Deals, mergers and downfalls

  • 28/12/2016
Deals, mergers and downfalls

High-flyers came crashing down to earth, big deals were done and media unions proposed in a busy year of business.

Done deals

The year was studded with multi-million dollar acquisitions - some domestic and some offshore - and one of those snapped up had very humble beginnings.

Petrol station chain Z Energy led the way after its $785 million deal to buy the Chevron's Caltex and Challenge! brands got the green light from the regulator. The approval was conditional on it selling 19 service stations and a truck stop.

Brendan Lindsay, who began trading from his garage and slept in his car on business trips, agreed to sell his Sistema kitchen plastics company to US giant Newell Brands for $660m. As part of the deal, Newell agreed to retain manufacturing in the firm's state-of-the-art Auckland plant for the next 20 years, preserving hundreds of local jobs.

In return for selling 47 percent of Kiwibank to the NZ Superannuation Fund and ACC, NZ Post pocketed almost $500m from the deal. The national pension fund grabbed a quarter of the bank's holding company and ACC took a 22 percent stake to keep the bank in Kiwi hands and give it the ability to help fund its ambitions.

Other notable deals included Fletcher's $303m purchase of roading company Higgins, approval for Silver Ferns Farm to sell half of the meat processor to Chinese company Shanghai Maling for $261m, the sale of Strait Shipping to an Australian private equity firm and Air NZ paying US$35 million to settle a class-action lawsuit in the US over cargo fuel and security surcharges.

Caltex Australia also said it would buy Australian-owned Gull New Zealand for $340m, subject to approval, in 2017.

Media mergers

The rapidly changing media landscape was the catalyst for two potentially groundbreaking mergers but both met resistance.

Fairfax and NZME announced in September that the country's two dominant media players were looking to merge in an effort to unite against the offshore digital ad-grab by the likes of Facebook and Google. Under the proposal NZME would pay $55m in cash and issue shares to give Australia's Fairfax Media a 41 percent stake in the merged business. But competitors are against it and the regulator in November said it was likely to oppose the merger arguing it would substantially lessen competition in a number of markets, including those for premium digital advertising, advertising in Sunday and community newspapers, and would likely lead to a paywall on one of the news websites. A final decision is due in March.

The Commerce Commission is also lukewarm on a planned tie-up between Vodafone NZ and pay-TV operator Sky TV. Sky plans to buy the telco Vodafone New Zealand for $3.44 billion in cash and shares in a reverse takeover. Vodafone's British parent group would own 51 percent of Sky's shares, and Sky would get all of Vodafone New Zealand's shares and assets - creating one company controlled by Vodafone. The regulator said it wasn't satisfied the deal wouldn't substantially reduce competition, saying while consumers may benefit from cheap services at first, other broadband and mobile providers could lose the ability to build scale in their businesses and become weaker rivals. A final decision is due in February.

Belly up

While media companies were looking to merge to ensure their future in a converged environment two former high-flyers came crashing down in 2016.

Children's clothing retailer Pumpkin Patch, which had been the darling of the stockmarket not so long ago, was placed into administration and no buyers emerged for the business. Its shares were valued at $4.95 in January 2007 - valuing the company at $830 million - but were worth just 6 cents when administrators were appointed in October.

Crime fighting software company Wynyard followed a similar story with shares slumping to 21.5 cents by the time the administrators were called in. The tech stock had climbed as high as $3.12 in 2014 - putting its market capitalisation at $340m - after listing at $1.15 a year earlier. But it went into voluntary administration in the same week as Pumpkin Patch after revenue failed to match soaring costs and the board decided against securing emergency funds to keep it going. Shareholders have been told they have lost everything and a class action against the directors has been launched.

A land of milk and apples

Farmers have been doing it tough for a few years, especially those in dairy that got in when milk prices were booming and have since been laden with high debt while prices plunged. But after two years of payouts that failed to reach the break-even point for most things are looking up. Fonterra lifted its forecast payout to $6 per kilogram of milk solids at the end of the year which economists reckon will add an extra $3.8b to New Zealand's economy. Prices for whole milk powder have risen by close to 75 percent at auction since July and some think prices will continue to strengthen in 2017.

While farmer are licking their lips, apple growers are cranking out fruit with the largest export crop set for 2017. The bumper harvest of 21.5 million cartons is set to reap $800m in export earnings as the sector tracks ahead of its target to become a $1b industry by 2022.