Omissions in partial bid for Rubicon

The Takeovers Panel has found that companies associated with American David Knott omitted to instruct that their shares should not be voted on a partial takeover for New Zealand company Rubicon.

The panel decided not to seek any remedies from Dorset Management Corp, whose president and sole shareholder is Knott, because no harm resulted. It will make orders of costs against Dorset.

A group of related investment funds collectively known as "Knott" bid to increase their holding in Rubicon from 18.5 per cent to 27.33 per cent and a shareholders' vote was required to move above 20 per cent.

Rubicon supported the Knott offer, but did not recommend it after independent adviser Grant Samuel assessed the full underlying value of shares at between $1.15 and $2.26 each - much more than the offered 70c.

The partial takeover went ahead but it was revealed that shares held by Knott companies were mistakenly voted in favour. The vote still passed when the mistake was corrected.

The panel's summary of the case reveals that US-based fund manager Third Avenue International Value Fund, which owns 18.02 per cent of Rubicon, complained to the panel, believing its votes were miscounted.

Third Avenue intended to vote against the offer but an investigation found that because of an administrative error its votes were not cast.

The panel decided to pursue the issue of the counting of the Knott companies' votes itself and held a number of meetings with those involved in the voting process.

Goldman Sachs is global custodian for Knott companies. ANZ Nominees, a member of the Austraclear settlement system, acts as the local custodian. A company called RiskMetrics administers and documents the voting of securities held by Knott.

The panel investigated the voting instructions passed down the custodial chain. It found that Knott and David Jeuda, the chief financial officer and compliance officer of Dorset, knew the shares were not to be voted but the instruction to abstain Knotts' shares was not properly communicated to administrative assistant Alison Chiappone, Dorset's primary contact with RiskMetrics.

Rubicon was aware the shares were not to be voted and "sensibly" tested the approval numbers it received from registry Computershare against shareholder information it had.

There was nothing to put Rubicon on notice of any voting irregularity until it became aware that Third Avenues' shares had not been voted, the panel said. Dorset submitted that it did not intend to mislead.

- NZPA