THE MARKET Many surprising moves, but hardly a ripple

Press, 23 March 1985, Page 24

THE MARKET Many surprising moves, but hardly a ripple

By

ADRIAN BROKKING

The New Zealand sharemarket firmed a little every day this week, quietly but steadily, and Barclay’s index of industrial shares gained 26 points, or 1.8 per cent, to close at 1471.19 yesterday. Turnover yesterday was 5,177,429 shares worth $7,752,001. However, this cosy calm was shattered by the bombshell of New Zealand’s biggest-ever take-over bid, backed up by a smaller bid, although the market appeared to be too shocked to react much and kept to its snug and comfortable trend. Carter Holt, the forester and timber products manufacturer, made a $551 million bid for Alex Harvey Industries, the building supplies group, by offering 365 c cash or one Carter Holt share plus 45c cash for each AHI share.

Not surprisingly, Carter Holt shares dropped 10c to 315 c yesterday because of the dilution of capital that would be the result of a successful take-over, but a little bit more surprising, Alex Harvey shares rose only 25c, to 350 c.

As this is 15c below the cash offer price, it would suggest that the market is

not convinced that the bid will succeed.

Late last year ACI International (the old Australian Consolidated Industries) which has 56 per cent of the Alex Harvey capital, bid $2OO million for the remaining 44 per cent it did not hold.

This bid was vigorously opposed by the local AHI directors, and later rejected by the Government.

This bid also will need the approval of the Commerce Commission, and this could mean a delay of several months — perhaps one reason why the market is not exactly jumping around. Of course, the success of the take-over also depends on shareholder consent, and obviously ACl’s attitude is the key. If ACI were to accept, and opt for Carter Holt shares, it would become a 37.5 per cent shareholder in the enlarged Carter Holt. In fact, because the share capital of Alex Harvey is twice that of Carter Holt’s, acceptance by all AHI shareholders would be tantamount to a reverse takeover.

If ACI were to do nothing, while all minority AHI shareholders accepted, Carter Holt would becomethe single minority shareholder in Alex Harvey.

That does not sound too good, but Carter Holt’s chairman, Mr R. H. A. Carter, said that the Carter

board would find this an acceptable result.

Both New Zealand companies have had a long association, with representation on each other’s boards of directors. They have two large joint ventures, Canterbury Timber Products and Henderson and Pollard. Mr Carter said that he hoped a successful take-over would stabilise this situation after the unsettling effects of ACl’s bid.

Other options for ACI would be to either renew its bid for the minority interest in Alex Harvey and/or to make a counter-bid for Carter Holt. In view of the earlier reaction by the Government and AHI directors, these options are not very likely. In any case, the AHI board as a whole has a big say in the matter — the AHI directors said that they would meet on Monday. One aspect of the move that should be explained, as it smacks of “insider trading” was the strong bidding for Alex Harvey shares before the announcement of the Carter bid.

Alex Harvey shares closed last Friday at 305 c but a mystery buyer bought one million shares at 325 c on Wednesday and another 100,000 on Thursday. If the bid succeeds that buyer stands to make a profit ol more than $440,000. The Securities Commission

might well look into this. Fletcher Challenge is merging its two merchant banking subsidiaries, Marac and Challenge Corporate Services. This is a kind of Peter and Paul situation, but as Marac has a number of outside shareholders, it is disappointing that the market did not learn more of the financial details concerning the deal. Marac’s managing director, Mr Barrie Downey, denied rumours that Fletchers would buy out the minority shareholders in the company. There were a number of other sizeable moves in the market this week. A mysterious bidder is standing in the market for a 15 per cent shareholding in Fleur International, at 65c — 9c more than the previous market price.

Crown Corporation bought out Brierley Investments’ 50 per cent holding in Hawke’s Bay FarmersDalgety for an undisclosed sum, and this pastoral group will now be a wholly-owned Crown subsidiary.

Brierleys was involved in two other moves. The investment group announced a bid to complete its holding in Neil Holdings, Ltd, and its associate, City Realties, announced that it had increased its 20 per cent holding in National Insurance to just below 25 per cent.