MARKET CLOSE: NZ shares fall as Spark seen threatened by Sky TV-Vodafone tie-up

Wednesday 8th June 2016

New Zealand shares fell, led by Spark New Zealand on concern it will face a stronger rival if talks between Sky Network Television and Vodafone Group result in a formal alliance. SkyCity Casino Group rose after completing its $263 million capital raising.

The S&P/NZX 50 Index fell 45.80 points, or 0.7 percent, to 6991.51. Within the index, 23 stocks fell, 18 rose and nine were unchanged. Turnover was $172 million.

Spark dropped 4.3 percent to $3.485 after Sky TV, the nation's largest pay-TV company, said it is in talks with Vodafone about potentially combining their New Zealand assets. Sky TV kept its shares in a trading halt after the announcement, having last traded at $4.47, having said the two companies were in discussions “regarding a potential transaction involving a combination of the businesses of Sky and Vodafone New Zealand.”

The stock price move "correlated with the news that Sky TV and Vodafone were looking at each other and what that would mean as a stronger competitor for Spark," said James Lindsay, senior portfolio manager at Nikko Asset Management. "Sky has been talking about doing something from a capital management or asset buying perspective. That's unlikely to be an outright bid for Vodafone's assets but a merger or scheme of arrangement seems pretty logical." A combined Vodafone/Sky TV would be able to reduce costs such as IT, he said.

SkyCity rose 2.4 percent to $4.73. Institutional investors have paid a small premium to mop up remaining SkyCity shares that weren’t taken up in the retail component of the casino company’s one-for-10, $263 million capital raising. Retail shareholders took up about $49 million of the $85 million they were offered in the retail component of the offer at $4.40 a share, and the remaining $36 million was raised from institutions in a bookbuild at $4.66 a share.

"The sale seemed to be pretty well supported," Lindsay said.

Kathmandu, the outdoor clothing chain, fell 2.7 percent to $1.46. Kathmandu is suing its biggest shareholder, Briscoe Group, in an effort to recoup what it spent fending off the rival retailer’s failed takeover attempt.The Christchurch-based outdoor equipment chain has filed a claim in the High Court to claw back $2.7 million and A$446,000 of expenses racked up when it fended off Briscoe’s hostile takeover, it said today.

A2 Milk gained 7.9 percent to $1.51, having tumbled about 9 percent yesterday in continued volatile trading. Lindsay said the stock is popular with retail investors, "and their optimism bids it up and vice versa when sentiment falls."

Cavalier was unchanged at 66 cents after rival Godfrey Hirst lost a High Court appeal against a wool scouring merger that would give a Cavalier-linked business dominance of the New Zealand industry.

Meridian Energy fell 2.6 percent to $2.63, Mighty River Power dropped 1.6 percent to $3 and Contact Energy fell 1.1 percent to $5.34.

Tower fell 2.6 percent to $1.53, Orion health Group dropped 1.9 percent to $5.09 and Ryman Healthcare declined 1.7 percent to $9.62.

BusinessDesk.co.nz

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