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UPDATE: Kirk's shareholder Cushing reserves judgment on asset sale

Monday 29th October 2012

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Kirkcaldie & Stains' biggest shareholder, H&G, the investment vehicle for the Cushing family, is reserving judgment on a major asset sale by the retailer which drove the share price up 23% to a four-and-a-half year high.

David Cushing says detail is too scant on the company's sale of its Harbour City Centre building in Wellington, so his family, with a 19.9% holding, is adopting a wait-and-see position to the transformational deal.

He was "not happy" with the $2.90 the shares rose to on Monday morning, saying the company was worth more than that. The family paid about $2.60 a share overall for its holding.

The share price rose to $3.20, up 23%, by early afternoon.

After the close of trading on Friday, the company announced the sale of the Harbour City Centre building in Wellington but it did not name a buyer, a price or say what it will do the proceeds.

The building, across the road from the iconic Kirks store and housing some of its departments, had an August 2011 valuation of $46.5 million, which was expected to increase to $48.7 million when earthquake strengthening was completed, the company's 2011 accounts show.

That is more than the $26.7 million the whole company was worth at Friday's share price.

"They didn't say much. There are important details that we need to assess," Cushing told BusinessDesk. "We are open-minded on any proposal that unlocks value for shareholders. Saying that, we consider the Harbour City Centre to be premier real estate."

He says the building has a fantastic location, blue-chip tenants and long-term leases, and it was being earthquake strengthened to the top of the building code.

He says listed property companies are trading at a small premium to their net asset backing.

"We are going to wait and see what develops. I'm sure the chairman will be in touch." He expects the company will carry on retailing, even though its most valuable asset has been the Harbour City Centre.

"I think the retail business certainly has a future and [managing director] John Milford is doing a great job. I'm optimistic that the business can do better."

He was certain that a capital return to shareholders would be an option being mulled by directors.

Grant Williamson at Hamilton, Hindin, Greene says there would be a number of ways to return money to shareholders. "It has always been touted that this company is asset rich. Investors will like the fact that they are liquidating."

The deal is subject to due diligence and board and shareholder approval.

Milford said the buyer would not need Overseas Investment Office approval.

He said the transaction was conditional on the approval of both boards and it would require a 75 percent vote of Kirks' shareholders.

It was too early to say what the company would do with the proceeds of the transaction.

The company intended to continue as a retailer, he said.

ACC held 4.7 percent as at Oct 4 last year. LG Investments is also a large shareholder.

Kirkcaldie turned down a bid for the retail business earlier this year, saying the parties had "substantially different" views on the unit's value. It had been looking to expand its property arm.

BusinessDesk.co.nz

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


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