Arm wrestle for Rural Equities

Rob Hosking

Friday 21st May 2004

The arm-wrestle is under way for control of Rural Equities.
St Laurence Equities confirmed this morning it is going after the rural property investor and manager, offering shareholders $1.50 cash per share.

Shareholders have previously been offered $1.25 from H&G Limited, a company owned by Sir Selwyn and David Cushing.

"We see Rural Equities as a fund manager but it's a manger of rural property. And that's right where our interest is," says St Laurence managing director Kevin Podmore.

St Laurence focuses mostly on property-related investments.
The firm is particularly interested in Rural Equities' ownership of a firm which managers the New Zealand Rural Property Trust, Podmore says.

Some investors in that trust - disappointed with persistent low performance - have called for it to be wound up, and Podmore does not rule that out, although he says there should be other ways of dealing with it.

"I suppose the challenge is to align the interests of the manager and the investors. The value for the manager is the ongoing management contract. "I don't have a firm view of this at the moment, but maybe there's an opportunity to restructure the contracts so as to create an incentive to manage in a way that creates more value for investors."

Unlike the H&G bid, St Laurence, which is a partial takeover attempt, Podmore says St Laurence is bidding for all the shares.

"While St Laurence would prefer to own 100% of Rural Equities, the offer is not conditional on all shareholders accepting our price of $1.50 per share. We would be content with a shareholding of at least 50.1% in Rural Equities and would be long-term investors in the company."

The bid is partially based on an assessment by PriceWaterhouseCoopers late last year which concluded that fair value of the shares, for a controlling interest, would be between $1.30 and $1.69 per share, with a mid-point of around $1.49 per share.

Podmore says Rural Equites has been under-performing for some time, with units trading at an average of 43% below the PWC figure.

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