NZ shares fall as Sky TV shows its hand

New Zealand shares fell on Tuesday as investors returned from the long weekend to find Sky Network Television was more likely to make an acquisition than be bought out themselves.

Tuesday, June 7th 2022, 6:59PM

by BusinessDesk

The S&P/NZX 50 Index fell 151 points, or 1.3% percent, to 11,265.70. Turnover was $132 million.

Last week, investors were excited by rumours, published in the Australian Financial Review, that private equity funds had been asked to consider buying Sky TV.

Shares in the pay-television company jumped more than 7% on the prospect of a $500m takeover and an easy exit for investors.

Today, that share price spike was completely reversed as a new report emerged that Sky TV was itself on the hunt for a sizeable acquisition: Mediaworks, a radio and advertising business recently valued at roughly $150m.

Sky TV confirmed this report and said it was in “exclusive negotiations” with Mediaworks’ owners, but the transaction was “still highly uncertain”.

If the deal is struck, it would likely mean a private equity buyout would be off the cards in the immediate future.

Equity analysts were sceptical of the deal. Morningstar’s Brian Han said it was “puzzling” and questioned whether it was a negotiating tactic.

Media commentators saw more sense in the deal. Spinoff founder Duncan Greive said it would bulk up Sky’s advertising business and give the group much more diversification.

Investors appear to have preferred a private equity buyout and Sky shares fell 7.2% to $2.45. Shareholders would have to approve the acquisition, if it were to go ahead.

Elsewhere on the market, most stocks were heading lower. The key detractors from the index were Pacific Edge, which fell 5% to 75 cents, Mainfreight which dropped 4.2% to $78.11, and Fisher & Paykel Healthcare, down 3.3% at $20.10.

Serko was up 1.7% at $3.66, the biggest gain on the top 50 index, while Ryman Healthcare was up 1.3% at $9.37.

Outside of the index, Metro Performance Glass jumped 8.5% to 25.5 cents and Hallenstein Glasson Holdings rose 4.3% to $5.99.

Nick Smyth, a strategist at BNZ bank, said global interest rates climbed after US employment data looked strong on Friday night and China loosened covid restrictions on the weekend.

The higher rates, driven by market expectations that the US Federal Reserve will tighten monetary policy as planned, weighed on equities, and boosted the US dollar, he said.

The NZ dollar was trading at 64.69 US cents at 3pm in Wellington, down from 65.55 cents on Friday. The trade-weighted index was at 71.96, from 72.59 yesterday.

Tags: Market Close