Resistance Developing To Dalgety Bid

Press, Volume CVIII, Issue 31828, 5 November 1968, Page 22

Resistance Developing To Dalgety Bid

(N.Z.'P.A. Reuter—Copyright) LONDON, November 4. Notice has already been served that Dalgety and New Zealand Loan may have rough country to cross in its bid for New Zealand and Australia Land, the financial editor of “The Times” wrote on Saturday.

The market reaction to the bid, which was announced late on Thursday night, was to hoist the N.Z.A.L. price above the value of the bid (14s sd) to 15s 3d. The price before the bid was 10s 9d.

A fairly substantial shareholder has already mounted criticism of the bid. His case is that taking out the livestock in the balance sheet at current market prices, and assessing the total agreagc of land through the land tax payable, the land is in at £1 16s an acre at the bid price, whereas it could in fact be

sold for anything between twice and four times as much. This would put the break-up value at over 30s a share. Lazard Brothers, the merchant banker who is advising Dalgety, counter this argument with three points. There would be a sizeable capital gains tax bill: it would be difficult to hold the management together over, say, a two year period while the company was broken up piecemeal; third, the Dalgety bid is all equity, and any assessment of the bid’s worth must be coloured by one’s opinion

of the potential worth of the Dalgety equity. The reaction of the N.Z.A.L. board, which will weigh up the bid in the light of its specialist commercial experience and its existing close ties with Dalgety, will be crucial. . It may be delayed a little as it is understood that two directors are at present in the West Australian bush, and the chairman is in hospital with hip trouble. One interesting feature of the bid was Dalge* ’s partial use of deferred income shares as bid currency—the terms are 20 ordinary and seven deferred Dalgety for every 100 N.Z.A.L. The reason for this was that the restocking by N.Z.A.L. after the Australiah drought would mean that it would temporarily be unable to make as large a contribution to combined earnings as it would normally be able. The deferred shares do not rank for dividend in respect of years ending up to June 30, 1971. The way to value them was to discount the price of the Dalgety ordinary by three years gross yield of 4.4 per cent. This produced a value of 47s 4jd with the ordinary at 55s ljd.