Panel pushes takeover tidy-up

The way the final messy stages of takeovers are sorted out will be revamped under planned changes to the Takeovers Code.

Aiming at saving time and money, the Takeovers Panel has added two final proposals to a raft of changes first sent to the Ministry of Economic Development a year ago.

The late additions involve the way shareholders are paid if their shares are compulsorily acquired during a takeover and how, when and why independent expert reports are required.

The simplest bit first: investors whose shares are subject to compulsory acquisition under the code may soon be able to choose how they are paid. They will still have to relinquish their investments but will at least have some say in the method of compensation.

The panel wants to close a loophole that enables offerers (the company taking over) to coerce shareholders to accept an offer they oppose, solely to avoid an undesirable compulsory acquisition outcome - that is, possibly getting landed with equity in a company they don't want to invest in.

The issue was in the spotlight during Prime's offer for Powerco.

Powerco shareholders were offered 100 per cent cash or 100 per cent Prime debt securities or a 62.5 per cent cash and 37.5 per cent debt securities mix.

At the time, the panel said it seemed unfair - although legal - that shareholders who did not accept Prime's offer and who later had their shares compulsorily acquired had to accept Prime's debt securities as payment for their Powerco shares.

"With this change, they'd no longer have to be concerned about that," panel senior executive Kerry Morrell said.

The panel is also looking to change the code requirements about when an independent adviser's report is needed to determine the price for any compulsory acquisition.

At present, a target company commissions an independent expert's report on the offer - mainly to say whether the price offered is okay.

If the offerer acquires 90 per cent of its target, it may compulsorily acquire outstanding shares. To do this, it must commission its own independent report. If the outstanding shareholders object, the panel appoints a third independent expert whose findings are binding.

The planned change would remove the need for the offerer to get the second report, saving them time, and money - $30,000 to $50,000.

Morrell said a second report had, on occasion, been required - such as with Shotover Jet and Sky City Leisure - when some investors were vigorously opposed to a takeover and had no intention of accepting it, thereby prompting the third report to settle the matter.

"We're not taking away the right for investors to object but we're just going to the final act rather than through the extra step," Morrell said.

The exception will be if an original offer was for scrip (equity), as that's what the original expert report will be based on. Under compulsory acquisition, if the offerer hasn't got 50 per cent acceptances then its compulsory acquisition offer must be in cash, which would mean it would still require the second independent report.

Former Sky City Leisure noteholder Paul Glass - whose takeover objection, along with those of other investors, prompted a third report - thinks the review should go further.

He proposes that the stock exchange simply appoint an independent expert - from a list of approved companies - at the start of any takeover process.

"If the exchange appointed a person at the beginning you'd only need one report and you'd get genuine independence. At the moment, there's quite a bit of shopping around to find someone who's likely to endorse whatever view you're trying to promote," Glass said.

Once consultation on the revisions is complete, they will go to the Commerce Minister about the middle of the year.