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Salient: Victoria University Students' Paper. Vol. 28, No. 2. 1965.

Takeover — Financial Implication


Financial Implication

The attempted takeover of the Dominion has since resulted in a number of changes in the share capital structure.

In the same way that the paper itself has not moved with the times, the structure of the Wellington Printing and Publishing Co, Limited had remained unaltered until its 60,000 £5 shares were open invitation to a takeover offer. This will be more clear when it is realised that the comparable capitals of The New Zealand Herald And The Auckland Star were £1,530,000 and £1,813,000 respectively.

The first change had already commenced when Thompson struck. Or could it be that it was the company's first sluggish reaction to news of the takeover? At the time of the offers, the Mercantile Gazette suggested that the Dominion had known of the Thompson move some months before it was made public.

Such a suggestion-based on a Dominion warning to the Stock Exchange that the company's articles limited the size of individual shareholdings—contrasts wryly with the injured innocence which the company adopted in face of the takeover. Not surprisingly, the suggestion was not reprinted or discussed outside the Gazette even though the Dominion went to the desperate lengths of reprinting favourable Letters to the Editor from other papers.

Whatever the reason behind the move the first one increased the company's capital to £500.000 in £5 shares. Part of the increase was in the form of a 1 for 3 bonus issue and the balance was a cash issue at a premium of £2/10//0 per share which brought in £150,000 in new capital. Why this new capital was wanted can be wondered at.

The financial strength of the company was not revealed until the takeover bids which uncovered over £500,000 in undisclosed assets.

The next move of the Directors was to raise the dividend to 14 per cent. This was aimed at persuading shareholders not to sell their shares. At the same time the company announced it would split the shares into £1 units and seek Stock Exchange listing. The company now had 500,000 shares, a near ten-fold increase from the position only a few months earlier.

Now the company has made a one-for-two bonus issue, combined with yet another share split for which 'decimal currency' is the thin excuse Capital rises to £750,000 and the number of shares to 1.500.000—a 25-fold increase in the number of shares in just over a year. At the same time a dividend rate which must have been embarrassingly high has been pared back to ten percent—in fact making an effective yield of 15 per cent on holdings before the second bonus issue.

It is clear that the Dominion is now a much more formidable takeover proposition. Particularly when the Murdoch-bought shares at present being held in trust come back on the market, the shares may be expected to appeal as a speculative proposition, and the number of shareholders will probably increase rapidly.

Whether or not the failure of the Thompson bid for the Dominion is to be regretted is a matter for personal opinion. On the economic level one conclusion may be reached, on the journalistic level quite another. But it is worth commenting that Thompson has since been frozen out of an attempted Scottish takeover by the same tactics which were used against him by the Dominion Board. By buying up shares at Inflated prices on the Stock Exchange, his Scottish opponents gained majority control exactly as the Dominion Board gained majority control through its compromise with Murdoch.

In the Scottish affair as in New Zealand, Thompson's first bid was rapidly overbid by his rivals. As in New Zealand, a second, higher bid, could only be made too late. While Thompson made the headlines, his rivals bought the shares.

The effect on the Dominion of the bid cannot yet be fully gauged. The paper has been seeking staff from many New Zealand papers, and from the Wanganui papers alone has hired the Chronicle's Editor and General Manager and the Herald's Advertising Manager. Now working or writing for the Dominion are men who have been critics of its past history, including one Journalist who in different employ wrote leaders welcoming the Thompson bid This sudden search for what journalistic talent has not already deserted the New Zealand dallies in disillusion may in the end convert the Dominion to an adequate daily.

Certainly it has been the Dominion more than the Evening Post which has done most to earn the verdict of a writer in the Sydney Bulletin: "Wellington, surely, has the poorest press of any capital city in the Western World."