Board backs bid but Richmond chair won't sell

By JIM EAGLES

The ferocious inter-island takeover battle for North Island meat giant Richmond took an ironic turn yesterday with a majority of directors recommending acceptance of the latest offer from South Island predator PPCS.

The recommendation is in line with an independent adviser's report from accountancy firm Ferrier Hodgson, which found the PPCS offer of $3.05 a share to be within its valuation range of $3 to $3.67 a share.

The directors also noted that the price was a significant premium over the share price before the takeover bid was announced.

But despite the favourable recommendation PPCS still has a long way to go before it can realise its longstanding ambition to link up with Richmond and create by far the largest meat company in the country.

The Takeovers Panel is to meet on Thursday to consider a query from Richmond about whether a part of the PPCS offer complies with the Takeovers Code.

If the offer survives that hurdle there could be an alternative bid, most likely from British meat king Bernard Matthews, who has strong links with Richmond and two weeks ago bought a 4.3 per cent stake in the company.

North Meats, Matthews' investment vehicle in New Zealand, said last week it was waiting for the Takeovers Panel's decision before deciding on its next step.

Even if no further offer comes it is by no means certain PPCS will be able to buy the number of shares it needs.

The legacy of the bitter fight for Richmond - which has three times seen PPCS seemingly victorious, only to be stopped by the courts because of breaches of the rules - has created an extremely complex situation.

The latest court ruling, which has been appealed by PPCS, ordered the South Island co-operative to forfeit its 16 per cent shareholding in Richmond and to lose the voting rights in a further 36 per cent it has an agreement to acquire on February 3.

But the court also said PPCS could retain the voting rights in that 36 per cent block of shares if it succeeded in an offer to buy 90 per cent of Richmond.

That is what PPCS is seeking to do.

However, the 4.3 per cent owned by Matthews, a further 8.01 per cent owned by Hawkes Bay meat millionaire Graeme Lowe, plus small stakes held by Richmond staff and farmer-suppliers opposed to the takeover, should prevent the 90 per cent mark being reached.

But Ferrier Hodgson's report calculates that if PPCS can secure more than 72 per cent of Richmond shares then, even if its existing shares lose their voting rights as a result of the court order, it will still have more than half of the remaining voting shares.

This would put it in a position to control the company.

Whether PPCS can reach that target remains to be seen.

Yesterday's recommendation from the directors and the independent adviser obviously represents a big step forward.

However, to get to the 72 per cent level, PPCS will have to win acceptance from about half of the approximately 1980 small shareholders in Richmond.

Some of those small shareholders are the very Hawkes Bay people who have been leading the fight against PPCS.

Richmond chairman Sam Robinson, who is himself a small shareholder, said he would not be accepting the offer.

"He believes," according to the Richmond board's statement, "the circumstances which brought about the offer, including the litigation and its outcome, raise issues over and above those of pure financial value."

The directors' statement also revealed that four of the company's senior officers who had small shareholdings intended to reject the offer while three others "are yet to make a decision".

PPCS mailed its takeover offer to shareholders last week and the offer closes on February 26.

At the end of all that, Richmond has lodged a case with the Court of Appeal that, if successful, could see PPCS required to sell all its Richmond shares including any acquired as a result of the present takeover offer.