked at
what else to do with $47 million,'' he said.
Following the meeting, Mr Faulkner was asked if consultants
had talked to potential buyers.
''There are a few entities who have expressed an interest,''
Mr Faulkner said.
Given the 15.5% stake can still block any sale or takeover of
LPC, Mr Faulkner was asked if Port Otago would seek a
''premium'' on its shares - a sale for more than sharemarket
''Yes, I believe so. Selling on the [open] market is not an
option; it is strategic at 15%,'' he said.
Having told the councillors talks with LPC had ''gone
nowhere'', he declined afterwards to confirm whether there
had been talks specifically with the Christchurch City
Council or any large institutional investors, whether
domestic or international.
Mr Faulkner said ''if the price isn't there'', Port Otago
would not sell, while Port Otago chief executive Geoff
Plunket said the company was able to maintain its ''long-term
`hold' strategy'' and keep the stake.