Richmond chief tells court of PPCS distrust

PPCS could have been an acceptable partner for Richmond had it not sought ownership, Richmond chief executive John Loughlin said yesterday.

The long-standing wrangle over the legality of South Island meat company PPCS' attempts to take over Hawkes Bay-based Richmond is being heard in the High Court at Christchurch before Justice Young. The hearing is to test the legality of PPCS' sale and repurchase of Richmond shares in terms of the Richmond constitution.

Action is being taken by Richmond, a Richmond shareholders group, RJ Bell and others. PPCS is the first defendant and Hawkes Bay Meat the second.

Under cross-examination, Mr Loughlin outlined why PPCS was an unsuitable partner for Richmond.

He said Richmond was looking for a value-creating partnership. "We didn't see ownership as necessary to that.

"We felt if we could get value first, then ownership could be organised around that to support it.

"PPCS didn't see it in those terms. That's where the point of conflict came.

"If PPCS had chosen an alternative approach of demonstrating they were the most value-creating partner for Richmond, then I think Richmond could have supported them."

But Mr Loughlin said a North Island partner would have been of greater value, "because the South Island companies have rationalised their industry on their own, and have achieved sustainable value.

"If we could have partnered someone in the North Island and rationalised offices, plant, transport costs etc, then there would be enormous value there.

"I accept PPCS had a harder road [to gain acceptance as a Richmond partner] than other companies in that regard, but it wasn't impossible."

Former chief executive of Richmond Malcolm Foster outlined in his affidavit reasons for the longstanding distrust of PPCS.

He said the shareholder suppliers and shareholder employees of Richmond were an important element of the company's success.

There had been "a considerable degree of antipathy" towards PPCS holding a significant stake in Richmond since at least 1997.

"I share such views because of concerns that PPCS would seek to control Richmond's business for the greater benefit of PPCS, and to the detriment of other Richmond shareholders, including supplier shareholders."

Mr Foster said PPCS was seen as pursuing its competitive interests without regard for the interests of the industry.

He said the wish of many Richmond shareholders that PPCS not control Richmond had heightened to open hostility because of the secretive way PPCS had acquired shares in Richmond.

Of HKM's purchase of Richmond shares in 1998, when HKM bought the Meat Board's 33 per cent shareholding in Richmond, Mr Foster said documents had shown PPCS was in effective control of that parcel of shares from the outset.

When in 2000 PPCS was forced sell its Richmond shares, they were bought by Active Equities, which later sold them back to PPCS.

Mr Foster said Active Equities had two seats on the Richmond board, and they would have been well aware of the hostility towards PPCS.

"I find it extremely difficult to accept, if they were free agents in respect of the Richmond shares, that Active Equities could genuinely have taken the view that permitting a controlling stake in Richmond to pass to PPCS was in the interests of the Richmond shareholders."

- NZPA