Tuesday, March 28, 2006

Christopher Niesche: Thrown out with the rubbish

Waste Management and Australia's Transpacific Industries might like to call the deal they announced yesterday a merger, but make no mistake - this is a takeover.

Transpacific wants to buy all of the shares in the New Zealand-based rubbish company, leaving Waste Management shareholders with no equity in the new business.

As Transpacific said in its briefing notes: "Waste Management NZ will cease to exist following completion of the amalgamation."

In short, the company will join the list of others that have recently departed from the New Zealand stock market.

By calling a takeover a merger, Transpacific can get around the Takeovers Code, which would require it to win 90 per cent of Waste Management's shares before it could acquire all the shares in the company and take it off the sharemarket.

Under the Transpacific proposal, company law requires only 75 per cent of shareholders to vote in favour of the deal for it to go ahead.

This means that up to 25 per cent of Waste Management shareholders can decide they don't want to accept the offer, but still have their shares compulsorily acquired.

Transpacific has a strong position in liquid waste, Waste Management in solid waste. Together, the two companies will create what they say is Australasia's largest waste management business and save A$30 million ($35 million) a year in synergy benefits.

Investors acknowledged what a great deal this is for Transpacific, pushing its shares up 23 per cent on the ASX yesterday. Waste Management shareholders will get a 24 per cent premium over Friday's close if enough of them accept the $8.64-a-share offer. But that's all they can hope for. They won't be able to go along for the ride.

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