Delegat's suffers takeover setback

Winemaker Delegat's has failed in its bid to overthrow the Takeovers Panel's ruling that stalled its bid for Oyster Bay Marlborough Vineyards.

Justice Forrest Miller's decision in the High Court at Wellington yesterday leaves Delegat's unable to proceed with its takeover and virtually guarantees it will be challenged in further court action by rival bidder Peter Yealands and major shareholder David Rankin.

The case was closely watched by lawyers and sharemarket participants as it marks the first time the Takeovers Panel's powers have been tested in court.

"It's one-nil to the panel in the sense that the panel has been found to have made a decision that wasn't successfully reviewed," said a commercial law expert.

While it was possible Delegat's could look to appeal yesterday's ruling, "I suspect the real action is going to be the next step - where either Rankin or Yealands ask for a more significant order to be made - to force them to make another offer or to require their offer to lapse which will presumably happen shortly."

Delegat's had asked the High Court to review the panel's ruling which in the short term kept it from declaring its partial takeover bid for Oyster Bay unconditional and taking up its controlling stake.

The panel found Oyster Bay's directors had contravened the Takeovers Code by omitting crucial material.

Delegat's hoped a favourable decision yesterday would enable it to settle up early next week with shareholders who had bought into its offer.

But Justice Miller agreed with the panel's finding that Oyster Bay shareholders should have been told what their share was worth if the company did not have its existing long-term contracts with Delegat's.

Delegat's managing director Jim Delegat took yesterday's ruling on the chin. "We are very comfortable with the outcome," he said.

"It holds the position in the interim and assures the integrity of our bid agreement with accepting shareholders whilst a correcting statement is issued by the Oyster Bay independent directors." 

Under the Takeovers Panel's "preferred outcome", Oyster Bay would send investors who accepted Delegat's offer an additional statement containing the "encumbered" and the "unencumbered" value of its vineyards.*

Investors would then be able to reconsider their acceptance.

Without long-term contracts to supply Delegat's with grapes for the next 40 to 60 years, the unencumbered value of Oyster Bay's land was estimated to be up to $90 million - twice its value with the contracts - but Delegat's said this was hypothetical.

"Oyster Bay will pursue the panel's preferred outcome which they'd already begun to do and they hope for a quick outcome for all shareholders," said company chairman Bill Falconer.

The Sequence

* In August, Delegat's won a bidding war with Marlborough's Peter Yealands to take control of Oyster Bay Marlborough Vineyards.
* But last month the Takeovers Panel ruled that Oyster Bay's directors had contravened the Takeovers Code by omitting material information from critical takeover documentation.
* The takeover is on hold while the documentation is re-submitted.
* The High Court yesterday rejected the legal challenge Delegat's had brought against the panel's ruling.

Correction: In the original version of this report, we stated incorrectly that the panel had ordered the disclosure of vineyard values.