by Jenny Ruth
Mike Pero Mortgages' independent directors are recommending shareholders reject New Zealand Finance Holdings' takeover offer for their shares but that they should accept for their options.
The NZ Finance offer values the company at $20.63 million. The directors also note that founder Mike Pero won't be accepting the offer for his remaining 3% stake.
NZ Finance already has control of the company, having bought 54% from Christchurch businessman George Gould and declaring its offer unconditional on December 7.
Humphrey Rolleston, chairman of the committee of independent directors, says independent adviser Crightton Anderson Corporate Finance values the shares between 96 cents and $1.09, including a 5 cent premium for control, so the independent directors consider that valuation fair and reasonable.
NZ Finance is offering 82 cents a share, the price it paid Gould, and 2 cents an option. "Only by achieving 100% ownership can NZF unlock full synergy benefits. The offer price is too low to recognise the importance of full ownership to NZF," Rolleston says in a letter to shareholders.
Mike Pero shares were trading at 76 cents ahead of the offer being announced and they are currently trading at 85 cents. Mike Pero chief executive Jeff Staniland has also updated the company's forecast earnings for the year ending June 2006 to $1.9 million from previously expecting an improvement on the previous year.
In August, the company reported a $1.62 million net profit compared with its $1.55 million prospectus forecast. Rolleston says that if NZ Finance fails to gain 90% acceptance of its offer, Mike Pero will remain listed, although NZ Finance will be able to nominate directors to the board.
"While many commentators are predicting a slowing in house sale volumes and house price growth, the company's long-term track record of growth and the strategies currently implemented suggest that ongoing organic growth is possible," Rolleston says.
The company's monthly mortgage origination confirmations to the end of November have trended higher than average 2004/05 monthly confirmations, he says. NZ Finance managing director John Callaghan says he isn't surprised by the independent director's recommendation.
"It serves to reinforce our decision to invest in this company." NZ Finance has previously made it clear that a major aim is to increase its distribution capability. It already owns two mortgage broking brands, New Zealand Mortgage Finance and Approved Mortgage Brokers.
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