KEY POINTS:
The Takeovers Panel is recommending law changes tightening the rules around "scheme of arrangement" style ownership changes - such as those attempted in two foreign bids for Auckland International Airport.
Its key recommendation means such deals could still take place either under the Takeovers Code, or as a
scheme of arrangement under part 15 of the Companies Act - but would require court approval.
The panel's recommendation follow concerns that some companies may have been sidestepping the code. The most notable example was in 2006 when Waste Management and Transpacific Industries amalgamated under Part 13 of the Companies Act.
A similar proposal was mooted by Dubai Aerospace, and later the Canada Pension Plan Investment Board, in their failed bids for Auckland International Airport.
Such deals, also known as schemes of arrangement, require only 75 per cent shareholder support for the acquirer to gain 100 per cent of the target company, instead of the 90 per cent required by standard offers under the code for a bidder to move to compulsory acquisition.
Critics say amalgamation essentially reduces the prospect of a counter-bid, and adversely affects the right of shareholders. The Takeovers Panel has made recommendations to the Minister of Commerce for changes to the Companies and Takeovers Acts to close the loophole.
For any scheme of arrangement with an effect on voting rights, the court would have to be satisfied that shareholders in the target companies would not be disadvantaged. A "no-objection" statement could be obtained from the Takeovers Panel to help.
And in addition to the existing requirement of 75 per cent approval from shareholders who turn up to vote, the panel is recommending an additional standard that all those votes combined would have to represent more than 50 per cent of the total voting rights of the company.
Chief executive Kerry Morrell said the proposals still allowed for takeovers to take place outside the code.
"It retains the flexibility of the market by having the schemes mechanism available for changes of control of code companies, but there is greater regulatory oversight - so better information for shareholders, and more rigorous voting requirements."
Andrew Harmos, of legal firm Harmos Horton Lusk, was supportive.
"What the panel's really saying is don't use this scheme to try and get yourself an unfair procedural advantage. It just brings in a measure of consistency to the different measures of effecting a takeover."
The firm has been involved in a number of high-profile takeovers, representing Abano Healthcare during the partial takeover offer by Masthead Portfolios in October last year, and the full takeover offer by Crescent Capital Partners in December.
"I think it's a good idea. I need to read all the detail, but in principle, I'm pleased that they have done this because I think there's been a degree of procedural unfairness with some of the transactions that have been promoted outside the code."
