Bid For Harley Chambers Has Novel Features

Press, Volume CIX, Issue 32312, 2 June 1970, Page 18

Bid For Harley Chambers Has Novel Features

(By Our Commercial Editor)

The bid by the Christchurch lawyer and businessman Mr J. G. Rutherford for Harley Chambers, Ltd, is a “first” of its kind, and—whether it succeeds or not—might well make history in New Zealand-

The novelty of the bid is that it involves a building society, but only indirectly, and the mechanism by which the property is transferred from a public company to that society. A building society cannot make a take-over offer for the share capital of a company, but it may purchase real estate. The actual take-over bid is

therefore made by Mr Rutherford, from his own cash resources, and when it succeeds the property may be transferred to the Internatio'nal Building Society, in exchange for building society shares. The offer of 650 c a Harley „ a ™ fb ‘ $195,000 On the company, whereas the Government

■ valuation of the building is • $210,000, I believe. - Therefore when assessing 1 the merits of the take-over - bid, the question is whether ■ the building—on the open ' market—is worth Government valuation or more. Most real estate experts I have consulted are doubtful ' that Harley Chambers could ' be sold for $200,000. Admittedly, the site is a good one—-but the area of the property is small, and will be even smaller after the strips of 15 feet are. taken off to conform with the new town planning requirements for the area. Expensive To Run The toning is Commercial 3. This makes an eventual redevelopment of the site that more expensive. Any redevelopment, however, would have to wait for a considerable time, because it would be many years before the value of the building plus the land equated the value Qf the land only. The building is old, and expensive to run, and yet it is too solid to break down—too much value would be destroyed. The immediate value of the building is therefore determined by its yield, and this is very low. Shareholders who accept the cash should be able to invest this for better than twice the present income, and better prospects of capital gain, whereas the building society shares give a return almost three times better. Increased Income The bonus issue cannot be regarded as an effective defensive measure—if it is intended as such. The value of the shares is mostly in their asset backing, and this move only spreads the asset more thinly over more shares. The income will also be watered down. (To be continued)