Christchurch City seeks to mop up remaining shares in Lyttelton Port
Christchurch City Holdings, the city's infrastructure investment arm, says it will offer to buy the 20 percent of Lyttelton Port Co [NZX: LPC] it doesn't already own and has a lock-up agreement for Port Otago's 15.5 percent holding. The shares soared on the news.
CCH already owns 79.6 percent of the port company and with Port Otago's holding it will comfortably be above the 90 percent threshold to compulsorily acquire the rest of the shares. It will offer $3.95 a share for remaining stock in the port company, higher than the stock has ever traded and valuing the business at about $404 million. In addition, Lyttlelton Port would also pay a special dividend of 20 cents to existing shareholders, using any imputation credits to pay the tax. The shares jumped 24 percent to $4.10 on the news
"This acquisition will enable CCH to have greater flexibility in its relationship with LPC" said Bob Lineham, the investment company's chief executive.
A formal takeover offer is likely to be made next week, the company said. On completion the port company would be delisted.
The transaction comes on the same day that the city council released a report from investment bank Cameron Partners identified a $400 million gap in Christchurch's ability to pay its share of the earthquake rebuild. That's on top of an already identified $440 million funding shortfall in a report by accounting firm Korda Mentha.
The city is contemplating the sale of a strategic stake inits investment company, which controls the city's port, airport and electricity network to help close the gap.
Mayor Lianne Dalziel argues the city would gain strategic advantage from bringing on new investors to CCH. A funding shortfall above $800 million could threaten the city's A+ credit rating from Standard & Poor's and may breach its financial obligations under local government finance legislation.
CCH owns 89.3 percent of Orion, the city's electricity network, 75 percent of Christchurch International Airport, as well as the port stake, and businesses including the Red Bus company, City Care, Enable Services and Ecocentral.