The recent takeover activity involving Auckland International Airport (AIA) raised some key issues about the New Zealand market, ABN Amro Craigs Broker Peter McIntyre said yesterday.
The major issue was the small number of blue chip stocks available on the New Zealand Stock Exchange.
The latest debate on overseas ownership of New Zealand assets began in April last year with the growing market expectations that AIA could be a potential takeover target.
In July, Dubai Aerospace made an offer but that was subsequently overtaken in November by the Canadian Pension Plan (CPP), which offered to buy 40% of the company at $3.65 a share.
The price had been volatile during the period as the offer took its many twists and turns, he said.
The share price peaked at $3.41 in July, but weakened to sit at $2.10 now.
However, the Government had the final say. First, it outlawed the stapled security structure that the canadians were going to implement at AIA.
Then it pushed through changes to the Overseas Investment Commission rules and the sale of "strategic assets''. That proved to be a bridge too far for the CPP offer, with the Government using the new rules to block it.
"We can take a lot away from this experience. Top of the list has to be the determination of the Canadians. You have to admire their tenacity. They came up against a number of what we thought were 'deal breaking' hurdles, but they found a way over, around or straight through
all of them. Ultimately, the Government had to change the law before they succumbed.''
AIA remained one of the best companies on the NZX, Mr McIntyre said. Other offers could not be ruled out, although the tighter rules made it tougher for potential suitors.
Several of New Zealand's top 10 companies had either had bids in the past or were possible targets given their open registers.
They included Contact Energy, Fletcher Building, Sky TV, Sky City, The Warehouse, Fisher & Paykel Healthcare, Fisher & Paykel Appliances and AIA.
Losing some or all of those companies would not be good for the market, or the New Zealand economy, in the long-term, he said.
In Australia, workers must contribute 9% of their gross wages to compulsory superannuation and had more than $A1 trillion ($NZ1.17 trillion) invested in their superannuation schemes.
In New Zealand, KiwiSaver was a few months old and around $700 million had been contributed so far. Also, about $13 billion was invested in the New Zealand Superannuation Fund.
"Clearly, we have a long way to go to catch up to the Australians. But, as KiwiSaver accounts build up, and if it ever becomes compulsory, we are going to have to find homes for these savings.''
A large percentage of the Australian superannuation money was invested in the Australian share market. There were about 2000 companies on the Australian market with a combined value of $A1.3 trillion. In comparison, New Zealand had about 200 listed companies with a combined value of $60 billion, Mr McIntyre said.
New Zealand needed all the good quality listed assets it could get. Companies that owned key infrastructure assets, had low risk earnings, but also had the potential for earnings growth and were fantastic superannuation assets.
They were long-term in nature and should provide both capital and income growth over 10, 20 and 30-year time periods - the timeframe of superannuation savings.
"The Canadian Pension Plan clearly understands this. Perhaps our KiwiSaver savings should be invested with them,'' he said.
Peter McIntyre's disclosure statement is available on request from ABN Amro Craigs.
