LPC

[minimoke]

As a shareholder I am starting to feel complicit in this mass manslaughter, as an accomplice. I suppose this is how all you Pike River shareholders felt? Not a nice feeling at all. I should probably be chained up and restricted to a small room. But since I do live in a kennel, perhaps I am just getting my comeuppance after all?

SNOOPY

and so you should. Do you not wonder what the ceo is doing for his pay? But there is a similarity to nzo and prc. Lpc have the same approach to mushrooms. Here is what it says on their career page: "safety is our top priority.......as a result we have an excellent safety record". Imagine how many workers your company would be killing if they didn't take safety so seriously!

[Marilyn Munroe]

The release of LPC's annual result has been overshadowed by the unfortunate death in the terminal.

The effects of the earthquake have had a whip-saw effect on the balance sheet making the result difficult to interpret Container volumes have grown, fixed asset values have grown massively. It points to good future financial results.

The board is meeting tomorrow(01/09/2014) to consider the independent advisers report, adopt the target company statement , their recommendation to shareholders, and approve the dividend which forms part of the takeover offer.

LPC faces an important crossroads in ownership. Whatever the result of this process I hope it does not negatively effect health and safety at the port.

Boop boop de do
Marilyn

[Snoopy]

The board is meeting tomorrow(01/09/2014) to consider the independent advisers report, adopt the target company statement , their recommendation to shareholders, and approve the dividend which forms part of the takeover offer.

Released at the close of trading today

"The Board of Lyttelton Port of Christchurch (LPC) met today to consider the Independent Adviser's Report prepared by Northington Partners on the merits of the Offer by Christchurch City Holdings Limited (CCHL) and to finalise the Target Company Statement and Directors' recommendation to shareholders in respect of the Offer."

"The Board has unanimously resolved to recommend to shareholders that they accept the Offer."
"The Board has also resolved to pay a fully imputed special dividend of $0.20 cents per share on 18 September 2014."

SNOOPY

PS Shouldn't only the independent directors be advising on this takeover offer?

[Snoopy]

Released at the close of trading today

"The Board of Lyttelton Port of Christchurch (LPC) met today to consider the Independent Adviser's Report prepared by Northington Partners on the merits of the Offer by Christchurch City Holdings Limited (CCHL) and to finalise the Target Company Statement and Directors' recommendation to shareholders in respect of the Offer."

"The Board has unanimously resolved to recommend to shareholders that they accept the Offer."
"The Board has also resolved to pay a fully imputed special dividend of $0.20 cents per share on 18 September 2014."

The trick on how $5 is really only worth $4 is out.

Northingtons have valued the company on future cashflows. That means the insurance payout is modelled as being spent {in the future} and so is not reagrded as cash on the balance sheet. That means that $5 is really only worth $3.50, and you minority sharehodlers ought to be really pleased we are offering $4 for your $5. Great eh?

The question in my mind though is this: If the insurance payout combined with existing assets is really only worth $3.50, yet it has a cash value of $5 today, does this not imply that LPCs future business plan will not earn the company its cost of capital?

PS Shouldn't only the independent directors be advising on this takeover offer?

Hmm looks like all the directors regard themselves as independent, because they were not appointed by the council. They were instead appointed by CCHL, the 100% owned commercial arm of the council! Seems a dubious way to look after small shareholders to me!

SNOOPY

[Snoopy]

The question in my mind though is this: If the insurance payout combined with existing assets is really only worth $3.50, yet it has a cash value of $5 today, does this not imply that LPCs future business plan will not earn the company its cost of capital?

LPC has been valued as a ‘development project’ based on future cashflows. This is principally because of the huge pipeline of building projects going forward, as the port is rebuilt. An alternative valuation technique, using industry multiples, requires a series of closely comparable industry players to be traded on market. That way a comparative database is available. But few ports are being rebuilt in the way that Lyttelton is being rebuilt.

Interestingly the lead author of the report, Greg Anderson from Northington Partners, is the same Greg Anderson who was lead author of a similar report published in 2006 by Crighton Anderson. Crighton Anderson subsequently merged into Northington Partners. 2006 was the last time CCHL made a formal bid for the whole company. Interestingly, back then they also used a discounted cashflow valuation when valuing LPC.

At least one copy of this 2006 valuation survives, in what I have coined as my ‘library of shame’ (a rather nondescript cardboard box in my spare bedroom). A comparison between the two offers is interesting reading, of which more later.

The HY2014 report (ended 31-12-2013) supplied with the current takeover offer is seemingly a deliberate attempt to ensure minority shareholders are not fully informed. I say this, because Northington partners have clearly had access to the FY2014 results. Selected FY2014 results are quoted in comparison tables 6 and 7.

Furthermore, the full results were released to the stock exchange on Friday 29th August.

https://www.nzx.com/companies/LPC/announcements/254620

So how can you explain what arrived in the envelope other than to say the full FY2014 results have – deliberately - not been forwarded to minority shareholders?

SNOOPY

[Marilyn Munroe]

I to share Snoppy's reservation about the independent advisers report. Nortington Partners have used an enterprise value method when there is a comprable publicy listed company to compare with.

The most relevant parrallel to LPC is Tauranga. This is for two reasons, both are publicly quoted and containers are a significant part of their business. Other listed port operations such as Southport(Bluff) and Northport(Marsden Point) are less relevant.

I not finally made up my mind but I propose to ignore the take-over offer and then request the directors undertake a Expert Value Determination as is provided for in the compolsory aqusition provisions of the take-overs code.

The mechanics of compolsory aquisition are discussed on pages 5 and 6 of the Northington Partners report. A fish hook for hold-outs is if the expert valuation report is less than the CCHL offer then you will be forced to accept the experts lower price.

Boop boop de do
Marilyn

[Snoopy]

I to share Snoopy's reservation about the independent advisers report. Nortington Partners have used an enterprise value method when there is a comparable publicy listed company to compare with.

The most relevant parrallel to LPC is Tauranga. This is for two reasons, both are publicly quoted and containers are a significant part of their business. Other listed port operations such as Southport(Bluff) and Northport(Marsden Point) are less relevant.

I not finally made up my mind but I propose to ignore the take-over offer and then request the directors undertake a Expert Value Determination as is provided for in the compulsory acqusition provisions of the take-overs code.

The mechanics of compulsory aquisition are discussed on pages 5 and 6 of the Northington Partners report. A fish hook for hold-outs is if the expert valuation report is less than the CCHL offer then you will be forced to accept the experts lower price.

Marilyn, Northington's have declared that a direct multiple comparison with POT is not relevent because POT is bigger and growing faster. I am not sure I agree with that. But other expert advisors may take the same view as Northingtons.

Namely, because of all the rebuild cashflows, you have to value LPC on future cashflows via this enterprise value method. And if they do that (getting it wrong like Northingtons ;-) ) then holdouts may only get $3.50, not $4. Can you 'hold out' on your own, or do you need a critical mass of like minded shareholders?

SNOOPY

[percy]

Marilyn, Northington's have declared that a direct multiple comparison with POT is not relevent because POT is bigger and growing faster.

SNOOPY

Get your hands on the cash as soon as you can and get some POT .
Faster growing,better managed.

[Snoopy]

The trick on how $5 is really only worth $4 is out.

Northingtons have valued the company on future cashflows. That means the insurance payout is modelled as being spent {in the future} and so is not reagrded as cash on the balance sheet. That means that $5 is really only worth $3.50, and you minority sharehodlers ought to be really pleased we are offering $4 for your $5. Great eh?

The asset value question has prompted a market response from LPCs Chairman.

-----

12 September 2014
NZX RELEASE: MESSAGE FROM LPC CHAIRMAN

The Lyttelton Port of Christchurch (LPC) Board has received enquiries about whether the net asset value contained in LPC's 2014 Annual Report should have been compared to the valuation used in the Independent Adviser's Report prepared by Northington Partners Limited, dated 2 September 2014. The Board raised this question with Northington Partners who have noted the following:

Our assessed value for LPC is based on the business’ future earnings capacity. This approach reflects that LPC will continue to operate as a port business and that its current value is a function of future trade volumes, revenues and net earnings. Importantly, our value assessment also reflects the fact that the Company needs to invest over $500m in the next 10 years to rebuild the basic port infrastructure that is needed to service the business volumes that are incorporated into our financial projections.

The net assets value reported for LPC as at 30 June 2014 is at a historically high level because of the $322m cash balance arising from the insurance settlement received in February 2014. This cash is however clearly not a “surplus” asset; the cash represents pre-funding for the capital expenditure program needed to rebuild the port infrastructure and support future business operations –it is not a separate realisable asset that can be added to the underlying business value.

The net assets value of a business reported in its financial statements is very rarely a useful indicator of the fair market value of the business, and is only potentially relevant when:

Liquidating the business is a sensible strategy, and the assets can be physically and economically separated and sold; and
Recorded book values are based on updated market valuations which reflect separate sale.

Neither criterion is satisfied for LPC.

Clearly the best use of the LPC assets is to support continued port operations, and the recorded value for “Property, Plant and Equipment” (approximately $249m) largely represents depreciated cost. Because our valuation assessment is based on the future earnings potential of the business, the most appropriate cross-check for our Discounted Cash Flow (DCF) value range is based on
implied earnings multiples.

The Board believes that the Independent Adviser's Report was prepared in accordance with best industry practice and that LPC was valued appropriately.


-------
Ends

I wonder what will happen when CCHL gets its hands on LPC with all that cash on the books? Do Northingtons really believe that the cash strapped Chistchurch City Council, via CCHL, won't be raiding the LPC piggy bank? Perhaps Northington's haven't considered that question because they truly believe cash in a bank account cannot be transferred (is not separate and realisable)??!!?

I don't see the cash part of the NTA as 'adding to the business value', as Northington's put it. But I do see it as one good measure of the business value.

SNOOPY


-

[blackcap]

I thought company directors were tasked under the Companies Act to maximize share holder value?

Would it not be more beneficial for shareholders if the company were liquidated and cash paid out to owners?