COMMERCIAL Review Of Week’s Stock Exchange Transactions

Press, Volume CV, Issue 31043, 26 April 1966, Page 21

COMMERCIAL Review Of Week’s Stock Exchange Transactions

Almost reluctantly on Friday Ross and Glendining directors pulled aside the woollen curtains on the United Empire Box take-over offer and told their shareholders to give favourable consideration to the bid.

Since the offer was first announced their thinking has been blanketed by caution and Friday’s announcement'was the first guidance given to the holders of Ross and Glendining stock.

They waited the full two weeks required by the Companies’ Amendment Act, 1963, from the time they first got formal notice of the offer—meantime, presumably, knitting their brows—before making their qualified recommendation.

While United Empire Box directors regarded the deal as neatly packaged, the Ross and Glendining board was still pondering its approach. Ross and Glendining directors told their shareholders that they would not sell their holdings until holders of 75 per cent of the shares in the organisation accepted the bid. This makes it seem that the directors have much less than a majority interest in Ross and Gledining. If this is the case the success of the U.E. Box offer is going to depend completely on the rank and file shareholders. Decision There are some 2500 shareholders in Ross and Glendining and now the decision is up to them. While Ross and Glendining directors were legally quite entitled to take the full 14 days to consider the offer the result has been some very

confused thinking by the market. Had the directors, given some earlier indication of their recommendation there might not have been the profit-taking on Ross and Glendining shares. Uncertainty Uncertainty about what the future might hold was obviously why those Ross and Glendining shareholders who sold did sell. Apparently they did not feel so confident about the company’s prospects as the directors did in their statement. But even the directors hedged when it came to the matter of future profitability. With a candour that was quite refreshing, they said that while they believed profitability might increase they were not prepared to give an undertaking on this. Performance On the past record of perforance by U.E. Box it seems that organisation can offer a brighter outlook for Ross and Glendining shareholders. There was a somewhat unusual reaction to Friday’s announcement by Ross and Glendining: Ross and Glendining shares fell 2d to Us lOd, while U.E. Box gained 3d to 11s Id. At these prices the U.E. Box offer of a U.E. Box share and 3s cash, plus a 6 per cent partly tax-free dividend, seems attractive to Ross and Glendining shareholders whose shares were down to 6s 9d not so long ago. Wide Range Investors seem to be ranging widely in their buying at present—like tourists in an open-air market—and it is fairly difficult to define any clear pattern of trading. Behind the smoke-screen of speculation on the outcome of the United Empire Box bid for Ross and Glendining some widely different stocks have been rising slowly but steadily. Just as there often seems little reason why a tourist might buy this or that in a street market, it is difficult to understand why some issues are advancing in otherwise uncertain trading. Indecision This indecision was underlined last week by the quick reaction to announcements from companies. It seems the market is looking for guide-posts and are quick to follow those that seem to be showing the way even if it is not clear where the road is leading. Higher dividends were announced by both Christchurch Gas and New Zealand Breweries and straight away the prices of the shares rose to new high levels for the year. Golden Bay told shareholders that it planned a three-for-20 tax-free bonus issue with the new shares ranking for dividend in the second half of the current financial year.

The announcement came in an interim report in which directors declared an interim ordinary dividend of 5 per cent, compared with last year's interim 4 per cent, but said that the increase did not indicate a higher payout for the year. Market Rumour Golden Bay shares sagged to 14s 6d late in February, but since then market rumour boosted the price to 16s 3d just before the bonus news. Even so, the price rose a further 3d to 16s 6d after the announcement. If dividend is held steady at 10 per cent on the higher capital the yield on the latest price of 16s 6d is 3 per cent. This yield compares with the median 4 per cent in “The Press” market leaders table. However, if the market adjusts the price of the share after the issue to about 14s i the yield would then be 3.5 per cent—still below the median. Record Output Golden Bay’s output in the 1965 year was a record, but profit rose only 3.1 per cent. During the last year the Building Programmer cast a shadow over Golden Bay stock, but it is now out in the sunshine again with news of the bonus. Golden Bay directors said in their report that profit rose in the six months to December 31 and that profit for the full year should be satisfactory. Sales are running at a high level and prospects seem to be promising. It remains to be seen If current market thinking believes is putting too much weight on Golden Bay’s prospects. Breweries Another case In point is reaction to New Zealand Breweries shares. On news of the merger with Leopard the shares improved but then the price started to slide. Then last week came the announcement that total dividend for the year was to be lifted from 10 to 11 per cent. Immediately the market bid the price up to 13s 9d—a new high point for the year. On Wednesday last week Christchurch Gas announced that dividend for the year would be 7 per cent. Christchurch Gas has paid a steady 6 per cent dividend since 1959 except for 1964 when it added a 2 per cent centennial bonus. The shares are not often traded, but the day before the higher dividend was announced a parcel of shares changed hands in Christchurch at 18s 9d. On Thursday there were sales at 19s 3d in Christchurch and 19s in Auckland. Premium Issue G. J. Coles’ shares also reacted to news on Wednesday that the company planned a one-for-five premium for “the greatest expansion in the history of the organisation.” On Wednesday Coles had dropped to a low point for the week of 10s Bd, but firmed to close on Friday at Ils Id. Generally last week the market was steadier. Trading was over a much wider range and turnover was moderately heavy.