John Burns offer better

Press, 7 April 1979, Page 18

John Burns offer better

The directors of John Burns and Company, Ltd, have again rejected the offer of 170 c a share by Brierley Investments, Ltd, and in doing so say that shareholders will benefit more by also rejecting the offer, and accepting a plan for the reconstruction of John Burns. “You have received an offer from Engineering Holdings, Ltd, a Brierley Investments, Ltd, subsidiary, of 170 c for your ordinary shares and nothing at all for your specified preference shares. This is conditional on no further dividends being paid. If the Brierley bid is successful, cash will not be paid before July 4, and possibly as late as November 1979.

“Engineering Holdings’ offer, in the opinion of your board, is not in the best interests of shareholders,” the directors of John Burns say in a letter to shareholders. “The reasons for our view are in essence the result of a programme embarked upon two years ago.

“We intend that shareholders will receive 175 c a share in cash — all tax-free over the next 21 months, and retain a substantial investment in a strong and profitable John Burns.” they say.

“For each ordinary share you will receive: 50c taxfree dividend on July 2; 50c tax-free capital reduction on March 31, 1980, and 75c taxfree payment on December 31, 1980. “You will still have a 50c share whose asset backing is over $2.00; and dividends totalling 12.5 c a share will be paid in the financial years ending June 1980 and June 1981, in addition to the above capital payments. “If annual dividends of at least 12.5 c per share are not twice covered by trading profits, further distributions will be made to shareholders,” the directors prom--156 RECONSTRUCTION “These proposals are the result of the board’s planning over a long period. They are not merely a re-

sponse to the offer by then Brierley Investments sub-[; sidiary. Rather, Brierley In- i vestments’ is endeavouring tjl pre-empt our reconstruction [ < plans. |S “As a result of the offer, I we have had to disclose our it specific intentions rather I < sooner than otherwise, but|i in essence they remain the ; < same.” the John Burns!' directors say. The 1977 annual report;! advised that the company; 1 had embarked on a com-': Iprehensive restructuring pro-,1 gramme. A programme of; realisations resulted in a! drop in total assets em-li ployed in the company of ; SI.6M between June 1977,1' and June, 1978, despite thej effects of inflation on work-j ing capital. p The Customs St, and Stan-h ley St property sales im Auckland, were part of this programme. i In addition, 7 acres of sur- > plus land at Carbine Rd, Auckland, have been sold,;' and negotiations on the sale! of another large property! are underway. John Burns still has valu-l

i able real estate holdings,| [generally in good areas, with; I many potential uses. In the; I last set of accounts, land [and buildings were shown at 54.2 M. ■ A registered valuer puts Ithe realisable value of land land buildings owned at June, 11978. to S6.BM, an increase ■ of over S2M from book lvalue. ! After making provision [for some new investment, it [has been decided to return 54.5 M to the ordinary shareholders as detailed earlier. PREFERENCE I Engineering Holdings has; [made no offer for specified preference shares. If the [offer for the ordinary shares jis successful and these are removed from stock exchange listing, the value of i specified preference shares will be largely theoretical, since they will be a minority, locked into an unlisted company. Their value will be entirely dependent on whether ■at some later date, Engineerling Holdings make an offer for them. In these circumI stances, Brierley (as the

only potential buyer) will need to pay very little. John Bums’ directors say.

Because the capital payments to the ordinary shareholders will reduce the asset-backing of the ordiary shares into which the preference shares convert, the directors recommend that the preference shares convert three preference shares into five ordinary shares rather than the present six into five.

This doubles the numbe 1 of ordinary shares inti which the preference share | convert, and increases the, asset backing on conversion If the preference share were to convert into ord> nary shares on the existin. ratio, they would eaci presently qualify for a divi dend of 10.4 c. On the pro posed conversion ratio the; would each presently qualifx for a dividend of 20.8 c.

In addition, as part of th< scheme of arrangement, the annual dividends payable or the specified preference shares willbe increased from 12 to 14 per cent as from January, 1980.