TNZ bid 'inadequate', says AAPT

AAPT's board of directors has recommended its shareholders reject Telecom New Zealand's bid for a controlling 40 per cent of the company.

The directors believe TNZ Australia's of $5.10 is "inadequate" and undervalues the company.

AAPT's chairman, Lee Casey, said: "This below-market bid ignores the company's strategic position in the Australian telecommunications market and substantial growth potential."

According to Casey, the board was not prepared to accept an offer that "is not in the best interest of all shareholders".

This announcement comes on the heels of discussions with TNZ on Tuesday this week.

During these discussions, TNZ made a non-binding proposal to subscribe to a $300 million placement of AAPT's shares at $6 per share, and that it would also purchase Cable & Wireless Optus' 10.56 per cent shareholding for $5.20 per share.

Further discussions with AAPIS, which owns 17.32 per cent of AAPT through a wholly owned subsidiary, revealed that AAPIS would not be prepared to support such a proposal at a shareholder meeting.

The following day, TNZ withdrew this proposal and made its current offer, along with a number of conditions relating to the conduct of AAPT's business.

"An independent valuation of the company following Cable & Wireless Optus' takeover attempt placed the company's value between $6 and $7 per share," Casey said. "This valuation will be updated.

"Six dollars per share is what the company is worth at the very least," Casey said.

"Therefore it is very difficult for us to contemplate a proposal that suggests that TNZ should gain control of the company at $5.10 per share," he said.

Rejecting suggestions that the bid was an insult, Casey added, "we see TNZ as a strategic partner.

"However, if they wish to raise their shareholding, they must pay a fair price."

Casey added that synergies between AAPT and TNZ could still be exercised without a 40 per cent majority. "There is an opportunity to create a great trans-Tasman alliance," he said.

Comparing this bid with the failed Optus takeover attempt, Casey described TNZ as "far more forthcoming.

"TNZ attempted to meet our demands to ensure equality for all shareholders," Casey said.

"However, they obviously were not prepared to go far enough," he said.

"The board would be surprised if the shareholders went for this bid," Casey added.

"But the big unknown is the Optus shareholding."