Cancel low ball offers, says FMA

Bernard Whimp. Photo / Supplied

A series of "low ball" share offers from businessman Bernard Whimp were misleading and should be cancelled, the Financial Markets Authority told the High Court in Wellington yesterday.

Lawyer for the FMA, Justin Smith, said that 1157 shareholders had accepted the offers for shares in several high-profile companies, including TrustPower, Vector and Fletcher Building, worth a total of $7.198 million.

Smith said the offers by limited partnerships associated with Whimp were above market price but payable over 10 years and dividends were foregone, putting them below market price.

Documents sent to shareholders failed to adequately mention that the payments would be made over 10 years and that the offers were essentially an "unsecured loan to Whimp", he said.

"This meant that the value of the offers would be considerably less than the headline price."

The offers were also "exploitative" because they gave the impression shareholders only had a limited time to accept.

The court was read several affidavits from people allegedly misled by the offers, including an elderly Tauranga man who accepted because he "needed the money now", not realising it would be paid over 10 years.

"I reckon I would be dead by then, I'm 81 years old and need the money now," the man's statement read.

The court case followed a High Court injunction on March 24 forcing the limited partnerships associated with Whimp to send corrective statements to the shareholders who'd been approached, pointing out the offers were misleading and asking shareholders if they still wanted to sell.

Smith said 149 of the shareholders chose to go ahead with the offer regardless of the outcome of the court case.

He argued that if the court found the offers were misleading, the share sales, excluding the 149 who had chosen to go ahead, should not proceed.

He said there was no need to send another letter to shareholders allowing them to opt in or opt out of the offers.

Lawyer Nicholas Till, representing Whimp, did not contest that the offers were misleading but disagreed with the FMA's argument that no further letters should be sent to shareholders.

Till said if the court found the offers were misleading, a letter should go to shareholders who had not responded to the letter following March's injunction making it clear that the payments would be made over 10 years. This would remedy the argument that payments were misleading.

But Smith said Whimp's track record, including 14 convictions under the Companies Act and a conviction for burglary, suggested he wouldn't pay the full amount to those who accepted the offer.

Justice Gendall reserved his decision. An interim order stopping transfer of shares would remain until a decision was reached.

- NZPA