Herald on Meridian sale

August 21st, 2013 at 2:00 pm by David Farrar

The Herald editorial:

The structural drawbacks have largely been remedied for Meridian’s part-float, as needed to be the case given that it is easily the largest of the three power companies on the Government’s privatisation list. The sale will involve instalment receipts that allow investors to pay for the shares in two bites while receiving the full dividend. The first instalment will be for 60 per cent of the share price, payable on application, with the balance to be paid in 18 months. This greater affordability is enhanced further by a minimum application of $1000 for the first instalment. There will also be a share cap for New Zealand retail investors, so they will know the top price they will pay in both instalments.

This approach is not unique. It was used for the float of Australia’s Telstra and, locally, by Ameritech when it exited its Telecom shares. In both cases, it answered a particular need to create a heightened attraction to potential investors. It is understandable that it should also be used for Meridian.

David Shearer was comparing this on TV to doing layby at Harvey Norman. Not sure why Labour would want to use such a positive analogy!! Many Kiwis do shop at Harvey Norman and love using layby to make big purchases more manageable.

It is important that many choose to become Meridian shareholders. On the broadest of fronts, a shareholding democracy is about reducing this country’s unhealthy emphasis on housing investment. 

The companies benefit also from the discipline and transparency of a market listing.

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18 Responses to “Herald on Meridian sale”

  1. Cunningham (746 comments) says:

    It annoys me how the media now don’t mention the cynical and destructive policy that the commies/Labour propose for the power industry when they talk about share price of MRP. They make out that it is the governments fault for the lower price but time and time again fail to menion that the threat to wreck the industry has a huge bearing on where MRP are and also on why this sweetner has been proposed. Labor and the Greens are committing economic treason and then criticising the government for a low MRP price and for this proposal even though they are a big reason why. MSM lets them get away with murder.

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  2. anonymouse (652 comments) says:

    Except that the correct word to use is *hire purchase* not *Layby* or ( layaway) which is what happens when the goods remain in a storeroom until they have been fully paid for, usually done for planned events like Christmas etc, Layby is actually becoming very rare, most stores have stopped offering it, as credit provision is now a more lucrative earner.

    I am fairly sure that Harvey Norman do not actually have lay-by, just various forms of “zero interest” HP

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  3. Matthew Hooton (114 comments) says:

    I remember doing lay by for some cool (then) Ray Ban ski glasses from a shop in Newmarket in 1988 when I was 16. Great that lay by still exists for the next generation.

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  4. smttc (638 comments) says:

    Russel Norman says the layby scheme will cost taxpayers $40,000,000. He just plucked the number out of his arse on Red Radio this morning.

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  5. Cunningham (746 comments) says:

    smttc (488) Says:

    “Russel Norman says the layby scheme will cost taxpayers $40,000,000. He just plucked the number out of his arse on Red Radio this morning.”

    Pretty rich when their power nationalisation policy has already cost the taxpayer hundreds of millions before it is even implemented.

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  6. Ruminator (18 comments) says:

    Yeah, you should totally rush out to buy these. Because the Mighty River shares have been a great score.

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  7. Nick R (443 comments) says:

    Excellent. The interest free loan will make losing money much more affordable.

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  8. Cunningham (746 comments) says:

    Ruminator (6) Says:

    “Yeah, you should totally rush out to buy these. Because the Mighty River shares have been a great score.”

    Long term they will be OK. Either National will win next year in which case I expect they will rise back to what they were or higher. Or the opposition win and try to implement their policy. It will either not be possible to implement or a complete disaster in which case it will be dismantled by National once they get back in and we will be back to where we are now. I am planning on hanging on to mine for the long term so am not concerned.

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  9. peterwn (2,940 comments) says:

    Dividends are to be paid on the partly paid shares AFAIK – that is hardly ‘lay-by’. Personally I think Tony Ryall and Bill English were disingenious saying (at Question Time) that they had done no calculations of the foregone interest. Except perhaps this would require a guess at dividend payments and it would not be desirable for the Ministers to ‘predict’ dividend payments even as an ‘for example’.

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  10. wikiriwhis business (3,302 comments) says:

    Mr Key says National supporters want him to do a U-turn on previous promises and work with Mr Peters, if it means stopping a Labour-Greens government, and a 3 News/Reid research poll backs this up.

    what do you think Nat supporters ?

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  11. Manolo (12,643 comments) says:

    God help NZ if this imbecile Captain Mumblefuck Shearer ever becomes PM.
    He’s even unfit to be a school janitor.

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  12. Ian McK (237 comments) says:

    Why do media continually bombard readers with crap from Norman, Vance, Espiner, the Obese German Criminal, etc. Are they commanded to do this by the New Plymouth reject Little, of EPMU infamy.

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  13. Cunningham (746 comments) says:

    wikiriwhis business (1,595) Says:

    “what do you think Nat supporters ?”

    And that is relavant to this story why??

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  14. jcuk (512 comments) says:

    I have had my local HN store and it would have to be something incredibly worthwhile to get me back there after clueless assistants not being able to answer simple questions from my wife and being led astray in one purchase by the manager into buying something I didn’t really need for my purpose … he made the sale but lost a customer who had previously spent quite frequently on big items … not any more.

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  15. Akld Commercial Lawyer (138 comments) says:

    Please excuse what follows – it has been a trying day and, for light relief, I thought I would have a bowl at irony.

    One of the most annoying things about carpooling a bunch of other people’s kids to sports practice in the early morning is when someone makes a assertion on National Radio, like that from the good Dr, this morning – I cannot yell “Nimrod”. Obviously, it is not a one-way bet – that the punters get to pay by instalments and the imputed interest won’t be factored into the price.

    So for those of us who wish we were asking the questions for National Radio – if the price of Meridian shares is determined by a book-build (aka an auction) do you think there will be difference to the outcome of the book-build with/without instalment receipts being factored in?

    And if National Radio was confused by any of this, they could have used Google and found out that an Auckland University academic has done a study on the topic. What’s more, 9 years after publishing his study, he is still there and even has the same email address. Perhaps you might ask him – his name is Alistair Marsden and he really is quite approachable.

    More to the point, the Treasury advice to the Finance Minister is that it will be close to fiscally neutral and instalment receipts are back in vogue for the same reasons you would want to use them here – the target audience will have Christmas on their mind and a tax payment early in the new year. We want to get a bit more price tension going here, especially now that Power NZ has been exposed for what it always was (a big fat lie) and the way to achieve that is to give the punters a bit time to pay.

    Not only do we need a better Opposition, but we need journalists who can think on their feet and ask the hard questions on issues other those that are closest to their own hearts.

    And whilst I might like to say that I have to work with politicians of every hue, what about starting with, on the law of averages based on his performance over say the last 12 months – chances are, if the drumbeat comes from the good Dr then there might be a catch.

    And finally, has anyone noticed that the Labour Finance spokesman seems to have gone AWOL?

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  16. Paulus (2,299 comments) says:

    Look forward to buying Meridian, like MRP. Price not of any great concern even an opening reduction from sale day.
    It was Australian Institutions who chickened out over MRP to give a few cents reduction – not relevant.

    You do not buy one day sell the next, in the current climate, for a capital gain, which is taxable as a trader under Capital Gains Tax rule anyway, or should be.
    Both great investments with decent dividend and possible capital gain over time.

    What idiots like Wussel do not understand, never had a real job, with a sale value in the billions, is that such a term sell over 18 months will be factored into the sale price to cover the three dividends over the full settlement period.

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  17. JamesBlake (14 comments) says:

    Just curious, if it is such a good investment why do they need this sweetner to get people to buy? Surely people should be lining up around the corner to buy shares. Oh wait thats right MRP’s poor performance has scared people off.

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  18. flipper (3,274 comments) says:

    ACL…and Paulus…

    Excellent, both.

    ACL.. My wife keeps on telling me to stop shouting at the radio or TV, although I must say that I gave up on Red radio several years ago.
    Apropos your comment… *** but we need journalists who can think on their feet and ask the hard questions on issues other those that are closest to their own hearts. ***

    Former NZ Herald Editors like Les Munro, Budge Hintz, John Hardingham , Noel Chappel and Peter Scherer would have kicked their silly buts all the way to the reading room – until they learned to be real reporters, not effete snob “journalists”. :)

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