Marlborough Lines rejects advice on takeover offer

13 October 2009

Marlborough Lines rejects the basis for Horizon Directors’ recommendation to shareholders

Marlborough Lines believes Horizon shareholders should seriously question the Horizon Directors’ recommendation today and seek their own independent advice about the merits of Marlborough Lines’ partial takeover offer of $3.96 per share in Horizon.

“In recommending against acceptance of our offer, the Directors have indicated that they expect to deliver increased profits to shareholders to an extent they have been unable to do previously. Marlborough Lines believes that Horizon’s Directors will be unable to deliver on their newfound profit and value expectations,” said Ken Forrest, Managing Director, Marlborough Lines.

“We question how the independent valuation commissioned by Horizon has arrived at its figures. The company’s disclosures to the market up until our offer was notified do not support that valuation range,” he said. 

At its Annual Shareholders Meeting on 6 August 2009, Horizon’s Chairman stated that the underlying after tax profitability of the Company was around $4.5 million. On 28 September, following Marlborough Lines’ notification of intention to offer on 14 September and the day before Marlborough Lines’ partial takeover offer for Horizon opened, Horizon issued a revised profit outlook with an increased after tax profit forecast of around $6 million.

Horizon stated that its revised profit outlook was based on increased revenue due to a cold winter, cost savings and mark to market gains on the Company’s interest rate derivatives. However, these are one-off factors that are not the basis for sustained higher profits in future.

“The sudden revised profit forecast issued by Horizon after the offer was notified will have influenced the valuation range, and is unlikely to be sustainable. Our view is that given that there have been no fundamental changes to the Company, its historical share price and past performance provide a more appropriate indication of its value and likely profitability.”

“Given our offer represents a 34% premium over the last trading price of Horizon shares before the offer was notified, we continue to believe our offer is an attractive proposition for shareholders as a unique opportunity to realise a substantial premium on their investment,” said Mr Forrest.

The Eastern Bay Energy Trust holds 77.29% of the shares in Horizon. Marlborough Lines’ offer provides an opportunity for the Trust to realise gains to date and immediate value from the sale of a proportion of their shareholding. This would in turn provide an opportunity for the Trust to return immediate value to the community and to diversify its investment portfolio and reduce risk.

“We are confident that, notwithstanding the Horizon directors’ recommendation, the Trustees of the Eastern Bay Energy Trust will take appropriate legal and financial advice in relation to the offer, in light of their legal duties to the beneficiaries of the Trust,” said Mr Forrest.

As a partial takeover offer rather than a full takeover, Eastern Bay Energy Trust would also retain a significant stake in Horizon with Marlborough Lines holding a maximum of 51% of all shares.

This will enable the Trust to continue to extract value from its remaining shareholding in Horizon for the benefit of the community, with the support of an active shareholder with an established track record of delivering improved performance and growth prospects through added scale, operational efficiencies, and investment in the lines network in other regions where we have formed successful commercial partnerships.

In those regions, the local communities have benefited from Marlborough Lines’ investment in their lines networks. This has not only enhanced the reliability of the local networks and contributed to regional economic development through improved lines infrastructure, but also created local employment opportunities. For example, when Marlborough Lines purchased a 51% share in the network joint venture OtagoNet seven years ago, the number of employees at that time was 33, which has since grown to 80.

To date, Marlborough Lines has already received acceptances for nearly 5% of shares in Horizon Energy held by shareholders other than the Eastern Bay Energy Trust, which indicates they consider the offer of $3.96 per share to represent fair value. However, as a partial takeover offer, the offer will only be successful – and other shareholders able to realise the benefits of this offer – if the Eastern Bay Energy Trust as majority shareholder accepts in respect of a proportion of its shares.

Marlborough Lines’ partial takeover offer for Horizon was sent to shareholders on 29 September 2009 and remains open until 30 October 2009 (unless extended).

 
ENDS

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