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First NZ increases Airwork target price

NZ Newswire logoNZ Newswire 5/10/2016 Sophie Boot

First NZ Capital has increased its target price for specialist aviation company Airwork Holdings in response to the takeover lock-up deed between China's Zhejiang Rifa Holding Group (RIFA) and Airwork's major shareholders.

Announced on Tuesday, the deal means RIFA has agreed to make a conditional partial takeover offer for 75 per cent of Airwork's ordinary shares at $5.40 per share.

The stock rose as 18 per cent to $5.20, but was down 1 per cent to $5 in trading on Wednesday.

Parties associated with non-executive director Hugh Jones hold 58.9 per cent of the Auckland-based company and have agreed to sell, while Condor Holdings, also associated with Jones, will accept the offer of some of its 5.2 per cent holding - meaning RIFA will become the controlling shareholder, with more than 50.1 per cent of Airwork.

The proposed takeover offer price is a 20 per cent premium on First NZ's 12-month forward discounted cash flow (DCF) valuation of $4.50 per share, and represents a price-to-earnings multiple of 10.4 based on its 2017 forecasts, analysts Paul Turnbull and Andrew Steele said in a note.

First NZ increased its target price to $5.15 per share from $4.50, and retained a 'neutral' rating.

The revised target price represents a combination of a 25 per cent weighting for its DCF valuation, and a 75 per cent weighting of the RIFA offer.

The takeover will be subject to a number of conditions including agreement from the Commonwealth Bank, ANZ and BNZ to continue Airwork's current funding arrangements and agreement from joint venture partners to continue those arrangements on existing terms.

It will also require Overseas Investment Office and Chinese government approval.

Airwork's independent directors have advised all shareholders to take no action, pending further guidance from the company.

It's understood that the deed intends a takeover notice being given on or prior to this Friday.

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