Transpacific Industrie's Capital Raising is Trash

I feel for Transpacific Industries [TPI] NZ | AU shareholders. I say this because shareholders like myself benefited from their Executive Director and Chairman, Terry Peabody's generosity when he shelled out over NZ $800 million to buy Waste Management NZ in 2006.

Some say he overpaid, I say the asset was a stunner and I got shafted long-term but nevertheless I got a 50% return on my investment for a year and the money came from debt Peabody was able to raise from idiotic investment bankers who took a percentage cut for arranging such loans for Peabody to go mad with.

I really have TPI shareholder money in my back pocket, thanks for that, but the borrowing of the last few years had its wrap up of sorts today where the company is trying to ironically raise about $AU800 million to fend off bankers (ahh there they are again to collect) and eventual liquidation.

They have managed to raise around AU $620 million so far from institutions and a cornerstone shareholder, Warburg Pincus (another investment banker/private equity player) and will ask for the remaining balance from those poor old suffering shareholders at the princely sum of AU$1.20 per share.

If the institutional capital raising is anything to go by the interest in pouring more money into this company is low. It only just reached its minimum target.

My message to those shareholders is, don't do it!

The architect of the company failure is still there at the head of the business, it is unbelievable that he hasnt been pushed out or had the decency to walk the plank, but Terry Peabody is an arrogant man and he will not admit that he has done much wrong. He has destroyed around AU$ 3 billion in capital in the business that he manages and an arrogant man doesn't change his ways easily.

The cornerstone shareholder should reign him in though.

It seems to me though that the cornerstone shareholder,Warburg Pinkus, who will hold 20% of the company or more once the capital restructure is finalised, and that should be in early September, might want to extract as much value from their investment at the expense of minority shareholders and Peabody, who will also have a large stake, will want to continue with the staus quo.

Cut your losses TPI Holders, it ain't worth it chasing good money after bad.

There is of course short money to be made here.

Just a heads up for New Zealand investors. It seems to me that Transpacific's best assets still lay in its New Zealand operations. Waste Management and parts of Envirowaste and other companies that TPI run here are virtual monopolies, making good money and the fact that an investment banking organisation/private equity company has a large stake in TPI could mean a sell off of some of those assets in the future.

Slightly more than a stab in the dark from me, but nevertheless we could get it back on our NZX one day.

Just though a good rumour was warranted.

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c Share Investor 2009

Share Investor Friday Free for all: Edition 10

Ian gets a Bargain



The Warehouse in Hamilton


Ian Morrice , the head of The Warehouse(WHS) has received good news recently. It was reported in mainstream media today that he is to receive a total remuneration of $3.908 million for the 2007 financial year to June 29.

Nothing wrong with that, Morrice has done well to turn around company fortunes by selling the losing Australian arm and reinvigorating the shop floor by selling more consumer friendly brands in his stores.

Speculation by media in the case of The Warehouse is that one of those targets was an increased share price. Like Auckland Airport(AIA) a few months back managers were given incentives if certain performance targets were met and the link to share price performance was cited by that company.

Both AIA and WHS were/are under takeover speculation so the increase in share price is totally unrelated to the performance by management or the CEO and the incentives paid to those at AIA and Morrice at WHS are clearly undeserved.

If share price increases can be pinpointed to management's achievements then and only then incentives should be paid.

In a closely covered case by business media, the appeal by Foodstuffs, Woolworths and The Warehouse has finished today but a decision is not expected for several weeks.


Playing the game of Monopoly



A Waste Management Trash Unit

Proving that the Commerce Commission can make a ruling in favour of a virtual monopoly business in New Zealand they have cleared Transpacific Industries to buy some businesses off Envirowaste Services.

The company have been trying to buy parts of Envirowaste for some years after being turned down by the CC to buy the whole company a few years ago. That decision followed the purchase of Waste Management by the Australian trash giant and the approval of that purchase by the commission.

Transpacific was yesterday cleared to buy EnviroWaste's solid waste collection businesses in four centres and solid waste businesses in two others.

That decision could shed some light on a decision pending before the commission on whether The Warehouse could be purchased by two dominant retail industry players.

Oils Well?

The recent climb in the price of oil from the low of $US70 per Bbl to over $96 today and the worry over the price is a complex tale of inflation and increases in productivity and technology.

While the price is clearly just below the inflation adjusted April 1980 record price of US$101.70 there are reasons why we shouldn't worry too much, yet.

Since those heady days individuals and companies have increased productivity manifold times and the technology that we now use, for industry and personal use, allows the consumption of far less of the black stuff.

Our cars get more millage to the gallon/litre for a start and vehicles are one of the biggest users of oil, especially you Americans!!

As a footnote to this story, no the world isn't running out of oil. The "Peak Oil" theory is as mythical as global warming and the tooth fairy The left are mining P.O. to advantage their nonsense and collect more taxes.


Acres of Shopping


The new 210 million dollar Westfield at Albany, New Zealand


The expansion of retailing in New Zealand looks set to continue for the foreseeable future if the plans of the mall giant Westfield (WDC) are anything to go by.

Westfield has just opened a giant mall, a former apple orchard from where the "Albany Beauty" apple gets its name, in Albany, just a stones throw from where I live.

That new mall has 5.2ha of indoor floor space and although it was opened yesterday, the 1800-seat Sky City(SKC) Cinemas, will not open until next year.

The company have 12 malls in New Zealand and look set to continue expansion of not only Albany, where there are acres of land to do so, but malls in Newmarket, Auckland and Christchurch as well.

Construction of other shopping precincts unrelated to Westfield, in the Albany area, are going ahead stridently as the population in the area expands rapidly.

Westfield look to have a great future in this country as its covered mall shopping areas don't have the same dominance as they do in such regions as its home market, Australia and the home of the mall, the USA.



NZX Market Wrap

New Zealand shares dropped more than 1 per cent today following significant declines on Wall Street, but the local market's fall was smaller than for those around the region.

The benchmark NZSX-50 index closed down 53.8 points at a one-and-a-half month low of 4154.13. Turnover totalled $113.4 million, with 24 rises and 80 falls.

Telecom shed 2.6 per cent, or 11c, to a more than two-month low of 417 after its quarterly result today. The company said net profit for the three months to the end of September were $225 million, unchanged from a year earlier. But profits from continuing operations were up 29 per cent.

The mobile outlook wasn't good, some of the ways they got some profit seemed to be from lower tax and one-off things like the Southern Cross dividend. Obviously the combination of a bad day and a poor result.

Air New Zealand was one of few leaders to post a rise, up 3c at 215 despite ongoing oil price rises.

Fletcher Building fell 32c to 1168 and continued its dramatic fall over the last week, Contact Energy was down 4c at 900, Fisher & Paykel Appliances lost 8c to 348, F&P Healthcare was 6c lower at 317, and Auckland Airport lost a cent to 287.

Sky City was down 6c at 539, while Sky TV rose a cent to 570.

Smaller stocks to rise were Methven, up 6c at 246, NZX, up 8c at 948, Nuplex, up a cent at 756, and carpet maker Cavalier, 2c higher at 310.

Pumpkin Patch was down 6c at 293 after I bought some earlier this week at 309, Michael Hill lost 20c to 1025, Ebos fell 8c to 537, Freightways was down 7c at 383, and Mainfreight fell 3c to 732.

C Share Investor & NZPA 2007

NZ Dollar Wrap


Reuters currency rates

4.45 today 5pm yesterday

NZ dlr/US dlr US76.25c US77.11c
NZ dlr/Aust dlr A82.99c A82.91c
NZ dlr/euro 0.5277 0.5335
NZ dlr/yen 87.60 88.99
NZ dlr/stg 36.65p 37.13p
NZ TWI 70.61 71.32
Australian dollar US91.90c US93.08c
Euro/US dollar 1.4444 1.4462
US dollar/yen 114.90 115.37

Disclosure: I own WHS Shares

C Share Investor 2007