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MARKET CLOSE: NZ shares down, Sky TV continues to weaken while Comvita, A2 gain

Friday 3rd March 2017

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New Zealand shares dipped, with Sky Network Television weaker after its merger with Vodafone NZ was denied, while A2 Milk Co and Synlait Milk gained on a closer supply deal.

The S&P/NZX50 Index dropped 14.97 points, or 0.2 percent, to 7,160.86. Within the index, 25 stocks fell, 16 rose, and nine were unchanged. Turnover was $134.8 million.

Sky Network Television was the worst performer, down 2.7 percent to $3.61. Port of Tauranga dropped 2.3 percent to $4.29 and Stride Property declined 2.2 percent to $1.80.

Kiwi Property Group dropped 0.4 percent to $1.415, and NPT was unchanged at 63 cents. Negotiations between Kiwi Property Group and NPT over a property deal are progressing constructively but taking longer than expected, with a shareholder meeting now planned for April, NPT says. If the Kiwi Property transaction is backed by NPT shareholders, it would expand the company's portfolio to $400 million from its current $170 million, and more than double distributable income to $16.8 million by 2020 from an expected $5.8 million in the 2017 financial year.

Comvita was the best performer, up 2.4 percent to $7.67.

A2 Milk Co gained 1.3 percent to $2.40, while Synlait Milk rose 4.5 percent to $3.24. A2 has bought an 8.2 percent stake in Synlait at a small premium, building on an existing supply agreement between the milk marketer and dairy processor. 

Sydney-headquartered A2 bought 14.6 million shares at $3.275 apiece from Dutch dairy processor Royal FrieslandCampina, a 5.6 percent premium to yesterday's closing price of $3.10 and 3 percent premium to the one-month volume weighted average price. The Dutch company, which counts Fonterra Cooperative boss Theo Spierings as alumni, took a stake in Synlait when it went public in 2013 buying shares at $2.20 apiece in the float, but signalled a change of tack in the investment when it didn't acquire further stock in last year's capital raising. 

"They're confirming the partnership a bit more, that's good news for both parties really and they've both picked up on the back of it," said Grant Davies, investment advisor at Hamilton Hindin Greene, "Synlait does a lot of the processing for the formula that goes to China, a big part of A2's growth in the long term is going to come through that avenue. Having said that, A2 use local processors and local cows in the UK and Australia where they sell fresh milk, so they're not completely tied to Synlait but it helps both companies to have a strong partner working together to export their product."

Restaurant Brands New Zealand rose 0.4 percent to $5.35. It says it has gained approval from Yum! Brands, the parent company of Pizza Hut and Taco Bell, to acquire the only franchisee for those stores in Hawaii but the time taken for sign-off means full-year profit was at the lower end of guidance.

Settlement is expected in the next two weeks, the Auckland-based company said in a statement. The delay means profit excluding non-trading items in the year ended Feb. 27 was at the lower end of the company's guidance of $30 million to $32 million, it said.

Outside the benchmark index, Tower was unchanged at $1.32. ASX-listed insurer Suncorp Group said its proposed takeover of the NZX-listed general insurer would be "unlikely to materially change the competitive dynamic" in New Zealand. The offer, worth a total $219.3 million, trumps a $197 million deal already on the table and backed by Tower's board and major shareholders Salt Funds Management and Accident Compensation Corp to sell to Canada's Fairfax Financial Holdings at $1.17 apiece.

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