Is Tourism Holdings a takeover target for Chinese investors?

Could motorhome rental company thl be taken over by Chinese investors? Image: thl

Chinese investment manager Citic Capital has become the largest shareholder of Tourism Holdings Limited (thl) after spending more than $20m this month purchasing almost 11% of the company.

The move has raised interest from analysts who will be watching closely to see if yesterday’s substantial shareholders notice on the NZX of a series of Citic purchases of thl stock leads to a possible takeover.

“In some cases, a substantial shareholder notice such as this does bring that sort of outcome but it may be that they are just passive investors and are prepared to just sit and watch,” said senior investment advisor Peter McIntyre from Craigs Investment Partners.

Citic can buy up to the 19.9% of thl stock before triggering Takeovers Code requirements which limit further purchases. However, the investor would still be allowed to make a bid for thl.

“There’s always that possibility but it is too early to say,” said McIntyre.

“They can go to 19.9% before they go into that ‘no-fly zone’ and they are a wee bit away from that. The market will be looking with interest to see if they build their position from here – that will give us some cues obviously.”

From a listed point of view, there was not a lot of opportunity to enter the New Zealand tourism sector, which is not well represented in the public markets and thl’s recent performance had brought it to the attention of some global investors, added McIntyre.

The motorhome manufacturer, rental and tourism operator’s stock price had gone from a low of 41c in 2009 to an all-time high of $5 today. The company made a record FY17 net profit of $30.2m, a target it did not expect to reach until 2019.

Citic has spent $20.4m in a series of thl stock purchases this month at an average price of $4.85 a share, taking its shareholding to 10.8%.

Another analyst, who did not wish to be named, said it was too early to speculate on Citic’s motivations.

“It’s not that often that we get a block trade from a Chinese buyer like this but where they go from here, you just don’t know. Do they sell in the future, or do they hold on, or do they make a bid for the company? At this stage, you just don’t know.”

The announcement yesterday prompted thl chairman Rob Campbell to release a statement saying the company had noted the further increase in shareholding by Citic.

“thl has a strongly articulated global strategy, which it is rolling out. We have no reason to think that this should not continue,” said Campbell.

“We are proud of our New Zealand culture and approach. We believe there is further upside in our business and ability to grow value to our shareholders. We are hopeful New Zealand and other investors will continue to support our business and growth strategy.”

Citic is now thl’s biggest shareholder with fund manager Milford Asset Management reducing its stake to 5.4% as of last week from about 11% in June.

Head of investments at Milford, Brian Gaynor, told the Ticker in June that the selldown was part of the investor’s plan to rebalance its portfolio as thl shares increased in value.

Hong Kong-based Citic states on its website that it is an alternative investment management and advisory company with more than US$21bn of capital from a diverse group of international institutional investors under management.

Citic’s thl stock purchases follow another Chinese company’s indirect investment in the New Zealand tourism sector. China’s Rifa Jair Company is taking over New Zealand’s largest general aviation company, Airwork, which has extensive scenic tourism and charter flight interests.

Airwork partly owns INFLITE, which offers private plane and helicopter charter scenic flights and activities such as heli-fishing, heli-skiing, and private island dining.

Rifa is currently in the process of acquiring the remaining circa 10% of shares of NZX-listed Airwork that it does not already control.

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