MARKET CLOSE: Fight for Farming Systems buoys market

Monday 16th August 2010

New Zealand stocks rose for the second session, as news that NZ Farming Systems Uruguay had received another buy-out offer helped the market shrug off worse-than-expected GDP data from Japan.

The NZX 50 closed 8.4 points up, or 0.3%, to 3023.5. Within the index, 32 stocks rose, five fell and 13 were unchanged. Turnover was $50.4 million.

Japan GDP rose an annualised 0.4% in the three months ended June 30, less than a fifth of the pace forecast by economists, fuelling fears that the global recovery is on rocky ground. Japan’s Nikkei was last trading 0.8% down at 9180.7 and Australia’s S&P/ASX 200 was down 0.3% at 4446.9.

Locally, M&A activity helped the bourse close in positive territory after Union Agriculture (UAG), a private entity formed to develop prime agriculture land, made an offer of 60 cents cash per Farming Systems (NZX: NZS ) share. The bid trumps 18.45% shareholder Olam’s offer of 55 cents per share. Shares in Farming Systems rose 8.6% to 63 cents, leading gains on the day.

“We now have two bidders competing for Farming Systems, so there is some real M&A activity in the New Zealand market, which is good to see,” said Grant Williamson, a director at Hamilton Hindin Greene. “The shares are trading above the offer price, so investors must be thinking that there will be a follow up offer from Olam. That’s pure speculation at this stage, but it certainly wouldn’t surprise me “

Farming Systems' board has previously advised shareholders not to sell to Olam until they receive target company statements and an independent appraisal and it reiterated its advice today.

PGG Wrightson (NZX: PGW ) rose 3.8% to 54 cents. Olam previously signed an agreement with the rural services company to buy its 11.5% stake in Farming Systems for $15.5 million, well below the 60 cents offer.

Pyne Gould (NZX: PGC ), the financial and rural services company, rose 4.9% to 43 cents after the company said earnings in its latest year were about 5% higher than forecast despite increased impairments.

Profit was $22 million for the year ending 30 June, up from $20.9 million previously, boosted by a $17 million surge in net operating income, the financial and rural services company said in a statement.

Freightways (NZX: FRE ) rose 2.6% to $2.75 after the company announced its full year results, which were broadly in line with expectations. The company posted a 33% drop in profit as the tepid economy sapped demand for express packages and the courier company took a charge for changes to tax rules.

Net income fell to $23.2 million in the 12 months ended June 30, from $34.6 million a year earlier.

Air New Zealand (NZX: AIR ) rose 1.8% to $1.16 on news that Pacific Blue, the local unit of Richard Branson’s Virgin Airlines, is quitting New Zealand’s domestic routes in October.

Pacific Blue said in a statement that it is “removing capacity from services which are underperforming” and instead will concentrate on international short and medium-haul routes between Australia, New Zealand, the Pacific Islands, and South East Asia.

DNZ Property Fund's (NZX: DNZ ) shares ended their first day of trading at 99 cents, 2.1% above their issue price.

Fletcher Building (NZX: FBU ) fell 1.6% to $7.23, leading declines on the day as investors sold up ahead of what is expected to be a weak earnings announcement, Williamson said.

ING Property Trust (NZX: ING ) fell 1.5% to 68 cents after the listed property investor managed by ANZ-owned fund manager ING on Friday said it will recognise a $96.8 million hit to its bottom line from the government’s changes.

Restaurant Brands (NZX: RBD ) fell 1.2% to $2.48, Warehouse (NZX: WHS ) fell 0.9% to $3.46 and medical equipment manufacturer F&P Healthcare (NZX: FPH ) fell 0.4% to $2.87.

Businesswire.co.nz

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