Nuplex opts to pay investors $3 million

Photo / Kenny Rodger

Nuplex investors would have been forced to wait until 2012 for an outcome in the Securities Commission's proceedings against the resins manufacturer and some of its directors if the civil case had been pursued through the courts, says the market regulator.

The commission and Nuplex announced yesterday that they had reached an out-of-court settlement, involving the company paying just over $3 million to all its shareholders who purchased shares on either the ASX or NZX between December 22, 2008, and February 18, 2009.

It was during that period that the commission alleged the firm and its directors John Hirst (now retired), Rob Aitken, Barbara Gibson, David Jackson, Bryan Kensington and Michael Wynter failed to disclose a banking covenant breach to the stock exchange when the information first became available.

Nuplex shares would have plunged by as much as 30 per cent had the company informed the market it was in breach of its covenants when the information first became available, the commission claimed.

The firm's share price plunged 30c in a single day in February 2009 when the company finally announced it was in talks with its bankers.

Securities Commission chairman Jane Diplock said the settlement was a good outcome for investors.

"There's always a trade-off between whether you get compensation for shareholders now or you take what could be a very long, extended and expensive litigation route," she said.

"In our view ... we thought that this settlement and paying up for the investors was the right decision.

"They get money now. Otherwise, had we taken it to court and sued the directors and pursued them, we wouldn't have had [an outcome] before 2012."

Nuplex chairman Rob Aitken said the settlement brought closure for the company.

"A committee comprised of directors who were not named in the proceedings was set up to deal with the commission's case against the company. The independent committee concluded that it was in shareholders' best interests for the company to settle with the commission and to do so along lines that benefited shareholders who may have been impacted by the company's inadvertent breach of continuous disclosure rules," said Aitken.

Nuplex independent director Peter Springford, who chaired the committee, said that in reaching the settlement the firm "weighed up a number of factors including the potential costs of defending all the matters raised in the commission's proceedings and the ongoing distraction to the company and its board and management".

At Nuplex's annual meeting in November Aitken estimated that the commission's proceedings would cost the company $1.3 million to defend.

Diplock said the settlement did not set any precedent for future, similar cases, and that the Financial Markets Authority - expected to be up-and-running by May - would pursue directors it suspected of failing to disclose material information to the market.

Chapman Tripp partner Roger Wallis said the Nuplex litigation was an important test case of the law.

"Although the pragmatic solution negotiated by Nuplex and the commission should be regarded as a win on points for the commission and affected shareholders, the full and final settlement against all parties means that personal liability of directors, and the scope of their reasonable steps defence, will not be resolved by this litigation," said Wallis.

Nuplex has also agreed to pay $148,127 as a contribution to the commission's investigation and court costs.

Shares in Nuplex closed down 4c yesterday at $3.59.

THE CASE

* Civil proceedings were brought by the Securities Commission against listed resins maker Nuplex in April last year.

* The commission alleged that Nuplex and some of its directors failed to disclose a banking covenant breach to the stock exchange when the information first became available "on or about" December 17, 2008.

* When the information was finally disclosed in February 2009 the firm's share price dropped 30c in a single day, meaning investors who purchased shares during the period in which the information was not disclosed were disadvantaged.