Independent Directors' Committee Recommendation
Capital Properties New Zealand Limited
3 November 2005
INDEPENDENT DIRECTORS' COMMITTEE RECOMMENDATION
Capital Properties New Zealand Limited today released its recommendation to shareholders in response to the announcement made on 28 October 2005 by AMP Property Portfolio Investments Limited that it was increasing the consideration under its full takeover offer from $1.42 to $1.48 per share.
The following letter will now be mailed
to shareholders. A copy of the letter will also be made
available later today on Capital Properties website at
3 November 2005
Dear Capital Properties shareholder,
AMP Property Portfolio Investments Limited ("AMP Property Portfolio")
Takeover Offer for Capital Properties New Zealand Limited ("Capital Properties")
AMP Property Portfolio has raised its offer for your shares in Capital Properties from $1.42 per share to $1.48 per share.
On balance, the Independent Directors of Capital Properties recommend that you do not accept the revised offer. The Independent Directors will not be accepting the offer in respect of their own shareholdings. The Independent Directors have weighed a number of factors, the most important of which are discussed in this letter. The Independent Directors recommend that you read this letter carefully and, if necessary, seek independent financial advice that takes your individual circumstances into account.
Since the Independent Directors last wrote to you on 28 October 2005 a number of significant developments have occurred, including:
* The offer has been raised from $1.42 to $1.48. This price revision brings the offer to the bottom of the $1.48 to $1.73 fair value range as assessed by Deloitte in their Independent Adviser's Report.
* AMP Property Portfolio has not further extended the closing date of its offer and it remains at 16 November 2005. This is significant because, under the provisions of the Takeovers Code, AMP Property Portfolio now no longer has the ability to vary either the offer closing date or the offer price unless the offer is declared unconditional as to level of acceptances prior to closing. Thus, if AMP Property Portfolio does not satisfy the 50% minimum acceptance condition by 16 November 2005, the offer will lapse. The 50% minimum acceptance condition requires AMP Property Portfolio to receive acceptances that would give it 50% of the voting rights in Capital Properties.
* Kiwi Property Holdings Limited has agreed to accept the revised offer with respect to its 19.2% holding in Capital Properties. Combined with its initial holding and other acceptances, this means that AMP Property Portfolio now has acceptances that would give it 36.2% of the voting rights in Capital Properties and its chances of satisfying the 50% minimum acceptance condition in the offer and controlling the board of Capital Properties have increased.
The Independent Directors' views on the initial offer of $1.42 are set out in the Target Company Statement dated 7 October 2005 and in two subsequent letters to shareholders dated 13 and 28 October 2005.
The Independent Directors note that at $1.48 the offer is now at the very bottom of the $1.48 to $1.73 fair value range assessed by Deloitte and is 12 cents per share (7.5%) below the $1.60 mid-point of the Deloitte range.
The Independent Directors draw shareholders' attention to the letter accompanying Capital Properties' Target Company Statement of 7 October 2005 where it was stated that the Independent Directors "consider that the Deloitte valuation may be viewed as conservative, particularly with respect to the valuation inputs on future growth and the cost of capital". The Independent Directors still hold this view.
The Independent Directors do not believe that the offer price of $1.48 adequately reflects the fair value of Capital Properties' shares including the control premium usually paid in a takeover. On balance, and assuming the company continues with its current policies and strategies in similar market conditions, the Independent Directors believe that, over the medium to long term, holding Capital Properties shares is likely to produce a higher value outcome for shareholders than acceptance of the AMP Property Portfolio offer.
In considering the Independent Directors' views on value outlined above, shareholders should take into account the following considerations as they apply to their individual circumstances:
* AMP Property Portfolio may acquire the 50% of the shares in Capital Properties necessary to declare the offer unconditional but less than the 90% holding required for it to effect compulsory acquisition of the remaining minority shareholders. Thus, Capital Properties shareholders who do not accept the offer should be aware that in future they may be a shareholder in a company controlled by AMP Property Portfolio. AMP Property Portfolio's offer document of 30 September 2005 indicates that, if the offer becomes unconditional, AMP Property Portfolio will seek majority representation on the Capital Properties Board and "support the Capital Properties Board in conducting a rigorous review of the existing assets, operations, policies (including distribution policies) and capital structure of Capital Properties. This may, among other things, result in Capital Properties acquiring new assets and selling existing assets, borrowing additional amounts, paying dividends and/or making capital repayments". There is therefore no assurance that the existing policies of the company, including dividend policies, will be continued under AMP Property Portfolio control.
* If the offer lapses, and also in the event that the AMP Property Portfolio offer becomes unconditional at a level below the 90% required for compulsory acquisition, the Independent Directors believe it is likely that the share price will trade at a level below the $1.48 offer price, possibly for some time into the future. Consequently, for those shareholders contemplating sale of their shares over the coming period, acceptance of the offer may represent a higher value outcome than holding the shares and accruing dividends and capital growth over the short to medium term.
* At the date of this letter the Independent Directors have no reason to believe that a higher offer for your shares will be forthcoming from any other party. There is no indication that AMP Property Portfolio will further increase its offer to encourage the success of its takeover proposal.
For the reasons outlined above (most of which are discussed more fully in earlier correspondence and the Target Company Statement) the Independent Directors believe that the revised AMP Property Portfolio offer of $1.48 does not reflect fair value for your Capital Properties shares and therefore recommend that it not be accepted. However, the Independent Directors note that following this recommendation may not produce the highest value outcome for all Capital Properties shareholders and draw shareholders' attention to the need to consider their own individual circumstances and, if necessary, seek independent financial advice that takes account of those circumstances.
The Independent Directors preference is for AMP Property Portfolio to further increase its offer to $1.55 per share at which point they would recommend acceptance having regard to all of the circumstances and would accept such an increased offer in respect of their own shareholdings.
Independent Directors' Committee
Capital Properties New Zealand Limited