By BRIAN FALLOW
Any merger between the New Zealand and Australian stock exchanges will be smoother thanks to the new takeovers code, says the Government.
"With the very positive talks about the merger of the New Zealand and Australian exchanges, there is no doubt in my mind there will be some form of takeovers regime," Commerce Minister Paul Swain said.
The new code was reasonably close to the Australian regime, he said. "This is very important work which would need to be done anyway at the time that merger occurs."
But the prime reason for introducing the code - foreshadowed by the Business Herald last week and formally announced yesterday - is to enhance confidence in the market from small New Zealand investors and international institutions.
"This Government stands beside international investors and small investors in the New Zealand sharemarket, who have been ripped off over many years," Mr Swain said in response to a parliamentary question from Act MP Stephen Franks, designer of the less-stringent stock exchange regime which the new code will supersede.
New Zealand stock exchange chief executive Bill Foster said that, while having identical commercial law was not a necessary condition of the stock exchanges' merging, the more the two countries' regimes resembled each other, the easier it would be to achieve recognition of each other's arrangements.
"Mutual recognition means you can be satisfied that the way another country does things, while different from the way you do them, is acceptable.
"If the regimes look like each other, that gives the parties more comfort."
The code prevents anyone from acquiring more than 20 per cent of a company unless the same price is offered to all other shareholders.
The offer need not be for all the remaining shares, but must be pro rata for enough shares to take the buyer's stake above 50 per cent, and be conditional on doing so.
The 50 per cent requirement can be waived by shareholder agreement if certain conditions are met.
The aim is to prevent control of a company changing hands by the transfer of a minority block of shares without shareholders having the chance to participate.
Finance Minister Michael Cullen said that when he recently made a trip to Europe, several people had raised the issue of a takeovers code.
"They say the absence of a code is a disincentive to invest in New Zealand. There was a strong feeling that New Zealand's protections for minority positions are inadequate, especially compared with alternative investment destinations such as Australia," Dr Cullen said.
Opponents of the code say it will provide protection for lazy or incompetent managements, by making takeovers more expensive and therefore less likely.
But Dr Cullen said there was no evidence that New Zealand management was sharper than in Australia or the United Kingdom, which had takeovers codes.
The code comes into effect on July 1 next year.
Its enabling legislation, the Takeovers Act, was passed in 1993. In 1995, the previous Government rejected the code which gives the act its content.
But ancillary legislative changes will be needed to allow the Securities Commission to provide support and administrative services to the Takeovers Panel, which drafted the code and is now charged with enforcing it.
As well, the act will need to be amended to allow the panel to issue class exemptions for inadvertent breaches of the 20 per cent threshold.
This might occur if a person held proxies for more than 20 per cent of the voting rights in a company, or if someone inherited shares which took them over the threshold.
The delay before the code comes into effect next year would give time for companies and the market to adjust, Mr Swain said.
Takeover code eases merger says Swain
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