Monday 8th January 2018
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King Country Energy, the leading electricity generator and retailer in the King Country, Waitomo and Ruapehu regions, said its independent committee recommends shareholders accept a joint venture takeover offer.
The energy company's two largest shareholders, Tauranga-based Trustpower, which owns 65 percent, and King Country Electric Power Trust, which owns 19.98 percent, have teamed up to offer $5 a share for the remaining shares which trade on the Unlisted platform.
An independent committee of the King Country Energy board unanimously recommends that shareholders accept the takeover offer, Toby Stevenson, chair of the board and the independent committee, said in a statement posted on the Unlisted market. The offer price is "comfortably above" the $4.92 midpoint of the value range of $4.37-to-$5.47 a share assessed by independent adviser Simmons Corporate Finance and represents a premium to King Country Energy's share trading prices on Unlisted, he said.
The takeover offer for King Country Energy follows Trustpower's earlier bid in 2015 when it secured the 54 percent cornerstone stake owned by Todd Corp's Nova Energy and the latest move will allow the joint venture to mop up the remaining 14.95 percent from minority shareholders and take full control. Trustpower sees King Country Energy's five small to medium-sized North Island hydro power stations as a good strategic fit with its 29 New Zealand hydro stations and it already operates the power stations under management services agreements.
If the takeover is successful, the joint venture will delist King Country Energy from Unlisted, install its own board, and assess whether to sell its retail business. The independent adviser's report noted that there are currently 32 electricity retailers in New Zealand, with King Country Energy holding just a 0.8 percent share of the market compared with Trustpower's 12.2 percent share.
The report said the joint venture could save about $400,000 a year in administration costs by removing King Country Energy from Unlisted, because it wouldn't incur listing fees, would face reduced share registry costs and could choose not to have any independent directors on its board. It could also save about $1 million a year if Trustpower took over management, reducing or disbanding the company's senior management team and corporate development activities. Other operational savings were also likely, it said.
The offer was an opportunity for shareholders to realise cash for their investment in a thinly traded share, without any brokerage costs, at a 13 percent premium on the levels that the shares have traded in the past year prior to the offer. The likelihood of an alternative takeover offer or an increase in the current offer price is "remote", it said.
"The offer price aligns with our assessment of the value of King Country Energy's shares," the independent adviser's report said.
King Country Energy, which holds the generation and retail businesses once owned by the local power board, last traded on Unlisted at $4.95 on Jan. 4, valuing the company at $125 million. Trustpower, originated from the former Tauranga Electric Power Board, last traded at $6.02 on the NZX, valuing the company at $1.88 billion.
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