Takeovers Panel under scrutiny

The Takeovers Panel's powers will be tested for the first time today when Delegat's Wine Estate appeals against the panel's ruling on its takeover bid for Oyster Bay.

Corporate lawyers are applauding Delegat's decision to appeal to the High Court, saying it is paramount the panel be taken to task.

Delegat's and rival bidder Peter Yealands have been embroiled in a bitter, five-month fight for control of Oyster Bay Marlborough Vineyards.

Last month, the panel found Oyster Bay directors contravened the Takeovers Code by omitting material information from a takeover document sent to shareholders.

To remedy the matter, the panel ruled that Oyster Bay should provide the information to shareholders who could then revoke their acceptances of the Delegat's bid.

On Tuesday, Delegat's asked the High Court to review the panel's ruling.

One corporate lawyer said Delegat's had no choice but to seek legal recourse. The lawyer, who asked not to be identified, said the panel's order was "harsh" since it penalised the party that did nothing wrong.

"The panel doesn't really have the power to do what they were suggesting," the lawyer said. "Especially since the person or company contravening the code was the target company, not Delegat's."

He said the panel's powers were limited to restraining the party that contravened the code.

Another corporate lawyer, who also asked not to be named, said this would be the first time a grievance with the panel had gone to court. In the past, firms had threatened legal action but the parties had reached commercial solutions before reaching court.

"To some extent, this represents a constitutional challenge to the power of the Takeovers Panel or at least the processes of the panel," he said.

A third corporate lawyer said the panel got the decision "absolutely right" in Delegat's case but felt the legal community would nonetheless be pleased the wine company had appealed.

"If these administrative bodies [the Takeovers Panel or the Commerce Commission] don't get challenged from time to time, they become a power unto themselves and they go off and make decisions that are at times controversial and hard to support."

He said even though Delegat's was being penalised when it was Oyster Bay that contravened the code, the panel acted correctly in that it had to ensure shareholders received all the information available in order to make an informed investment decision.

He predicted that the panel's decision would be upheld.

The new information, which the panel said shareholders had to see, shows that without Oyster Bay's long-term contracts to sell grapes to Delegat's, the vineyard is worth about $90 million, not $45 million as indicated in the target statement.

Delegat's argues that this unencumbered value is hypothetical because it was unlikely the vineyards would have been sold without the contracts intact.

Most of the lawyers expect the court will uphold the panel's decision or ask it to start from scratch and revisit the whole issue. They said it would be unlikely the court would substitute its own decision entirely.