Petro Taranaki Aust. move is approved

Press, 9 July 1986, Page 34

Petro Taranaki Aust. move is approved

By

SIMON LOUISSON

in Wellington Petro Taranaki NL shareholders approved the transformation of their company into an Australian property company at an extraordinary general meeting in Wellington yesterday, but only after a number of questions about the deal were raised by shareholders.

The meeting was held to approve the purchase of all the shares in Areco Holdings Pty, a Sydney property company, for sAustloo,ooo plus the issue of 18 million Petro Taranaki shares and six million options. The move is designed as the first step in PT’s diversification out of the oil industry.

Shareholders queried what PT was buying particularly as Areco directors at the meeting failed to produce a set of accounts.

PT chairman, Mr Geoffrey Albers, said PT was acquiring future assets, not net tangible assets.

“Present profitability was not relevant and there was no track record to base things on,” said Mr Albers.

After the meeting, Areco director, Mr Colin Bryant, . acknowledged that the company has made a maiden loss of $lOO,OOO. He said the accounts had not been presented to the meeting because they were waiting verification of one item of income.

He put the loss down to the initiation of a large number of new projects. PT director, Mr James Willis, commented that the current net tangible assets of PT was 12 to 15c, while it was acquiring future profits of 30c.

He acknowledged that the exchange rate had moved in favour of Areco since the deal was made, but said this was not significant in the total scheme of things.

Some shareholders expressed concern that New Zealand directors would be in a minority in the

restructured company. There would be two current PT directors, Mr Albers and Mr Willis, and three Areco directors. Only Mr Willis is a New Zealander.

Mr Albers refused permission for a lawyer, Mr Peter Gilbert, acting on behalf of Mr Anton von Tarkanyi, to raise a question concerning a claim for 2 million PT shares as commission for bringing Areco and PT together. Mr Albers refused on the grounds that neither Mr Gilbert or Mr von Tarkanyi were shareholders. Asked to explain the rationale for the Australian move, Mr Albers said that New Zealand and Australia were tied closely together and Sydney was a growth area with a population base greater than the whole of New Zealand. PT will take on the name of Areco Corporation NL, as well as its personality. It will retain its no liability status, and Mr Albers gave an assurance that there would be no immediate call on PT shareholders to make a further contribution on their shares.

Asked what will happen to the $1.5 million capital left from the deal, he said he could see no reason why all the funds could not be used in Australia.

Outlining the case for buying Areco, Mr Albers said Areco had the potential for high earnings, and PT was not required to outlay any large quantities of cash.

He. said the present level of funds held by Areco in cash and other short-term deposits, 1 and the funding arrangements entered into for the building projects in which

Areco was involved in Australia were such that the company was “adequately funded.” All necessary consents other than Foreign Investment Review Board approval have been granted. No problem was envisaged with the latter. Mr Bryant said that the company’s strategy is to invest in suburban Sydney because of the trend towards decentralisation. “We have therefore decided to seek out sites in these areas which offer the potential for prestige developments to satisfy these needs,” he said. The company could have a lean management, with only four or five employees and consultants.

Project funding would initially come from partners, rather than Areco, although it hoped to change this as the capital base was built up. After this, Areco would acquire its own sites as an investment portfolio. For Areco, the PT deal gave it a level of security against which it could obtain lines of credit to offset tight cashflow. Second, it provided Areco with the ability to outlay cash to buy prime sites from which projects could be developed. A number of developments in various stages of construction or planning were presented to PT shareholders. The main project was a commercial development in North Parramatta, for which there was a "major Aus-, tralian company” backer. However, a condition of the line of finance was that the company’s name was not disclosed.

Areco expected to make a profit of sAustl million from its projects this year.