The English are also selling their assets cheaply

Written By: - Date published: 8:35 am, October 25th, 2013 - 23 comments
Categories: Privatisation - Tags:

asset_sales_protest

There are many troubling things about the Meridian share float.  Blowing $1.1 billion of our equity as well as the cost of selling the shares is just the start.  But you have to wonder if the price is too cheap.

For instance why wasn’t the float cancelled?  After all according to the offer document “[t]he Offer may also be withdrawn at any time before the allotment of Instalment Receipts in the absolute discretion of the Crown.”  My reading of the document is that the allotment occurs in a couple of days time.  Theoretically the Government should forgo the float and it it was thinking of the interests of the country it would do so.  Expect however political interests to trump any such thoughts.

The prospectus indicates that the return on investment for the first 12 months will be over 10%.  Get this, we are paying down debt with an interest rate of about 5% so that we can lose an income stream which in the first year will be twice that amount.

Over in the United Kingdom the tories are engaged in a similar process in selling a public asset for way less than it was estimated to be worth.  Royal Mail has recently been privatised at an enterprise value of £4.1 billion.  The trouble with this is that many Banks approached for a vaulation suggested that it is worth more than twice that amount.

According to Sky News:

JPMorgan told the Government earlier this year that it believed Royal Mail could be worth up to £10bn, including its debts, ahead of the postal operator’s privatisation.

Sky News has learnt that corporate financiers from the Wall Street banking giant presented a spectrum for Royal Mail’s value ranging from £7.75bn to £9.95bn – the top end of which was more than two-and-a-half times the price at which ministers ultimately sold shares in the company in the most important state asset sale for decades.

The Government sold shares in Royal Mail for 330p each earlier this month, valuing the company’s equity at £3.3bn.

Including its roughly £800m of net debt, the privatisation effectively attributed an enterprise value to the company of £4.1bn, above the average valuation of £3.6bn ascribed to it by the nearly two dozen firms which pitched to advise on the sell-off.

The Government has ridiculed these claims but the share price has soared from 330 p each earlier this month to around 530p a couple of days ago.  At this price the group’s value is about £6.1bn including net debt.

Billy Hayes, General secretary of the Communications Workers Union has said:

On the opening day of the flotation Vince Cable wrote off the undervaluation as froth. A week later, we were told it was the fault of the CWU. We now have a prima facie case of a conspiracy against the UK taxpayer who were opposed to the sale and have now been robbed of billions. In any other walk of life this would be a sacking offence and we call on Vince Cable to resign. A full inquiry should be launched into the mis-handling of this unnecessary privatisation by Vince Cable. We would also like the matter to be referred to the public accounts committee to scrutinise how badly the taxpayer has been left out of pocket.

What will be interesting is the information relied on by Cabinet to set Meridian’s share price.  I suspect that as in the UK the price was set low to make sure that the shares sold and to give a healthy return to investors.  It may be that National has followed the UK example.  Its obvious intent to make sure that the Genesis float succeeds is obviously a major consideration.

It is clear that in the United Kingdom and in New Zealand we have Governments intent on divesting collectively owned assets so that the wealthy can increase their wealth.

Shame on them.

23 comments on “The English are also selling their assets cheaply”

  1. Tat Loo 1

    Reruns of the standard international crony capitalist playbook. No concern for making even more workers unemployed during a Great Recession, no concern for extracting even more from society and from the environment when there is so little remaining to give.

    It’s like the elite class retreat into a Versailles stronghold brain funk and cannot get it into their heads re: self interest, properly understood.

    At the end of the day, no one is better off with mass economic and civil deterioration. No one is better off in a society where the infrastructure is falling apart and basic functions of a civilised nation (like the mail) are constantly degraded.

    When peoples’ belief in the civil religion of infinite progress is shaken, very interesting and unpredictable things will occur.

    • But that is the point Tat Loo.
      Self-interest properly understood is that the capitalists’ whole world is centred on their private accumulation. Their morality is circumscribed by private profit.
      Each capitalist pursues his/her self-interest at the expense of every other capitalist.
      There is no collective capitalist self-interest in the survival of ‘civil’ society let alone civilisation beyond the next quarter.
      The only class with a universal interest (not the sum of individual self-interest) in a public or common future is the working class that collectively produces social wealth.
      The interesting thing that will happen is when that collective class interest takes the form of a socialist ideology and penetrates the deep recesses of the bourgeois ideology.
      When that happens and the collective wealth producers expropriate the private wealth accumulators, the ennui and cynicism will be buried in the rush for superlatives.

  2. even the herald today has an editorial pointing out that this whole asset-sale drive..

    ..is not being done for reasons that come within a bulls’ roar of economic-sanity..

    ..but is purely being driven by ideology..

    ..and i will add what the herald left out..

    ..that these randite-scum doing this to our country/future/people..

    ..are traitors..of the worst sort..

    ..through and through..

    ..’the economically-literate right’…

    ..yeah..right..

    ..phillip ure..

    • Chooky 2.1

      +1….very suspicious….who is going to make a killingin the long term?….follow the money….Nact politicians’ ‘blind trusts’?…overseas banks like Goldman Sachs?…cronyist capitalist friends?

      ….all NZers should be GIVEN shares in their own companies or the Key /English Nact programme of NZers State Asset Sales should be rescinded

      It is traitorous and pure transfer of wealth, thieft…..what is happening

      • johnm 2.1.1

        Hi Chooky
        “It is traitorous and pure transfer of wealth, thieft…..what is happening”
        + 1,000,000% right!

      • SpaceMonkey 2.1.2

        Economic treason needs to be added to the Crimes Act.

        • johnm 2.1.2.1

          Hi SpaceMonkey
          Yes the only way to stop the likes of Shonkey and his GoldinSacks mates looting the Country, however it’s a bit late now- all those wannabe rich like Shonkey types vote for him to protect their rentier profits.

        • Murray Olsen 2.1.2.2

          NAct are thinking of that. They define it as joining a union.

    • thatguynz 2.2

      +1 PU..

    • Dumrse 2.3

      There is none so blind as those that will not see……

  3. Disraeli Gladstone 3

    To be fair, there was a cap put on place though so that many high-end investors didn’t recieve their shares in favour of family investors. To be equally fair the other way, a lot of those family investors then sold them to make a quick £300-400.

    But, the asset sale in Britain was done somewhat better. Employees were given shares for free and so on.

  4. The Gormless Fool formerly known as Oleolebiscuitbarrell 4

    So, you complain that MRP was sold at an overvalue and Mom and Dads have been diddled. With Meridian, the complaint is that they’ve been sold too cheaply and the vendor has been diddled. You really are in a no-lose situation.

    • Tat Loo 4.1

      Just points to the inadequacy of the thinking behind the National Government’s asset sales programme. They overshoot, they undershoot, but they cannot get it right.

    • mickysavage 4.2

      I am not sure that I have ever said that MRP was sold for too much although the process has left some mom and dad investors out of pocket.

  5. bad12 5

    KiwiPower tho will give a Government on behalf of the people the muscle necessary to regain much of the shareholding and control of the companies involved in the production of electricity,

    Mighty River Power’s slide in value continues, last night trading as low as $2.15 a share and only recovering this morning to $2.17,

    Given that slide and the market listing price of the next company up on the block i think we can expect the market to settle at a price for both companies somewhere in the realm of $1.70 over the short period,

    However, given the advent of the next Labour/Green Government introducing Legislation to the House,(hopefully within the first 100 days of office), which will enable KiwiPower to set by regulation the price of wholesale electricity i would fully expect the share price, considering the low offer which will be forthcoming for the 3rd sale having further diluted the market value of the current 2 companies already marketed, will upon that Legislation becoming Law have the market settle upon an average share price across the 3 of somewhere in the realm of 70 cents a share,

    Considering such a price alongside the ability of ACC and the Cullen Super-fund,(given an incoming Labour/Green Governments ability and inclination to restart contributions of a sizable amount into the latter), there is much to be said and even more to be gained from having the Finance Minister direct both those funds to have a mass of buy orders in for all 3 of those assets at that price,

    In essence the market value of a share in any one of these companies in the medium term is no more than the cost of a roll of toilet paper…

    • bad12 5.1

      Just as an add-on with regards the Cullen Super-fund, given that KiwiPower will in effect allow the next Government to somewhat dictate what the market price of the shares in all of the sold off electricity companies will be it can be then seen where even borrowing to allow contributions to this fund will produce a significantly robust return so as to justify such borrowing…

  6. greywarbler 6

    On asset sales –
    Bill Rosenberg presentation to trade unions – very good of course. Very informative. Good charts. Good stats and figures. Concise summary.
    union.org.nz/sites/union.org.nz/files/Privatisation%20presentation_0.ppt‎

    From report ‘Take Back the Track’ on the Second Roger Award in 2000 by Murray Horton (CAFCA) who was a railway worker himself from 1976 to 1991. (Shows how these right wing subversives used the Labour Party as a front to advance their own plots and to confuse trusting workers as to the real impact and intent of their machinations.)

    http://www.converge.org.nz/watchdog/97/1.htm
    Several commentators drew attention to the irony of calling the campaign “Save Rail”. I was a Railways worker and union official, in the early 1980s, when Richard Prebble, as Opposition rail spokesperson, barnstormed the country on just such a campaign. He headed a march of several thousand Railways workers through central Christchurch; the then union put tens of thousands of dollars into Labour’s 1984 election campaign funds.
    As Minister of Railways in the Labour government, Prebble promptly decimated the Railways (and the union disaffiliated from the Labour Party). “Save Rail” is a phrase that leaves a very bitter taste in the mouths of tens of thousands of former Railways workers.
    Prebble saved rail all right – he saved it for the transnationals and NZ Big Business asset strippers and profiteers who bought it for a song under the next Government and proceeded to reduce it to the anaemic creature that it is today.

    A blog on a documentary that went missing and caused angst and sacking for those involved ‘For the Public Good’. http://dimpost.wordpress.com/2011/03/07/bleg-2/
    on sale of public assets.

    • Murray Olsen 6.1

      I went to see Prebble and Lange at a Save the Rail rally in Auckland. Lange made a great speech about big rigs crowding the family Honda Civic off the road. I don’t think he believed a word he said. I think history has been far too kind to him.

      • greywarbler 6.1.1

        mo
        I think that his mo was to make interesting sweeping statements – caught peoples’ interest but really was a reagan-type populist figure.

  7. greywarbler 7

    I’m a bit green on some computer stuff and if someone else is also – to get Bill Rosenberg’s report in my comment above, highlight link and copy go into google and paste into header line on page and then the box to open the file will open for you to use.

  8. Rich 8

    It’s no good making a 10% return (taxable) if the price drops by 15%.

    “Dumb and Mad” investors, indeed.

Recent Comments

Recent Posts

  • More proof National not delivering for New Zealanders
    The Ministry of Social Development’s latest Household Incomes Report is more hard evidence of the growing poverty in New Zealand, says Leader of the Opposition Andrew Little. “National claims to be delivering for New Zealanders. This report puts the lie ...
    21 hours ago
  • Strong support from medical community for Healthy Homes Bill
    More than a thousand medical professionals, medical students, and other New Zealanders have shown their support for Labour’s Healthy Homes Guarantee Bill, says Leader of the Opposition Andrew Little. ...
    24 hours ago
  • Labour will fund Buller Health Centre
    A Labour Government will fully fund the Buller Integrated Family Health Centre in Westport, confirming its commitment to the people of the West Coast and the role of central government to fund essential public services, says Labour’s Health spokesperson David ...
    1 day ago
  • National’s affordable promise for Auckland more smoke and mirrors
    The 26,000 additional houses National plans to build in Auckland on public land over the next decade include fewer than 5,000 affordable homes, while more than 60 per cent will be available for speculators to buy, says Leader of the ...
    1 day ago
  • National out of touch over immigration
    National’s abrupt backflip on their recently-announced changes to immigration shows they never understood the problem and just came up with a confused knee jerk response, says Leader of the Opposition Andrew Little. “Regional communities and businesses were quite right to ...
    2 days ago
  • English out of touch on homelessness
    Bill English’s comments that he doesn’t know why people are complaining about the blowout in the number of homeless families the government is putting up in motels just shows how tired and out of touch National is after nine years, ...
    2 days ago
  • All Kiwis to have same standard of cancer care
    Labour is promising that all New Zealanders will have access to the same level of cancer care no matter where they live in the country, says Leader of the Opposition Andrew Little.   “As someone who has survived cancer I ...
    3 days ago
  • Infrastructure announcement too long coming
    “What took you so long?” is Labour’s response to the Government’s announcement of a new infrastructure investment vehicle. Labour’s Auckland Issues spokesperson Phil Twyford says Labour announced its policy in 2015 to debt-finance infrastructure and service that debt with targeted ...
    3 days ago
  • Time for a breather on immigration
    National has no idea how to house the record number of people entering New Zealand, let alone cope with the pressure on health, education, and transport from this record population growth, says Labour’s Immigration spokesperson Iain Lees-Galloway. ...
    5 days ago
  • Labour to invest $4 billion in education
    Labour’s Education Manifesto will bring positive change across the education sector and is backed by a massive investment, says Labour’s Education Spokesperson Chris Hipkins.  “Labour’s plan will see an extra $4 billion invested over the next four years. It’s organised ...
    5 days ago
  • National’s shame: worst homelessness in the OECD
    National’s legacy is a housing crisis that has given New Zealand the worst homeless rate in the developed world, says Labour’s Housing spokesperson Phil Twyford. ...
    5 days ago
  • Labour taking action on school donations
    Labour will end so-called voluntary school donations for the majority of parents across the country under its $4 billion plan to revitalise the education sector, says Labour Leader Andrew Little. “Labour has always been committed to a world-class free education ...
    5 days ago
  • Labour to work with Queenstown to build more houses
    Labour will work with Queenstown-Lakes District Council, iwi, and the Community Housing Trust to build the modern, affordable housing Queenstown desperately needs, says Leader of the Opposition Andrew Little. ...
    6 days ago
  • Nats blow the Budget on motels after bowling state houses
    National is spending $140,000 a day putting homeless families in motels, the legacy of nine years of selling off and knocking down state houses, says Labour Housing spokesperson Phil Twyford. ...
    6 days ago
  • New revelations in Joanne Harrison report
    The State Services Commission’s report into the treatment of whistle-blowers by Joanne Harrison has revealed new accusations against the convicted fraudster, says Labour MP Sue Moroney.  “The report found that four staff inside the Ministry of Transport who had raised ...
    6 days ago
  • Snafu at Princess Margaret
    Jonathan Coleman has to stop the stalling over a new building for mental health services in Christchurch to replace the quake damaged Princess Margaret Hospital, says Labour’s Health spokesperson David Clark. “The Government must accept that Christchurch is still recovering ...
    6 days ago
  • Labour’s fiscal plan to build a fairer New Zealand
    Labour will re-build our housing, health and education while responsibly managing New Zealand’s finances, says Leader of the Opposition Andrew Little.  “Under Labour’s Fiscal Plan we will deliver big investments in the services we all need and care about, invest ...
    7 days ago
  • Nats show they’re the tax dodgers’ best friends
    The government is taking the knife to IRD at a time when we need a highly skilled department to ensure that multinationals and speculators don’t get away with dodging tax, says Labour’s Revenue spokesperson Michael Wood. ...
    7 days ago
  • Labour secures the future for NZ Super
    A Labour Government will secure the future for New Zealand Superannuation so we can continue to provide superannuation to those retiring at age 65, says Leader of the Opposition Andrew Little. “One of the first things a Labour-led Government will ...
    1 week ago
  • Multinationals must pay fair share of tax
    A Labour Government will crack down on multinational companies that are dodging paying their fair share of tax, says Labour Leader Andrew Little. “New Zealanders are missing out by hundreds of millions according to the IRD because multinational companies can ...
    1 week ago
  • ACT’s approach to children backward and ill informed
    Act’s new deputy leader’s claim that Labour’s support for families could “extend the misery of child poverty and even child abuse” is ill informed and offensive, says Labour’s Deputy Leader Jacinda Ardern. ...
    2 weeks ago
  • Canterbury hatchet job a disgrace
    The Government’s glib acceptance of advice that the Canterbury District Health Board doesn’t need more money is a hatchet job and a disgrace, says Labour’s Health Spokesperson David Clark. “To claim that the DHB was using tactics to leverage more ...
    2 weeks ago
  • Quality for Kiwi kids at ECE
    After more than a decade of rapid growth in the number of children participating in Early Childhood Education (ECE), it’s time to take stock and map out a clear plan for the future, says Labour’s Education spokesperson Chris Hipkins. ...
    2 weeks ago
  • Labour to boost ECE quality
    Labour will ensure kids get the best start in life by boosting funding for Early Childhood Centres to employ 100 per cent qualified and registered teachers, says Leader of the Opposition Andrew Little. ...
    2 weeks ago
  • Labour will stump up a million dollars for Maniototo Hospital
    A Labour led Government will make a million dollars available to rebuild the Maniototo Base hospital in Ranfurly, says the Leader of the Opposition Andrew Little.  “This will be a much needed boost for a long overdue rebuild that has ...
    2 weeks ago
  • No vision for the West Coast
    The West Coast welcomes any Government investment in our region but the lack of any real alternative vision for the West Coast’s economy is disappointing, says Damien O’Connor Labour’s West Coast-Tasman MP.  “The establishment of a Mining Research Unit will ...
    2 weeks ago
  • National’s youth work scheme too little too late
    After nine years, National’s belated attempt to provide work opportunities for unemployed youth should be seen for what it is, a half-hearted, election gimmick from a party that’s ignored the problem till now, says Leader of the Opposition Andrew Little. ...
    2 weeks ago
  • Kiwis won’t fall for Joyce’s spin
    Steven Joyce’s embarrassingly obvious spin on Labour’s Families Package won’t fool anyone, says Labour’s Finance spokesperson Grant Robertson. ...
    2 weeks ago
  • Labour prioritises families and public services
    Labour’s Families Package delivers a bigger income boost to more than 70 per cent of families with children than Budget 2017. By not spending $1.5 billion a year on tax cuts, Labour is able to do more for lower and ...
    2 weeks ago
  • Kiwis can’t sleep in your ghost houses, Nick
    The Government’s housing infrastructure announcement is another Nick Smith special – over-promising with no detail on delivery, says Labour’s Housing spokesperson Phil Twyford. ...
    2 weeks ago
  • Labour helps older New Zealanders and low income families with winter heating bills
    Labour will further boost its commitment to warm, healthy housing with a Winter Energy Payment for superannuitants and people receiving main benefits, says Leader of the Opposition Andrew Little. “Everyone deserves a warm, healthy home to live in. But that’s ...
    2 weeks ago
  • National must rule out retrospective override for Ruataniwha
    National must categorically rule out using retrospective legislation to override the Supreme Court’s decision that the land swap of conservation land flooded by the proposed Ruataniwha Dam was illegal, says Labour’s Shadow Attorney General David Parker. “Having not got their ...
    3 weeks ago
  • Flavell’s failure a win for Māori landowners
    The Māori Development Minister’s admission that his unpopular Ture Whenua Māori Bill won’t pass into law prior to the election is a victory for Māori landowners, but only a change of government will keep the Bill gone for good, says ...
    3 weeks ago
  • Stats confirm growing housing shortfall
    National’s failure to fix the housing shortage has been starkly illustrated by new statistics, says Labour Housing spokesperson Phil Twyford. ...
    3 weeks ago
  • Systemic abuse of kids in state care
    After admitting there was systemic abuse of children in State care the Government must do the right thing and launch an independent inquiry, says Labour’s Deputy Leader Jacinda Ardern. ...
    3 weeks ago
  • Migrant worker exploitation needs sharper focus
    The astonishing number of employers found guilty of exploiting migrants shows that migrant exploitation is a serious problem in New Zealand, says Labour Workplace Relations and Safety spokesperson Iain Lees-Galloway. “A total of 53 companies have been banned from recruiting ...
    3 weeks ago
  • Minister faces questions over dam debacle
    Today’s Supreme Court ruling dismissing an appeal to allow a land swap for the controversial Ruataniwha Dam is a victory for our conservation estate and Hawke’s Bay ratepayers, but leaves the Conservation Minister with serious questions to answer, says Ikaroa-Rāwhiti ...
    3 weeks ago
  • Too little too late on Wellington housing
    The announcement today on social housing in Wellington by the National Government is a pitiful and cynical election ploy, says Labour’s Wellington Central MP Grant Robertson. “In 2012 Housing New Zealand emptied out the Gordon Wilson Flats, taking 130 places ...
    3 weeks ago