While Port Otago is stressing it can still sit on its investment, at present worth about $47 million, it appears the time may be right to broker a deal on a purchase that was made for strategic reasons rather than financial rewards.
Despite denials at the time, the then $37 million purchase in early 2006 was a strategic, successful ploy to block Lyttelton Port of Christchurch (LPC) from being sold by its 75% shareholder, the Christchurch City Council, to an international port operator.
Councillors of Port Otago's 100% owner, the Otago Regional Council, heard last Wednesday the port company was ''evaluating'' its options on whether to sell the stake, given LPC's share price has been buoyed by recent insurance payouts of $382 million.
Port Otago chairman Dave Faulkner briefed the councillors, saying the insurance payout and the subsequent resumption of dividends at 2c per share were ''a little disappointing''.
''We have appointed consultants to assist us with the [shareholding] review ... which is worth $47 million,'' Mr Faulkner said.
LPC has paid Port Otago about $2.7 million in dividends prior to the Canterbury earthquakes, which devastated LPC's infrastructure.
ORC councillor Michael Deaker labelled the LPC dividend as ''miserable'', asking Mr Faulkner whether the 15.5% stake had a strategic purpose for Port Otago's operations in the South Island or whether it should be viewed now as a ''return on investment''.
Mr Faulkner said there were several maritime issues going on at the time the stake was purchased, including port operator Hutchison's desire to own and manage LPC and the Government talking of ''amalgamations'' of unnecessary port operations.
''Because of our stake, Hutchison don't have it [LPC]. It is less strategic now; the reasons have changed. We've looked at what else to do with $47 million,'' he said.
Following the meeting, Mr Faulkner was asked if consultants had talked to potential buyers.
''There are a few entities who have expressed an interest,'' Mr Faulkner said.
Given the 15.5% stake can still block any sale or takeover of LPC, Mr Faulkner was asked if Port Otago would seek a ''premium'' on its shares - a sale for more than sharemarket value.
''Yes, I believe so. Selling on the [open] market is not an option; it is strategic at 15%,'' he said.
Having told the councillors talks with LPC had ''gone nowhere'', he declined afterwards to confirm whether there had been talks specifically with the Christchurch City Council or any large institutional investors, whether domestic or international.
Mr Faulkner said ''if the price isn't there'', Port Otago would not sell, while Port Otago chief executive Geoff Plunket said the company was able to maintain its ''long-term `hold' strategy'' and keep the stake.
