Port Otago reaps profit

Port Otago has reaped a massive profit selling its contentious shareholding in rival Lyttelton Port of Christchurch (LPC) for $65.7 million, a 77% gain on the investment.

The port company, 100% owned by the Otago Regional Council, will use all the windfall cash to slash debt, from $110 million to about $45 million, Port Otago chief executive Geoff Plunket said when contacted.

''We're happy and very pleased with the outcome,'' he said.

He declined to detail the process of how the sale came about, saying only Port Otago had recently engaged consultants to negotiate a price.

Port Otago is locked in to sell all its 15.48% stake - which it bought in early 2006 for $37 million - to the Christchurch City Council, which has an 80% stake in LPC.

The $3.95 per share takeover offer price was an almost 10% premium on recent LPC share transactions.

Port Otago chairman Dave Faulkner said the board had decided the 15.48% stake no longer had the strategic importance which applied at the time of the purchase.

The stake was contentious, in that Port Otago's holding formed a blocking stake which stopped the Christchurch City Council in 2005-06 from selling the port to an overseas port management company.

There was no small irony in that Cantabrians against the proposed sale were vocally supportive of Port Otago having stepped in.

The sale comes about from Christchurch's council launching a formal takeover for LPC yesterday and striking a ''lock-in'' agreement with Port Otago to sell.

That gives the council more than a 90% stake, so it will now compulsorily acquire the remaining about 5% of shares, and delist LPC from the stock exchange.

Port Otago has been criticised for having tied up the more than $30 million in cash, with few dividends from quake-hit LPC, getting little in return for its investment.

Port Otago had for more than seven years maintained it would keep the LPC holding long-term, but first hinted to the ORC in April it would consider selling.

Port Otago, which has paid the ORC almost $130 million since 1988, last week lowered its dividend policy to 50%-70% of its operating surplus after tax, but with ''intent'' to deliver $7 million per year.

ORC chairman Stephen Woodhead said yesterday the ORC ''fully supports'' the LPC share sale.


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