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| Subject: holds 24.3 per cent of ERG's voting shares. | |
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Author: New Zealand Herald, New Zealand - Mar 26, 2004==27.03.2004 |
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Date Posted: Sunday, March 28, 05:40:58am In reply to: Newspapers reporting result--March 7 2003 SMH 's message, "Noteholders have tickets to ride" on Thursday, March 06, 08:38:56am Brian Gaynor: Infratil's new key New Zealand Herald, New Zealand - Mar 26, 2004 ... L Morrison & Co as Utilico's manager and immediately invested $5.54 million, out of Utilico's total investable funds of $5.96 million, in ERG convertible notes ... Brian Gaynor: Infratil's new key 27.03.2004 COMMENT Duncan Saville took another big bite at a New Zealand listed company this week when he received shareholder approval to raise his Infratil voting stake above 20 per cent. Saville, who has a unique investment style, controls two other listed companies, Finmedia (formerly Dairy Brands) and Utilico International. He controls the UK-based Utilico Investment Trust, which is listed on the NZX. Infratil has been an extremely successful investment under Lloyd Morrison's stewardship. Does the latest move indicate that Morrison's influence is waning and Saville is beginning to call the shots at Infratil? Saville, who was born in South Africa, worked for Ron Brierley's Hong Kong listed Industrial Equity (Pacific) in the 80s. After leaving IEP he made his fortune by accumulating large holdings in undervalued UK water companies. He bundled these together and sold them to the public through Foreign & Colonial Special Utilities Investment Trust (now Utilico Investment Trust). He first appeared on the New Zealand listed company scene in 1994 as a director of the newly established Infrastructure & Utilities NZ (now Infratil). He was not on the board of Infratil International (now called Utilico International) when it listed in May 1997, but was appointed two years later. Utilico International failed to achieve its original objectives and in 2000 its share price hit an all-time low of 24c, compared with the public issue price of 50c. Saville began to accumulate Utilico shares and had a 48 per cent holding by the end of 2000. Twelve months later Utilico had sold all its assets, mainly airport investments, returned $46 million to shareholders and cancelled 94 per cent of its shares. Shortly after the November 2001 annual meeting Saville replaced H. R. L Morrison & Co as Utilico's manager and immediately invested $5.54 million, out of Utilico's total investable funds of $5.96 million, in ERG convertible notes. ERG is a high-risk Western Australia-based telecommunications firm that specialised in smart card applications and automatic fare-collection systems for urban transit networks. Utilico now has a combination of ERG ordinary shares, unlisted options and unlisted redeemable convertible notes. Saville, through seven different investment vehicles, holds 24.3 per cent of ERG's voting shares. ERG reported a loss of A$43.2 million ($49.5 million) for the six months to December but it remains optimistic about the future. Utilico's share price performance is highly dependent on ERG but the New Zealand company has no debt and Saville probably has alternative opportunities up his sleeve. Utilico now has just 5.4 million shares on issue with Saville owning 52.2 per cent and AMP 8.6 per cent, having raised its shareholding from 4.3 per cent over the past eight months. The company has a market value of $3.7 million at 68c compared with the estimated value of its investments of $4.4 million. Saville first became involved with Dairy Brands when some of his investment vehicles bought a 39.9 per cent stake in January 2000 at 25.5c a share. In January 2001 shareholders agreed to sell all the company's farms. This was quickly achieved and in September 2001 38.6 per cent of its share capital was cancelled through a 70c a share buyback. The following year shareholders were offered an optional buyback at 64c a share. Dairy Brands became an investment company and the management contract was transferred to Saville. The company then purchased 55.1 per cent of Hemscott, the UK investment publication company, and changed its name to Finmedia. Hemscott reported a net loss of £1.1 million ($3.1 million) for the year to December, compared with a loss of £2.4 million for the previous year. Finmedia announced a loss of $1.2 million for the seven months to December (it has changed its balance date from May to December). Saville, who owns 75.1 per cent of Finmedia, continues to look for new investment opportunities and is proposing to merge Finmedia and Utilico International. He has created significant value for Finmedia and Utilico shareholders, but what are the synergies between a Perth-based technology group and a London-based media organisation? At $1.00 Finmedia has a market value of $11.4 million compared with a London Stock Exchange value of $22 million for its 55.1 per cent Hemscott stake. As noted earlier Saville first appeared on the New Zealand listed company scene exactly a decade ago in the Infratil prospectus. He was described as a 37-year-old with a residential address in Surrey, England. He now lives in Sydney but also has a home in the UK. One of the features of Infratil was its management company structure. The management company, which was originally 80 per cent owned by Lloyd Morrison and 20 per cent by Saville, earned fees of $5.4 million in the latest June year and $4.6 million in the previous year. Saville's ownership of the management company has since increased to 30 per cent. Saville has been involved in important investments with Infratil. In 1998 NZ Airports, which was 40 per cent owned by Infratil and 60 per cent owned by interests associated with Saville, purchased 66 per cent of Wellington International Airport from the Crown. A few months later Infratil purchased Saville's 60 per cent interest in NZ Airports for a combination of cash, bonds and warrants. Saville received 31.1 million warrants that entitled him to acquire more Infratil shares at $1.40 each. These warrants were the subject of a resolution at Infratil's special meeting this week. In January 2001 Infratil and parties associated with Saville purchased Glasgow Prestwick International Airport for £34.5 million. The purchase was funded by £22 million of equity and £12.5 million of debt with Infratil supplying 67.3 per cent of the equity and Saville 32.7 per cent. The price equalled £1.11 per share. The first resolution at this week's meeting was the proposal for Infratil to purchase Saville's interests in Glasgow Prestwick. Just nine days before the meeting the airport issued a profit warning and Saville's sale price was reduced from £2.34 to £2.06 a share. This shaved his profit by approximately $4 million. The second item on the agenda was the proposed increase in Saville's direct holding in Infratil from 7.5 per cent to up to 20.5 per cent, following the exercise of the 31 million warrants acquired through the Wellington Airport deal. Saville's total voting holdings, including his associated interests, can increase from 18.4 per cent to an upper limit of 29.9 per cent as a consequence and he has made nearly $40 million from the warrants alone. Under the Takeovers Code, a purchaser is required to make a takeover offer once it obtains in excess of 20 per cent of the voting securities, including associate party holdings, unless shareholders exempt the purchaser from making an offer. Saville received an exemption on Wednesday without a single question from the floor or dissenting vote in a show of hands. Infratil argues that the vote was fairly technical because Saville already held in excess of 20 per cent of the company, if the warrants are classified as capital. That is true but the warrants had no voting rights and as far as the Takeovers Code is concerned, it is voting rights that matter. Saville and Morrison have worked well together (Finmedia and Utilico International both use Morrison's Wellington office as their primary address) but the latter is still in the drivers seat at Infratil. Shareholders can expect more look-a-like Wellington and Glasgow Prestwick Airport deals with Infratil and Saville both taking a shareholding. This has allowed Infratil to diversify its risk and given Saville an exit strategy and the ability to make money for his investment vehicles. * Disclosure of interest: none * Email Brian Gaynor [ Next Thread | Previous Thread | Next Message | Previous Message ] |
| Subject | Author | Date |
| ERG looks ahead with $67m raising=five-for-four=issue of shares at 20c apiece | July 2, 2004 | Friday, July 02, 06:59:23pm |