Edison's full bid for NZ Contact fails


California-based Edison Mission energy has given up its full bid for New Zealand's Contact Energy.

By CNN's Geoff Hiscock
Asia business editor

AUCKLAND, New Zealand (CNN) -- U.S. utility Edison Mission Energy has abandoned its full takeover bid for New Zealand subsidiary Contact Energy after failing to win 90 percent of acceptances.

Edison, which owned 51.22 percent of Contact when it launched its $450 million bid on October 12, told reporters Monday the failure represented differing views on the worth of the New Zealand power and gas company.

Edison bid NZ$4.14 a share (about $1.73), but fell well short of the 90 percent acceptance level required to move to compulsory acquisition.

Contact shares traded late Monday afternoon at NZ$3.73, down 5c from Friday's close.

Contact Energy chairman Phil Pryke said in a statement to the Australian and New Zealand stock exchanges Monday that the decision by shareholders not to sell was viewed "as a vote of confidence in the future of the company".

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Pryke said Contact chief executive Steve Barrett would remain in his position. There was speculation that Barrett would return to Edison Mission Energy.

Ratings agency Standard & Poor's immediately affirmed its BBB+ long-term and A2 short-term ratings on Contact and removed them from negative credit watch.

But it said the outlook remained negative because while Contact's cash interest and debt coverage ratios had improved as a result of very high electricity prices in the 2001 New Zealand winter, prospects for the medium and long term were "less certain".

Independent directors had recommended acceptance of the bid on November 6. Edison extended the offer by a month at the beginning of January, but was unable to convince enough shareholders to sell.

Edison Mission Energy, a unit of California-based Edison, bought an initial 40 percent of Contact at NZ$5.00 a share when it was privatised by the New Zealand government in 1999, then moved to a majority stake in May 2001.

Announcing its bid on October 12, Edison said its offer of NZ$3.85 was "full and fair".

That bid, which valued Contact at about $910 million (NZ$2.2 billion), was increased later in the month to NZ$4.25. That was reduced by an 11 cent dividend after Contact reported a 35 percent increase in profit to NZ$130.7 million for the year to September 30, 2001.

Contact produces about a quarter of New Zealand's electricity, using gas, hydro, thermal and geothermal assets.