Pulse Energy investors get mixed messages on board's takeover view

Friday 27th November 2015

Pulse Energy investors have been given mixed messages in a split recommendation on whether to accept a takeover bid for the electricity retailer, where three of the company's four independent directors won't take up the offer.

Majority shareholder Buller Electricity, backed by Otago based lines company Pioneer Generation, has offered 11 cents per share, $1.10 for mandatory convertible notes, and 5 cents per option in the takeover, which closes on Dec. 16, and is conditional on reaching the 90 percent threshold needed to mop up the remaining stock. The shares last traded at 10.5 cents.

A committee of the board's independent directors Trevor Janes, James Hoseason, Joseph van Wijk and Peter Young couldn't agree on what to recommend to investors. Janes, who chaired the committee, Hoseason and Young recommended investors sell their shares and options, but couldn't make a recommendation on the convertible notes, while at the same time saying none of them would take up the offer. Hoseason and Janes hold about 5.4 percent of Pulse's shares on issue.

Van Wijk said he would be selling into the takeover, and recommended investors accept unless another party trumps Buller's bid.

Pulse ceded a controlling stake to Buller Electricity in 2011 to repay debt and provide capital for expansion after the minnow retailer ran out of cash and leaned on the shareholder to get it through. Buller Electricity is the local lines network company on the West Coast of the South Island. It reported an annual profit of $328,000 in the year to March 31, on operating revenue of $110 million, according to its 2015 annual report.

The independent adviser's report by Campbell Macpherson valued the shares at between 9.2 cents and 11.3 cents, the options at a maximum of 2.8 cents, and the notes at $1.11 to $1.15. The report said all three prices offered fell within its valuation ranges, but said investors would need to make up their own mind on whether to accept the offer.

BusinessDesk.co.nz

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