Aussies expect foreigners to be offered up to 30% of the Mighty River Power shares sold in the SOE's IPO

Aussies expect foreigners to be offered up to 30% of the Mighty River Power shares sold in the SOE's IPO

Australian and other overseas investors are set to be offered up to 30% of the shares sold by the Government in the Mighty River Power float, according to The Australian Financial Review (AFR).

The AFR's Street Talk column, a regular source of investment banker leaks, says marketing for the SOE initial public offering (IPO) has stepped up a gear across the Tasman, with the book-runners, such as Goldman Sachs, sending analysts to meet investors ahead of the expected $NZ2 billion share sale.

"The company is expected to list in New Zealand and Australia in May, although the timetable is dependent upon regulatory approval in New Zealand," the AFR says.

"Australian and other offshore investors will be offered up to 30% of the $NZ2 billion float."

The latest AFR report comes after its Street Talk column reported last month that Mighty River Power would be dual listed in Australia and New Zealand. A listing on the Australian stock exchange, as well as the New Zealand sharemarket, and up to 30% of the shares going to offshore investors will be controversial on this side of the Tasman given the National-led government has pledged to put New Zealand investors at the front of the share buying queue.

Finance Minister Bill English says, including the majority stakes the Government retains in its SOE selldowns, ministers expect 85-90% of the shares to be held by New Zealanders after the IPOs.

The Government plans to sell up to 49% of Mighty River Power's shares, and the same amount at later, as yet unspecified dates, in Meridian Energy and Genesis Energy. Prime Minister John Key has said New Zealanders applying for up to NZ$2,000 worth of shares are guaranteed to receive the shares they apply for. SOE Minister Tony Ryall says about 400,000 New Zealanders have pre-registered their interest in buying shares.

The joint lead managers of the float are Credit Suisse/First NZ, Goldman Sachs and Macquarie Group. ANZ New Zealand, ASB, Craigs Investment Partners and Forsyth Barr are the retail syndicate.

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Tony Ryall has just released the following:
As at 10 am today over 400,000 New Zealanders have pre-registered their interest in buying shares in Mighty River Power.
Minister for State Owned Enterprises Hon Tony Ryall says that if New Zealanders have questions about share ownership, there is information available. 
“I urge them to go to the pre-registration website –  www.mightyrivershares.govt.nz.  It has a Frequently Asked Questions section which will be very helpful for new investors and for people who haven’t participated in a Share Offer before,” Mr Ryall says. 
“There is also the www.governmentshareoffers.govt.nz  website that has information on the Mixed Ownership Model programme, as well as information about share ownership.”
Mr Ryall says the pre-registration website and the 0800 call centre have been extremely busy since the launch of the pre-registration programme.
“We encourage New Zealanders who are interested in finding out more about the Mighty River Power Share Offer to pre-register their interest.  Pre-registering does not oblige you to apply for shares and will allow us to keep you informed.”
“But they’ll have to do that within  the next two and a half days.”
The pre-registration deadline is 5pm on Friday 22 March.
“Pre-registration is only for New Zealanders and it does not commit anyone to having to buy the shares,” Mr Ryall says. 
“A New Zealander who pre-registers may get a share allocation benefit of up to 25 per cent more shares that those who do not pre-register.  In the event that the Share Offer is oversubscribed, the 25 per cent allocation benefit will apply as follows:
·         A pre-registrant who goes on to apply for shares in the general public offer will receive up to 25 per cent more shares than someone who does not pre-register and  applies for the same amount of shares
·         Applies to all applications above $2,000.  All New Zealanders who apply are guaranteed the first $2,000 worth of shares applied for, irrespective of whether they pre-registered
·         No one will receive more shares than they applied for
“New Zealanders can pre-register online or via the Share Offer call centre at:
·         Website - www.mightyrivershares.govt.nz 
·         Free call – 0800 90 30 90 (8am to 8pm Monday to Friday and 8am to 8pm Weekends)
“The Government will remain as the 51 per cent majority shareholder of Mighty River Power and no other shareholder will be able to own more than 10 per cent of the company,” Mr Ryall says.

The joint lead managers of the float are Credit Suisse/First NZ, Goldman Sachs and Macquarie Group. ANZ New Zealand, ASB, Craigs Investment Partners and Forsyth Barr are the retail syndicate.
 
Now there's an exemplary bunch of financial institutions.
 
Curious as to why all these middle men are needed. The government is doing the pre registration on the website and is doing the advertising, why can't it just sell the shares direct and avoid most of the estimated $100m fees? Why are they needed at all if the intention is for locals to buy them?

Systems, knowledge and infrastructure. 
 
The government didn't build the website, they paid a Australian company to do it for them because they don't have the systems, knowledge and infrastructure.
 
The government needs these financial institutions because they don't have the systems, knowledge or infrastructure to list $1.75b worth of shares on the NZX and ASX simultaneously and distribute ownership of said shares to approx 400,000 Kiwis, including allocation of the required CSN and FIN registration numbers to all 400,000 new or existing investors. 
 
Think what you like of these financial institutions but I would much rather the private sector handled the whole thing. 

English and Key have both made it clear they expect 85-90% of the company to be NZ owned after the float. That really means 85%, and would presumably only go higher than that if a truly implausible number of NZers applied. Given they are floating half the company, then clearly 30% of the float is promised overseas.
They apparently have in mind getting $2 billion. Assume that all of the 400,000 people who preregistered actually applied (fairly unlikely) then they could apply the $2,000 limit. That suggests they have in mind allowing around $800 million (or 40%) in the public float, and $1.2 billion (60%) saved for financial institutions (and maybe Iwi) to make a windfall from. That 60% seems likely split between NZ and Australian institutions; although one imagines there will be few to nil restrictions on the NZ institutions immediately flicking their lot overseas.
Could be wrong, but that's how it's looking.
I struggle to describe how appalling I think that is, both as a long term economic management strategy, and also as a cop out on their promises to have the NZ public at the front of the queue, but there you go. Maybe it's just me, and everyone else is perfectly cool with it. Others can make up their own minds whether they still like and trust Key and English.