Independent Directors’ Committee Recommendation
1 December 2005
Updated Independent Directors’ Committee Recommendation
Capital Properties New Zealand Limited today issued an updated recommendation to shareholders in response to the announcement made on 30 November 2005 by AMP Property Portfolio Investments Limited that it was extending the closing date of its offer to 23 December 2005. 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 www.cpnz.co.nz under Articles/Media Releases.
Dear Capital Properties shareholder,
AMP Property Portfolio Investments Limited (“AMP Property Portfolio”) Takeover Offer for Capital Properties New Zealand Limited (“Capital Properties”)
Since the Independent Directors of Capital Properties last wrote to you on 11 November 2005 a number of events have occurred.
- AMP Property Portfolio has declared its offer unconditional and, as at 30 November 2005, had acceptances which would give it 75.9% of the voting rights in Capital Properties.
- The Board of Capital Properties has changed to reflect the shareholding changes. It now comprises non-independent directors Murray Gribben (Chairman) and Rob Morrison nominated by AMP Property Portfolio, and independent directors Michael Cashin and James Ogden. A further non-independent director is expected to be nominated by AMP Property Portfolio and invited to join the Board in the near future.
- Independent directors Tony Frankham and Peter Coote, and non-independent director Richard Didsbury (who was nominated by Kiwi Income Property Trust), have resigned from the Board. Continuing directors Michael Cashin and James Ogden now form the Independent Directors’ Committee for the purposes of the AMP Property Portfolio offer.
- The Board of Capital Properties has announced a review of the business. This review was foreshadowed in the AMP Property Portfolio offer document, where it was stated that, if the offer became unconditional, AMP Property Portfolio would 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.
- The Board has indicated that this review will be completed in December 2005 with an announcement of the outcome, including future dividend policy, before the end of January 2006. The Board has also announced that no dividends will be paid pending the announcement of the outcome of the review.
- AMP Property Portfolio has now further extended the offer until 23 December 2005.
The continuing Independent Directors have not formed any views at this stage on the outcome of the current review. Given the scope of the review, there is the potential for Capital Properties to emerge from the review with a different strategy.
In light of the success of the AMP Property Portfolio offer, the continuing Independent Directors have reviewed the comments made by the previous Independent Directors’ Committee in the letters to shareholders dated 3 and 11 November 2005.
In particular, the letter of 3 November set out the Independent Directors’ Committee’s reasoning in some detail and included commentary on factors that shareholders should take into account in considering the Independent Directors’ Committee’s views on value and their recommendation not to accept the offer.
Key comments in the 3 November letter included:
“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.”
Given the review outlined above there is “… no assurance that the existing policies of the company, including dividend policies, will be continued under AMP Property Portfolio control.”
“… 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.”
“… 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.”
Having reviewed the comments of the previous Independent Directors’ Committee, the continuing Independent Directors confirm the recommendation that the offer from AMP Portfolio not be accepted, and draw shareholders attention to the reasoning set out in the letter of 3 November. A full copy of the 3 November letter can be viewed at www.cpnz.co.nz/Articles/Media Releases.