George Kerr to dilute stake in Pyne Gould share issue

Pyne Gould Corp's [NZX: PGC] managing director George Kerr will dilute his stake in the financial services firm if it goes ahead with a planned share issue, which will increase its stake in Equity Partners Infrastructure Co No 1, the so-called EPIC fund, which holds a minority stake in a UK motorway operator, Moto.

The Guernsey-based firm wants to lift its stake in the EPIC, fund to 49 percent from 27 percent now, and plans to pay EPIC shareholders with Pyne Gould shares, it said in a statement. Pyne Gould may issue up to 41.6 million shares, representing 20 percent of the current shares on issue, to EPIC shareholders, though hasn't settled on a price yet.

The EPIC acquisition would dilute the Kerr-controlled Australasian Equity Partners Fund No 1 LP (AEP) of Pyne Gould to as little as 67 percent, from its existing 80 percent stake. AEP, which counts Californian hedge fund Baker Street Capital as a minority partner, took control of Pyne Gould in 2012, paying 37 cents a share.

This week, Pyne Gould said it wants to oust two of EPIC's directors and install its own in a bid to cut administration costs, reduce debt and lift shareholder value. Pyne Gould said it was concerned about EPIC's $10 million loan for three years of working capital, given the company's size and its structure as a holding company with one investment.

Pyne Gould and Kerr have been closely linked with the EPIC fund over the years, terminating its management contract in 2012 with an $8.9 million payment after it was advised Kerr's takeover would trigger pre-emptive rights in the shareholders' agreement for its 17.5 percent stake in UK motorway service operator, Moto.

The firm also updated its plans to list in London, which it expects in the first year of 2015, and intends to prepare its accounts in British pounds.

Pyne Gould also outlined potential dividend policy, which it sees as being 50 percent of consolidated sustainable net profit. It doesn't expect to include profit from firms where it owns less than 100 percent.

Three years ago, Kerr said the firm was no longer a high-dividend stock and needed owners with a long-term view and the ability to inject more capital in his pitch to take over the company after its exit from Marac Finance. At the time, Kerr said "PGC is now a company more likely to re-invest its earnings in its assets with a patient seven years and beyond investment horizon."

Last year, chairman Bryan Mogridge told shareholders the company is seeking to deliver compound growth north of 15 percent over the medium to long term, meaning it will deliver "lumpy results" and has a policy of not providing market guidance.

The company's shares fell 2.2 percent to 44 cents today, and have shed 6.3 percent this year.

(BusinessDesk)