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MARKET CLOSE: Tegel jumps 37% on takeover offer; Westpac, ANZ drop as banking scandal continues

Thursday 26th April 2018

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New Zealand shares dipped with Westpac Banking Corp and Australia & New Zealand Banking Group down as the banking scandal across the Tasman deepens, while Tegel Group surged on a planned takeover offer.


The S&P/NZX50 Index fell 6.59 points, or 0.1 percent, to 8,282.05. Within the index, 21 stocks fell, 17 rose, and 12 were unchanged. Turnover was $163.6 million.


The biggest story of the day was outside the benchmark index, where Tegel Group surged 37 percent to $1.12. Philippines-based poultry group Bounty Fresh Foods will mount a $437.8 million takeover bid for Tegel at $1.23, with the share price having been beaten up after multiple earnings downgrades.


The Filippino company already has Tegel's cornerstone shareholder Affinity Equity Partners on board, signing a lock-up agreement with the holding company Claris Investments for a 45 percent stake. The offer is a premium to the 82 cents the stock closed at on Tuesday, although it's still a discount to the $1.55 price the shares sold at in the 2016 initial public offering. 


Bounty Fresh will pursue a full takeover when it formally lodges an offer, but will accept a 50 percent stake, the notice of intention document shows. Other conditions include securing Overseas Investment Office approval and for Tegel to meet certain earnings thresholds. 


"It's trading little below the bid price on reasonable volume. A number of businesses within New Zealand stand out as being attractive to corporates globally, and Tegel obviously resonates pretty well," said Shane Solly, director at Harbour Asset Management. "Bounty being a Philippines-based organisation obviously it has to go through Overseas Investment Office, it's an interesting test of the new government's increased scrutiny."


Tegel saw $15 million in turnover today, making it the fifth-most traded stock on the NZX All Capital Index.


Westpac led the benchmark lower, down 3.4 percent to $30.05, while fellow Australian-owned bank ANZ dropped 1.9 percent to $28.40. In Australia, the sector has come under fire over revelations made at a Royal Commission public inquiry into misconduct within the banking and finance industries. AMP rose 0.2 percent to $4.34. 


"They're really getting smashed, coming under some real pressure, that has been driven very much by the Royal Commission dredging up information," Solly said. "There were some quite big downgrades in earnings forecasts for Westpac out overnight. For Westpac, the royal commission has raised some questions about the quality of its mortgage book, what people have actually gone through to provide lending that they perhaps shouldn't have."


Sky Network Television dropped 2.7 percent to $2.20, while Pushpay Holdings fell 2 percent to $4.02 and Ryman Healthcare declined 1.8 percent to $10.41.


Auckland International Airport fell 0.3 percent to $6.18. In an initial finding published this morning, the Commerce Commission said it is concerned the airport is planning to make excessive profits on its regulated assets, though the country's largest airport says it's optimistic it can convince the regulator that its plans to earn returns above a target benchmark will be successful.


The airport is arguing its risk profile has changed as it enters an extended period of major new capital developments, while the regulator said today that the company is targeting a return on its regulated asset base of 7.06 percent over the period 1 July 2017 to 30 June 2022 against the commission's mid-point benchmark of 6.41 percent, meaning it could earn an extra $47 million in profits after tax. A final decision will be published in September.


The best performer was Gentrack Group, which rose 3.6 percent to $6.84.


Fisher & Paykel Healthcare Corp gained 1.9 percent to $12.43.


"We're seeing a bit of strength in Fisher & Paykel - they had some recent positive releases with research about COPD [chronic obstructive pulmonary disease, which includes emphysema, chronic bronchitis and chronic asthma] and using their humidifier so that's the basis for many people, including ourselves, to think positive in the long term on Fisher & Paykel. You've certainly seen a bit of a bounce there," Solly said.


Mainfreight gained 1.8 percent to $24.22, TradeMe Group rose 1.6 percent to $4.54, and Skycity Entertainment Group advanced 1.3 percent to $3.99.


On the ASX at 5:15pm New Zealand time, Christchurch-based CropLogic was unchanged at 6 Australian cents. Its managing director Jamie Cairns has resigned with immediate effect, with the company's chief financial officer James Cooper-Jones appointed as acting chief executive.


ASX-listed Volpara Health Technologies is in a trading halt at 69 Australian cents while the Kiwi digital health firm raises capital from institutional investors ahead of next week's quarterly cash flow report. 



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