Few bargains for Kiwis in Aust—adviser

Press, 15 July 1987, Page 44

Few bargains for Kiwis in Aust —adviser

PA Wellington Australian sharemarkets now offer few bargains to New Zealand companies looking for take-over targets, according to a senior corporate adviser from across the Tasman.

Mr Robert Westphal, a Sydney partner in the accounting and consultancy firm of Arthur Young, also says the most successful deals are probably done where the target company has only one or two major shareholders. In a paper delivered to a Wellington seminar on company acquisitions in Australia, Mr Westphal says changes in attitude to foreign investment there have been dramatic. Outside investors in Australia are welcomed, unlike only two or three years ago when the reception was “distinctly cool,” he says. “Ron Brierley has been so active on Australian sharemarkets for so long that he is now scarcely regarded as an offshore investor in Australia and the same process is happening to Equiticofp and Chase Corp.” Mr Westphal’s involvement in New Zealand company moves into Australia has, in the last 12 months, included acquisitions by Richmond Development Corp, Unity Group and Paynter Corp. He says Australian equity markets now have virtually no bargains left in the sense of radically undervalued assets, earnings or management expertise.

A comprehensive revaluation of stocks has occurred, partly due to heavy support coming in from overseas investors, notably Japanese and American who have benefited frorp a relatively weak Australian dollar, he says.

Furthermore, the market value has been driven up on a higher level of

take-over activity which has shown no company, even BHP, is “untakeoverable.” Mr Westphal attributes the market strength also to a “much leaner, meaner” manufacturing sector made up of those who survived the battering inflation, exchange rates and labour problems brought into the 19705, and also to a scrip shortage induced by Australia’s capital gains tax and dividend imputation. The drop off in attractive take-over targets is evident in a rapid decline in the numbers of companies being delisted in Australia, with only four being removed from the boards in the final six months of 1986.

Mr Westphal suggests the high value now given to listed shell companies — more than half a million dollars — has also prompted successful purchasers to keep the listing of companies taken over. Successful deals appear to often involve companies with tightly controlled share registers and where prices are negotiated with one or two major shareholders. “Australian companies with open share registers and under-valued share prices are very scarce.” Nevertheless, the paper points to a growth in the rate at which take-over bids are made. In the first three months of this year, 51 bids were announced, compared with 147 for all of 1986.

Mr Westphal stresses the importance of New Zealand companies having clearly identified objectives and detailed local advice when crossing the Tasman to expand, and also appreciating the different statutory requirements put on offers and pricing. Joint ventures are often overlooked as a means of expansion offshore, he says, although they can be as straight forward as buying a 50 per cent stake in an existing Australian company.

The paper cites Paynter’s recent 50 per cent purchase in Sydneybased developer Condux Holdings, and the 25 per cent interest in Leda Holdings acquired by Unity Group.