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St Laurence and Dorchester get together

In a move many would not have predicted St Laurence and Dorchester have formed a strategic alliance which could possibly lead to a full merger.

Thursday, March 29th 2007, 5:50AM

by Philip Macalister

Dorchester has paid $29.6 million for a 25% cornerstone stake in St Laurence while St Laurence's parent company, St Laurence Mortgage Holdings, has paid $9.8 million for a 13.04% stake in Dorchester.

St Laurence is a property manager which has been differentiating itself by getting more into the funds management space.

Dorchester is a listed finance company which has good exposure to the consumer finance sector and distribution through Equity Investment Advisers.

Dorchester chief executive Andrew Walker says there are “numerous” synergies between the two organisations.

One reason the deal is a good fit is St Laurence has “manufacturing” skills, while Dorchester has stronger distribution capabilities.

In addition there is a good cultural fit between the two organisations.

“While the merits of this investment stack up on a standalone basis, there are significant benefits for both companies from increased scale, distribution, geographical reach and product diversification; both management teams are committed to working together to assess a number of future options including the potential for a full merger.

He says people will need to think differently about Dorchester.

"The St Laurence acquisition signals a change in direction and focus for Dorchester, further diversifying its financial services business and increasing its capability in the property finance, financial product development and fund and asset management sectors in which St Laurence operates," Walker says.

Walker says one of the things he identified after taking over Dorchester last year was the need to adapt to the changing economic environment.

He says New Zealand is moving from a culture of consumption to savings. Driving this is the KiwiSaver scheme, which he supports.

As such Dorchester has to shift its focus from consumer finance (it has a string of finance companies across the country) to one which is more concentrated on savings. He says the deal with St Laurence helps it make this shift.

Recently one St Laurence director Phil Newland announced he wanted to sell down its stake. In February his company, BG Capital Ltd, exercised an option to sell its 20% stake back to the major shareholders. St Laurence said at the time it was looking at “unsolicited offers”.

Walker says the discussions with St Laurence had started before the selldown and were “incidental”.

Walker says there are a lot of synergies between Dorchester and St Laurence and there is the “potential for a full merger”.

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