Exchange takes swipe at takeover decision

By ELLEN READ markets writer

The Stock Exchange has publicly criticised members of the market surveillance panel whose decision to waive the normal takeover rules enabled Lion Nathan to make a lightning raid on New Zealand's biggest winemaker.

The exchange's managing director, Bill Foster, admitted yesterday that he was unhappy with the panel's decision, the public outcry it had caused and "the impression created of a disorderly market."

But he stopped short of rapping the panel over the knuckles.

"In hindsight the market surveillance panel waiver was well intentioned, but the decision had unintended consequences," said Mr Foster.

He also tried to distance the exchange from the decision, claiming the overall outcome was unlikely to have been different if the waiver had not been granted.

Mr Foster also defended the use of waivers, saying they were important for the "structure and administration" in any market.

"It must be remembered that corporate activity, especially takeovers, are good for shareholders and the market generally," he said.

The statement came as Lion Nathan confirmed it had reached the 51 per cent stake it was seeking in Montana Group.

The panel's decision to grant Lion a waiver from the usual stand-down which applies when a company raises a takeover offer allowed Lion to approach institutional investors on Thursday night and effectively shut down a rival bid by British liquor giant Allied Domecq.

Public outrage over the decision continued yesterday, with many disgruntled shareholders contacting the Business Herald to express disgust.

As well as criticising the waiver decision, small shareholders have questioned why a new takeovers code, due to come into effect on July 1, cannot be introduced sooner.

The Government has said work is proceeding on the new code as fast as possible.

Meanwhile, one of the members of the market surveillance panel who made the decision to grant the waiver has said that his company sold Montana shares to Lion at $4.65 each.

Tower Asset Management managing director Paul Bevin confirmed Tower had agreed to sell 900,000 Montana shares to Lion.

Mr Bevin maintained he had no influence over the sale decision, and cited panel rules which allowed members to make decisions on companies in which they did not have a material interest.

A material interest was defined as 5 per cent of shares or more and Tower had less than 1 per cent of Montana's capital, he said.

"When asked at short notice to participate in the panel division for Montana, I was satisfied I was not conflicted and the position Tower held for our clients did not influence me whatsoever as a member of the panel."

Mr Bevin acknowledged Tower funds also held about 7.2 million Lion shares, or about 1.5 per cent of the company.

It did not hold any shares in Allied, directly or indirectly, he said.

The other members of the panel who made the waiver decision were retired Court of Appeal judge Sir Ian McKay and Ernst & Young director of corporate finance (and former sharebroker) Denis Wood.

The Australian Stock Exchange also tried to distance itself from the controversy yesterday.

Spokesman Gervase Greene agreed that the way the New Zealand exchange had handled the Lion/Montana episode had attracted a lot of criticism.

Mr Greene said that Australian takeover rules were quite different and therefore not really comparable. He declined to comment on whether takeovers was an area which would need work if the Australian and New Zealand exchanges were to merge.