Prime sent out its formal offer to the New Plymouth District Council, Taranaki Electricity Trust and Powerco Wanganui Trust late last night and the local bodies are expected to formally accept the deal - to buy their 53.65% stake in Powerco - later today.
However, the compromise solution - which saw NPDC, TET and PWT shift their combined shareholding to Australia and back again in the last few days - could cost Prime up to NZ$50 million extra in cash.
A phenomenal 160 million-plus (or 43%) Powerco shares were traded last week after the Takeovers Panel granted Prime an exemption allowing it to make cash-only offers to foreign security-holders instead the cash-bonds mix offered to the local authorities and other kiwi shareholders.
This wave of selling or transferring - largely by New Zealanders to overseas addresses - had meant the worst-case scenario for the three main Taranaki shareholders looked like only 33% cash but 67% of the unsecured securities, instead of the agreed 62.5%-37.5% split. This was because Prime had had a cash cap of NZ$425 million.
However, Prime has now put more cash into the deal and PricewaterhouseCoopers, the local authorities’ adviser, has arranged for Sydney broker Tricom, to buy bonds the three big shareholders receive above the 37.5% limit, up to a cap of NZ$50 million worth of bonds.
The council and trusts will receive the face value of the bonds, NZ$1 each. Industry commentators are divided, however, over whether the bonds will trade for more or less than that on the New Zealand Debt Exchange.
New Plymouth Mayor Peter Tennent said he was delighted the market difficulties created by the takeovers panel’s decision had been resolved satisfactorily.
“I am thrilled with this deal, which will be good for the district and means security for the (Powerco) head office and more security for the council’s investment funds,” he told EnergyReview.Net this morning.
“The fact that the surplus Sparcs will be on-sold at full face value reaffirms our faith in our advice as to the value of the Sparcs, and guarantees that the council will receive the agreed amount of cash for its Powerco shares.”
Tennent said many media reports run had been ill-informed and misleading and that unsecured, subordinated Sparcs were not the junk bonds they were made out to be.