A total takeover of Contact Energy by Origin Energy now seems highly unlikely given Contact's independent directors recommending a rejection of the NZ$5.57 per share cash offer.

Origin Energy chief, Grant King.

Details of the directors' recommendation, and the reasoning behind it, are set out Contact's Target Company Statement that is being mailed to all Contact shareholders.

Contact independent directors chairman Phil Pryke, John Milne, Tim Saunders and Patrick Strange approved the target company statement, which includes an independent adviser's report by Grant Samuel & Associates.

"The independent directors unanimously recommend that shareholders not accept the offer," said Pryke.

The directors came to this conclusion based on a number of factors, including:

* The offer price falls below the value range of NZ$5.74-6.34 assessed by Grant Samuel;
* The offer price falls below the value range of NZ$5.69-6.29 assessed by Cameron & Company, financial adviser to the committee of independent directors;
* The offer gives no premium to the current share price for Contact. Rather, the offer is at a discount to Contact's recent share price history.

Pryke said the independent directors also believed the offer price did not reflect Contact's strong position in the New Zealand electricity and gas markets, or the growth opportunities available to Contact. "Our current expectation is that Contact will record a net surplus after tax of approximately NZ$143 million this financial year".

There were good grounds to expect the business to achieve further earnings growth in the next few years for the reasons set out in the Grant Samuel Report.

"In conclusion, the independent directors believe the price offered by Origin is below the current fair value . . . and we will not be accepting the offer for shares we own or otherwise control," added Pryke.

Origin's offer opened on September 24 and closes October 26. Origin managing director Grant King has already said Origin will be comfortable owning only a controlling interest (the 51.2% formerly held by Edison Mission Energy) and to not complete a full takeover of Contact.

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