Low ball offers ring alarm bells

Fletcher Building chief executive Jonathan Ling addresses shareholders at Eden Park. Photo / Dean Purcell

Investors in some of New Zealand's biggest listed companies are being warned to check the current share price before accepting low-ball offers.

Telecom, Fletcher Building and TrustPower shareholders are among those who have been targeted with offers to purchase shares at a discount of up to 43 per cent on the market price.

The mailed cash offers were made by a range of limited partnerships, including Pearson Securities, Cargill Securities and Energy Securities, all backed by Bernard Whimp.

Whimp, now registered to a Sydney address but formerly of Christchurch, has made a number of undervalued offers for shares and debentures in the past year.

Whimp has previously used limited partnerships to get around a four-year ban on holding directorships that ended in October.

Fletcher Building said the offer was not endorsed by the company and appeared to be an opportunistic bid to acquire shares cheaply.

A letter from Cargill Securities LP is offering to purchase 3 million Fletcher Building shares at $5.64 per share - close to 30 per cent less than yesterday's closing price of $7.73.

"The offer price is considerably below the current market price for Fletcher Building shares, and accordingly it is recommended that shareholders not accept the offer and ignore the documents sent to them by Cargill Securities," Fletcher Building said in a statement.

The NZX said prior to accepting the offer shareholders should take time to compare the market price of their shares.

An unsolicited offer to buy shares below market value is not illegal, but it is against the law to mislead or deceive investors into accepting an offer, guidance from the Securities Commission said.

Milford Asset Management's Brian Gaynor said the offers were despicable.

Gaynor said the offer, which closes on January 7, is timed to take advantage of the holiday period with many brokers on leave and the Securities Commission closed until January 10.

"It gets people at a time when they have spent a bit of money at Christmas and they see that dollar sign and they get attracted by it," Gaynor said.

The offer appears to have deliberately targeted investors with smaller share parcels.

Publicly listed companies are required by law to provide a list of their shareholders on request.

An irate investor who contacted the Herald urged shareholders to send the pre-paid envelopes back empty at a cost to Whimp.

Gaynor said the rules around these kinds of offers were totally inadequate when compared to those in force overseas.

"In Australia, for example, you have to put in what the current price of the securities is and what the value of the offer would be if you sold the shares to the stock exchange," he said.

"It just makes my blood boil because we've had people in New Zealand who've been battered around so much with finance companies...

"Yes, he hasn't broken any rules, there's no question about that, but it should be clearly stated at the top that this is the price and this is the sharemarket price," said Gaynor.

The official-looking letters received by shareholders yesterday gave the headline amount for their share parcel with the offer price per share buried in the text of the document.

A 21-day settlement gives Whimp plenty of time to sell the shares before having to make payment, said Gaynor.

Gaynor is also critical of the market regulator, the Securities Commission, for being shut during a period when the stock exchange is still trading.

Commission spokesman Roger Marwick said the offer itself was not illegal and all the agency was able to do was advise investors to be extremely cautious of unsolicited offers.

CUT PRICE OFFER

Offer price Current price Discount
Contact $4.07 $6.20 -34 per cent

Fisher & Paykel Appliances $0.32 $0.56 -43 per cent

Fletcher Building $5.64 $7.73 -27per cent

Guinness Peat Group $0.49 $0.71 -31 per cent

Nuplex $2.41 $3.49 -31 per cent

Telecom $1.43 $2.18 -34per cent

TrustPower $5.30 $7.40 -28 per cent

Vector $1.56 $2.36 -34 per cent