New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Infratil (IFT) Australian Super Non-Binding offer at NZ$7.43 per share</h2>
Australian Super have submitted a proposal to acquire all shares of&nbsp;Infratil&nbsp;(IFT) for a total consideration of NZ$7.43 per share. The total offer consists of cash consideration of NZ$5.79 per share and 0.221&nbsp;Trustpower&nbsp;(TPW) shares per IFT share. The offer represents a ~25% premium to the closing price on Monday December 7. Our discounted NAV price target following the recently proposed divestment of its Tilt&nbsp;Renewables&nbsp;(TLT) is&nbsp;NZ$6.25. The offer price represents a 19% premium to our current price target. The offer was announced after the market close in New Zealand but the IFT ASX traded shares closed up +21% for the day at A$6.80 (NZ$7.16 using a 0.95 NZD/AUD exchange rate), we would expect a broadly similar reaction tomorrow in the New Zealand market.
Our un-discounted NAV is &gt;NZ$8 per share; we think the offer is likely to be rejected
We estimate that total value of IFT’s portfolio holdings is ~ NZ$7.65b (NZ$10.6 per share) and that net debt is c. NZ$1.6b (NZ$2.2 per share) for a total value of ~NZ$8.4 per share (12m forward). &nbsp;This is substantially higher than our price target of NZ$6.25 which factors in capitalised corporate costs (including the management fee) and expected performance fee for the next five years. In addition we apply a 10% discount in-line with our estimate of IFT’s historical, observed discount. We believe that the IFT board is likely to take the view that the offer undervalues IFT’s assets and that IFT could achieve a higher price by selling the portfolio companies one by one, should the choice be to unlock the conglomerate discount and/or exit the management contract with MCO. Specifically, the recent announcement of a strategic review into the TLT holding suggests that IFT is looking to selectively unlock the value of some of the portfolio assets.
Australian assets but WIA would need OIO sign off
The proposed offer is structured so that IFT’s current share-holders would retain IFT’s current 51% holding in TPW (shares distributed&nbsp;in specie). Of the remaining assets only two (Wellington Airport and Vodafone) are New Zealand companies, with Vodafone NZ already having international investors owning 50%. However, majority owned Wellington Airport will most likely need OIO approval.
Forsyth Barr IFT valuation
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1685503224497689053&amp;th=17641c40a3f5d1dd&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-cvcdzUxNmVlZlos29IAeybyk4oGM2SJ1-D78kmU9FFuAQbwTrOWdwovCsmwNT0KcoeTZRSVtpWxnJC6ayHFjlR73w1uqp3XgE-sopIBZAskDSb7APpw7pUBo&amp;disp=emb" width="602" height="336" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Forsyth Barr analysis
Aaron Ibbotson &nbsp;CFA Director / Senior Analyst, Equities
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.3&amp;permmsgid=msg-f:1685503224497689053&amp;th=17641c40a3f5d1dd&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-k7QbgdMIXPp0-Mw6WR0A4CN0EdbDjHHfLPiAol8AG3RdxGvLRlTJOi2tMGUwxle63TXVtzPhbhqyT-2YEhsyuFtO-aOXGuphSDRHcAot_XxQgcGK_6-STy2s&amp;disp=emb" class="editor-image img-responsive"></figure>
 M: +64 21 470 377 |P: +64 9 368 0024 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Infratil (IFT) Australian Super Non-Binding offer at NZ$7.43 per share
Australian Super have submitted a proposal to acquire all shares of&nbsp;Infratil&nbsp;(IFT) for a total consideration of NZ$7.43 per share. The total offer consists of cash consideration of NZ$5.79 per share and 0.221&nbsp;Trustpower&nbsp;(TPW) shares per IFT share. The offer represents a ~25% premium to the closing price on Monday December 7. Our discounted NAV price target following the recently proposed divestment of its Tilt&nbsp;Renewables&nbsp;(TLT) is&nbsp;NZ$6.25. The offer price represents a 19% premium to our current price target. The offer was announced after the market close in New Zealand but the IFT ASX traded shares closed up +21% for the day at A$6.80 (NZ$7.16 using a 0.95 NZD/AUD exchange rate), we would expect a broadly similar reaction tomorrow in the New Zealand market.
Our un-discounted NAV is &gt;NZ$8 per share; we think the offer is likely to be rejected
We estimate that total value of IFT’s portfolio holdings is ~ NZ$7.65b (NZ$10.6 per share) and that net debt is c. NZ$1.6b (NZ$2.2 per share) for a total value of ~NZ$8.4 per share (12m forward). &nbsp;This is substantially higher than our price target of NZ$6.25 which factors in capitalised corporate costs (including the management fee) and expected performance fee for the next five years. In addition we apply a 10% discount in-line with our estimate of IFT’s historical, observed discount. We believe that the IFT board is likely to take the view that the offer undervalues IFT’s assets and that IFT could achieve a higher price by selling the portfolio companies one by one, should the choice be to unlock the conglomerate discount and/or exit the management contract with MCO. Specifically, the recent announcement of a strategic review into the TLT holding suggests that IFT is looking to selectively unlock the value of some of the portfolio assets.
Australian assets but WIA would need OIO sign off
The proposed offer is structured so that IFT’s current share-holders would retain IFT’s current 51% holding in TPW (shares distributed&nbsp;in specie). Of the remaining assets only two (Wellington Airport and Vodafone) are New Zealand companies, with Vodafone NZ already having international investors owning 50%. However, majority owned Wellington Airport will most likely need OIO approval.
Forsyth Barr IFT valuation

Source: Forsyth Barr analysis
Aaron Ibbotson &nbsp;CFA Director / Senior Analyst, Equities

 M: +64 21 470 377 |P: +64 9 368 0024 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Infratil (IFT): Australian Super Non-Binding Offer at NZ$7.43 Per Share

Infratil Ltd

Infratil (IFT): Australian Super Non-Binding Offer at NZ$7.43 Per Share