Port Otago gains on sale of Lyttelton shares

 Port Otago makes gain on Lyttelton Port of 
Christchurch shares. Photo by Craig Baxter.
Port Otago makes gain on Lyttelton Port of Christchurch shares. Photo by Craig Baxter.

Port Otago has scored a financial coup against its competitor Lyttelton Port of Christchurch, having squeezed a 14%-23% premium on the share price in order to sell its 15.5% stake.

A report from the independent adviser yesterday recommends Port Otago's offer be accepted, noting the ''significant premium'' may have been needed to win Port Otago's support, which allows LPC's owner the Christchurch City Council to gain 100% control.

Last month LPC, which holds 80% of LPC, offered all shareholders $4.15 per share; which includes a special 20c dividend.

Yesterday, the independent adviser's report was released and estimated the full underlying value of LPC's shares was in a range between $3.35 and $3.65 per share, equating to a respectively 23% to 14% premium for Port Otago.

Port Otago purchased the shares in 2006 for $37 million and with the additional value and premium combined, will get back $65.7 million, which it has already earmarked mainly for paying debt.

The independent advisers said: ''We suggest that the significant premium contained in the total offer consideration could potentially be attributed to the additional value that CCHL [Christchurch City Holdings Ltd, the wholly-owned investment arm of the Christchurch City Council] needed to offer Port Otago in order to secure agreement to acquire its shares.''

CCHL cannot move to a 100% ownership position without buying the Port Otago shares and it may have determined that paying the premium for the shares it does not already own is more than compensated for by the strategic value gained by moving to 100% ownership, the advisers said.

Two days ago LPC's board backed the bid for it to buy Port Otago's 15.5% stake, meaning it can now compulsorily mop up the outstanding 10% of shares.

Craigs Investment Partners broker Peter McIntyre said the independent advisers' report was a ''fait accompli'', for the takeover to go ahead, unimpeded.

''There's no likelihood of another offerer coming in at this stage,'' Mr McIntyre said.

Last week LPC booked increased revenue and several records in cargo handling for its full-year result, repeating last year's, earthquake-adjusted, after-tax profit of $15.1 million.

Container handling was up 7.2% to a record 376,567 TEUs (20ft container equivalents), dry bulk imports were up 18.4% to a record 769,019 tonnes and log export volumes were up 62%, at 601,485 tonnes.

However, since the result was booked last week, LPC lost a third staff member in a year following an on-site accident, prompting widespread scrutiny and criticism.

LPC chairman Rodger Fisher said although the first half of the year was a challenging period for the company, the last six months of the financial year showed strong growth, with increases in both export and import container volumes.

''In total, LPC moved 9.8 million tonnes of cargo through the port this year, an increase of 3.9% on 2009, driven by export container, log and vehicle volumes,'' he said.

On the takeover question, LPC said in a statement: ''The board and management of LPC are fully committed to the negotiations, as it remains our belief that amalgamation is crucial for the long-term viability of New Zealand ports.''

Mr McIntyre said while the LPC's profit was ''like for like'', the company had hit several cargo handling records.

''The agricultural sector has helped out big time,''Mr McIntyre said of the fertiliser, grain and logs.

LPC had received $55.6 million from insurers for damage,but on February 28 it got a total $382.7 million, plus GST.

The company said there was one outstanding insurance matter, which may deliver an additional recovery, but declined to give any further details.

simon.hartley@odt.co.nz

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