24 Sep 2010

Shareholder revolt brewing at Nuplex

7:54 am on 24 September 2010

Another listed company is facing a shareholder revolt, after Guinness Peat Group bowed to investor pressure to install a majority of independent directors earlier this week.

The chemicals and resins maker, Nuplex, is keen to shift its head office from New Zealand to Australia, from where it already runs most of the business.

But investors and some businesspeople say the plan does not stack up.

Nuplex chairman Rob Aitken signalled a change in the annual report earlier this month, saying a move across the Tasman appeared to be in the best interests of shareholders.

He cited the greater liquidity of the larger Australian market, while access to its capital markets would help fund Nuplex's Asian growth plans.

Tyndall Investment Management holds almost 1.5% of Nuplex. Domestic equity manager Rickey Ward is not convinced by Nuplex's arguments.

He says Nuplex should remember New Zealand shareholders bankrolled a $160 million rescue package last year, when the company was struggling under high debt and banking breaches.

Radio New Zealand's business editor says the loss of a middle ranking stock like Nuplex would be a blow to the stock exchange and it has galvanised its supporters in a way that a private equity purchase a few years ago did not.

NZX director James Miller says demand for New Zealand stocks are higher than in Australia, weakening the argument that Nuplex's stock would be re-rated upwards.


Analysis by Deutsche Bank for Craigs Investment Partners also questions whether liquidity would be improved by moving away from its strong New Zealand shareholder base.

Indeed, it argues Nuplex may struggle to get coverage, or institutional investor attention, among the lower ranked firms on Australia's main stock exchange board.

A strong defender of New Zealand's markets, former NZX director Lloyd Morrison of Morrison & Co says personal reasons, rather than better outcomes for investors, tend to motivate such decisions.

He says that can cost companies dear.

Mr Morrison says actively courting Asian investors should be a key strategy for Nuplex, particularly if it wants to raise funds to increase capacity in China and Vietnam.

Meanwhile, Mr Miller says the concern around Nuplex's possible shift may prompt key shareholders to act in concert, as it did with GPG.

Mr Ward says he's written to Nuplex about his concerns, but is yet to receive a reply.