Infratil bid ‘just too low’ — Forbarr

Wealth manager backs firm’s reaction to Aussie offer

It’s good, in away, that Aussie Super have highlighted

the underlying value [of Infratil]. Neil Paviour-smith, Forsyth Barr

The head of a Kiwi wealth manager has backed Infratil’s refusal to open its books to Australiansuper, calling the pension provider’s current takeover bid “insufficient”.

Last week Australiansuper revealed it had made two approaches for Infratil, an infrastructure fund with assets ranging from clean energy to airports, the second valuing Infratil at around $5.4 billion. The offer sent Infratil’s shares surging above $7.

Infratil said the offer was not adequate and they did not expect further engagement at the current bid level.

But the board of the Wellingtonbased fund has come under pressure from some fund managers to discuss the bid with Australiansuper further.

As the offer became public, stateowned fund manager ACC said the premium to Infratil’s recent share price made it worthwhile for Infratil’s board to engage with the Australians.

Other shareholders have said while the price offer may not be enough to reach a deal, Infratil should be open to talks.

Neil Paviour-smith, the managing director of Forsyth Barr, said it was clear that there had been a level of engagement between Infratil and Australiansuper, but what the Australians wanted was for Infratil to open its books to allow due diligence.

“I think at this stage the offer insufficient,” Paviour-smith said.

“It’s good, in a way, that Aussie Super have highlighted the underlying value . . . The shareholders have benefited from the circumstances the company’s in, but the current price [being offered] is just too low.”

Yesterday analysts at Forsyth Barr released a note raising its target price on Infratil to $7.70, above the Australian offer price. The note outlined

is what its analysts saw as a range of likely scenarios which they said could result in Infratil’s shares being worth between $6.25 and $10.

Infratil had invested in communicating with its large base of retail investors, making it a popular holding among its clients, Paviour-smith said.

“The number one thing they do well is they deliver outstanding investment returns, which they’ve done over a long period of time. What your shareholders are ultimately looking for is a really good investment and Infratil has delivered that.”

At the end of June, it had delivered 19.1 per cent compounding annual return over a decade, he said. “That puts the company up amongst other high performers like Ryman [Healthcare], Ebos, Mainfreight, Port of Tauranga over that timeframe.

“You’re talking about a company that’s in the top half dozen or so of our leading companies over the last decade, in terms of delivering shareholders returns,” Paviour-smith said.

“I think investors like the underlying asset exposure of high-quality assets. I think they back the board and management in terms of their ability to sustain the performance and . . . the fact that the returns have been consistently good along that timeframe.”

Forsyth Barr’s services cover more than $20b of assets for its clients, with 22 offices nationwide. The exact holding of Infratil shares among its clients was unclear but Paviour-smith said the holding was significant.

“Infratil is one of our larger holdings amongst our client portfolios. It has been for a long time. We like the fact that it provides that diversified underlying exposure and, obviously, the return on top,” he said.

“I think investors will be mindful that if you were going to accept an offer that isn’t perhaps capturing some of that potential . . . it’s going to be difficult for Aussie Super at that current pricing.”

Morrison & Co, the investment bank founded by the late Lloyd Morrison which has run Infratil from the start, has a management contract which attracts significant annual fees. ACC clashed with the company over the fees at its AGM this year.

Paviour-smith believed investors did not mind incentives for strong performance.

He predicted the independent directors of Infratil would continue to monitor whether the fees were fair.

Infratil chairman Mark Tume last week confirmed Infratil’s 18 per cent return per annum was after tax and after all management fees.

“As it always has, the Infratil board will continue to consider all portfolio options and proposals that maximise shareholder value.” A subcommittee of independent directors had been set up to assess the offer, he added.