Your wealth: Aquiline's directors will learn their lesson

Peter V O'Brien

Friday 30th April 2004

The investment establishment's reaction to Aquiline Holdings' $90 million offer of converting preference shares and redeemable preference shares was predictable but understandable.

A company that rejected stock exchange listing, reckoned directors should set the share price and claimed its growth strategy would give results well beyond those of the formal market was guaranteed to cause nasal blockage among traditionalists.

It could be that Aquiline's insistence on non-listing and internal share price calculations were no more than shoving it to NZX's closed shop.

The business about directors setting the share price every six months was obviously a gimmick.

Aquiline's publicity was clear about buyers and sellers' freedom to arrange their own deals.

The facts, if brokers and fund managers had cared to go beyond Pavlovian responses, would have acknowledged the same.

Talk of amazing growth, in terms of share price and market capitalisation, was open to objection, because the directors set the price, which produced the capitalisation.

Critics overlooked (or perhaps were designed to overlook) a fundamental point.

Aquiline says it owns 14 importing companies involved in "foodstuffs, textiles, office supplies, electronics, chemicals, hardware and other industrial products."

More would apparently be bought.

Given the current mix is curiously close to that of a Hawke's Bay Company diversified investment group of 15 years ago and Aquiline is Bay-based, there are interesting coincidences.

Aquiline's directors will eventually learn a probably costly lesson.

It is impossible to run a host of diversified businesses, irrespective of apparent subsidiaries' management skills and investment theory.

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