UPDATE: Infratil Consortium Executed Sale, Purchase Agreement For Shell New Zealand Assets

Utilities and airport investor Infratil Ltd. (IFT.NZ) and the New Zealand Superannuation Fund said Monday they have executed a sale and purchase agreement for Shell New Zealand's distribution and retail business that includes a 17.1% stake in the New Zealand Refining Company (NZR.NZ).

The base purchase price is NZ$696.5 million plus an adjustment for actual net working capital in excess of NZ$208 million on the April 1 settlement date. The purchase remains conditional on funding and regulatory approval, the company said in a statement. Shell New Zealand is a unit of Royal Dutch Shell PLC (RDSA).

Infratil senior executive Tim Brown said the adjustment for actual net working capital will depend on fuel, payables and receivables in place on April 1.

There is also an NZ$13.5 million advance license royalty payment for brand.

Total equity provided by Infratil and the NZ Superannuation fund will amount to NZ$420 million, with the balance of the purchase to be bank funded, it said. Infratil and NZ Superannuation fund will each provide NZ$210 million. The stake in NZ Refining has an approximate market value of NZ$190 million, Infratil said.

Along with the stake in NZ Refining, the purchase also includes New Zealand-wide distribution, storage, marine and aviation assets, the rights to use the Shell retail brand, a 25% share in Loyalty New Zealand and the ongoing supply of Shell fuels and products. There are currently 229 service stations and 95 truck stops nationwide. The deal does not include any of Shell's upstream activities in the country.

The Shell NZ assets will represent some 10% of Infratil's assets, Infratil Chief Executive Marko Bogoievski told analysts in a conference call. Infratil's main asset is an 50.5% stake in Energy company TrustPower Ltd. (TPW.NZ) which will represent 48% of its assets after the Shell NZ purchase.

"The businesses being acquired have been built up by Shell over almost a century and their decision to sell due to changes in the global oil market has presented a 'once in a generation' opportunity," said Bogoievski.

Brown said if the Shell business were to have a similar result in the current financial year as it did in the previous year, the purchase would add around NZ 6 cents a share to Infratil. According to Infratil, Shell reported "current cost" earnings before interest, taxes, depreciation and amortization of NZ$138 million in the year to Dec. 31. Its reported earnings before interest and tax were NZ$157 million.

Bogoievski declined to give any specific guidance until the consortium is in the "driver's seat" but he said that the current level of performance of the Shell business "is a reasonable expectation of where we think this business is at."

Infratil stock gained on the news and was trading up 1.8%, at NZ$1.68 at 2240 GMT, while the benchmark NZX-50 was up 0.2%.

"It looks like a good deal, they seem to have bought it cheaply on an Ebitda ratio," said ASB Securities broker Stephen Wright. He said it would take some time, however, for the impact to translate into earnings.

The consortium and Shell NZ entered exclusive negotiations last November after Shell New Zealand said it was conducting a review of its downstream business as part of a strategic review of its global businesses.

-By Rebecca Howard, Dow Jones Newswires; 64-4-471-5990; [e-mail]