Contact offer 'full and fair' - Edison

By Phil Boeyen, ShareChat Business News Editor

Friday 12th October 2001

Edison Mission Energy says the price it is offering to take 100% of Contact Energy (NZSE: CEN) is a fair one.

The cornerstone shareholder, which already owns 51% of Contact, is offering $3.85 a share for the rest of the shares. The price assumes shareholders will not receive a final dividend from the company for the financial year ended September.

The offer is well below the $5.00 that EME paid for its initial 40% stake in 1999.

"We believe $3.85 is a full and fair price, providing shareholders with a very good return and making it attractive for them to sell," says Robert Driscoll, EME's Asia Pacific spokesman.

"For people that invested in Contact at the float in 1999, the offer represents a total return of 35% on the listing price of $3.10, including dividends paid by Contact. It is 40 cents above Contact's share price at yesterday's close."

Mr Driscoll says Contact's independent directors will now consider the offer and appoint an independent advisor to report on it.

"It is our hope their evaluation of our offer will be able to be sent to shareholders with our formal offer by early November. Shareholders will only have to November 30 to consider our offer, along with the independent directors' evaluation, and respond to it. Our aim is for the offer to be completed and for shareholders to be paid by mid-December.

Mr Driscoll says the price the company is prepared to pay is based on a detailed analysis of the business going forward and has nothing to do with the recent cold, dry winter which is expected to have improved Contact's bottom-line.

"We are not driven by short-term gains."

He also claims the offer is above the average valuation price of a number of brokers.

The company's offer, which will be sent to around 136,000 investors, applies to some 280 million shares and is conditional on reaching acceptances of 90.1%.

If accepted the takeover could pump up to $1 billion back into the investment market although as so many of Contact's shareholders are first time investors they may decide to spend the cash rather than reinvest it.

EME says the timing of the offer has been decided on a number of factors, including the stability of the electricity market.

"EME is confident that New Zealand's political and economic climate, environmental policy and regulatory regime for the electricity industry are positive for long-term investment and we are confident Contact will continue to be a top-performing company."

Mr Driscoll dismisses the argument that EME should be offering more for Contact because it will have control, claiming it paid a premium for control when it bought into the company at $5.00 per share.

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