The details of the share float have now been announced. According to stuff:
The Government has poured sugar on its offer of shares in Genesis Energy, pricing the company in a range below analyst valuations last month and offering a bonus share for every 15 held for just a year.
Details of the initial public offer were announced today by Finance Minister Bill English, revealing an offer price of $1.35-$1.65 a share, valuing Genesis at $1.35 billion to $1.65 billion.
The final price will be set on March 28 and investors will be able to buy shares from March 29 to April 11. The company is due to list on the NZX and the ASX on April 17.
At the offer price range, Genesis shares are expected to have a gross dividend yield of 13.5 to 16.5 per cent.
The offer terms value Genesis potentially well below the range expected by analysts from UBS and First NZ Capital. UBS had valued Genesis at $1.6b-$1.9b, while First NZ put its range at $1.4b-$1.8b.
The bonus share offer terms are sweeter than those for Mighty River Power, the first of the state-owned power companies to float last May.
Investors in Mighty River had to hold their stock for two years before receiving the bonus of one share for every 25. The maximum bonus will be capped at 2000 shares per investor.
While the Government sold down 49 per cent of Mighty River and Meridian Energy in the previous offers, it may sell as little as 30 per cent of Genesis, depending on the level of demand.
The amount of shares it will sell will be decided on March 26.
I posted about this earlier. The yield previously was anticipated to be 9% but is now anticipated to be around 15%. The anticipated value of the company now has a mid point of $1.5 billion compared to previous estimates of up to $2 billion. If only 30% of the shares are sold this will result in $500 million being paid. With a one for 15 loyalty share offer the sale proceeds could be $467 million less cost of sale. The loyalty share offer is much more generous than the one in 25 share bonus offered during the Meridian float. Profits will have to increase from $114 million last year to well over $200 million for the yield figure to be reached. And you have to wonder why you would sell a share returning 15% to pay down debt where you are paying interest at 5% or so.
Bill English was on Morning Report this morning. He was almost apologetic that Mighty River Power shareholders have done so badly and hinted that the generosity shown in this float somehow made up for things. The Government is making sure that the share float is a success for the corporates and rich individuals who are buying shares. Funny that but I thought they should be looking after the people of New Zealand instead.
Meanwhile gross Crown debt is $83 billion. The share floats have done no more than stopped debt running slightly higher while at the same time divested New Zealand of income earning assets and enriched the already wealthy and the merchant bankers engaged to complete the sale.
And they say that National has the skills to handle the economy?