By BRIAN FALLOW
The Government's plans to introduce a takeovers code will penalise investors by adding costs to the market and reducing efficient takeover activity, says Stock Exchange chairman Eion Edgar.
"That's the Government's prerogative, but it is not going to suddenly make the market go up 20 per cent," Mr Edgar said yesterday.
The Government plans to adopt the code recommended by the Takeovers Panel and rejected in 1995 by the previous Government.
Its fundamental rule prevents anyone acquiring more than 20 per cent of a company unless an offer is made to all shareholders on the same terms. The offer need not be for all the outstanding shares, but it must be for enough to take the bidder's stake above 50 per cent.
The intention is to prevent control of a company changing hands by the transfer of a minority block of shares, without other shareholders having the chance to participate.
At present listed companies choose one of three regimes allowed by the exchange. Only a small number have opted for a regime similar to the code's.
Stock exchange chief executive Bill Foster said a few vocal people strongly wanted to see a different regime imposed on other shareholders, but there was no evidence of majority support from shareholders for a change.
Mr Foster dismissed as "shallow" a Merrill Lynch survey last August of fund managers accounting for about 44 per cent of the institutional investment in the New Zealand sharemarket. Most perceived a lack a protection for small shareholders, and a majority favoured a takeovers code.
The exchange continues to defend its takeovers regime, and cites lack of confidence in the economy and underperformance by companies as the primary factors driving investors away.
Mr Edgar also cautions against the belief that if the NZSE merged with another stock exchange, the share prices of new listed companies would automatically rise.
The exchange's board was still looking at the options for a future structure, including the status quo, with a view to coming up with a clear recommendation by its September 13 annual meeting, Mr Edgar said.
A report by the Boston Consulting Group identified a number of options and the board has appointed investment banker Jon Cimino to advise it.
Merging with the Australian Stock Exchange was only one alternative, Mr Edgar said. Another was "open access" where all securities are listed on both exchanges.
And Australia was not the only other country in the frame, he said, citing Canada as an example.
Mr Foster said though one trend was for exchanges to merge and amalgamate to cater for the needs of large international companies, there was also a place for small exchanges catering to niche or local markets.
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