Panel dusted off to review all takeovers

By BRIAN FALLOW

WELLINGTON - The Takeovers Panel is being taken out of storage to review and update the takeovers code rejected by the previous Government in 1995.

Commerce Minister Paul Swain said the Government wanted to implement a code as soon as possible to ensure small investors get fair treatment in takeovers and to improve perceptions of the sharemarket.

"It is anticipated technical amendments will be made to the 1995 takeovers code in light of changes in the market over the last five years and overseas experience with takeovers regulation," Mr Swain said.

The minister said he expected the panel would consult with market participants, but only on technical aspects of the code, not on whether there would be one.

The code, drafted by the takeovers panel advisory committee in 1993, includes mandatory bid and equal price provisions. Its fundamental rule prevents anyone acquiring more than 20 per cent of a company unless an offer is made to all shareholders on the same terms. The offer need not be for all the outstanding shares, but it must be for enough to take the bidder's stake above 50 per cent.

The intention is to prevent control of a company changing hands by the transfer of a minority block of shares, without other shareholders having the opportunity to participate.

The Takeovers Act makes it the panel's prerogative to recommend, amend and enforce a takeovers code. The monitoring and administrative functions would most likely be performed by the same staff who serve the Securities Commission.

Since the code was rejected in 1995, the panel has had nothing to do and there has been some turnover in its membership. Its chairman is Telecom director John King and the deputy chairman is Auckland lawyer David Jones. It is understood that Bob Dougan, reader in law at Victoria University, who advised on the original code, has been engaged to draw up a list of possible amendments.

The panel will review the 1995 code in the light of experience of other jurisdictions with similar arrangements, notably Australian and Britain, and will also assess the experience of the New Zealand Stock Exchange's takeovers regime, under which a company's shareholders choose which of three more or less restrictive sets of rules they want.

Opponents of a takeovers code point to the fact that only a handful of companies went for the minority veto option, which most resembles the code. The stock exchange's position is that the current regime "ain't broke."

NZSE chief executive Bill Foster said the exchange still supported shareholder choice and that there was no evidence of any opposition by shareholders to the regime, which has been in place since 1994. It did not believe the share price performance of New Zealand listed companies had anything to do with the regulatory regime.

But if the Government wanted to make changes the exchange was keen to work closely with it, to ensure they were workable and practicable, Mr Foster said.

The chief executive of the Business Roundtable, Roger Kerr, a fierce opponent of the code five years ago, said that asking the takeovers panel to do the review was not a particularly objective or open-minded way to go about it.

"They were committed to their previous proposals."