Brian Gaynor: Tad too long in the ivory tower

Tower Corporation chairman Colin Beyer will be under intense pressure at the company's annual meeting on March 27.

Beyer, Lindsay Cuming and Olaf O'Duill are standing for re-election but nominations for outside candidates have now closed and three outsiders will challenge them.

These include the highly regarded Hutton Peacock, a former chief executive of Government Life, Tower's predecessor.

Beyer first joined the Tower board in 1989. If re-elected he will be entitled to stay until 2006, giving him 17 years as a director. This is an incredibly long period in view of Tower's recent poor performance and the Higgs report recommendation in Britain that directors should stay no more than 10 years.

Beyer may be hoping that family connections help him keep his board seat. GPG has acquired 9.9 per cent of Tower and Beyer's brother, Trevor, is a GPG director and a long-time associate of Sir Ron Brierley. But if GPG is true to form Tony Gibbs will be in charge of this one and he is not expected to let family sentiment influence his vote.

It would be surprising if AXA (7.7 per cent holder) or AMP Henderson (4.3 per cent) vote for Beyer but the 6.6 per cent owned by Tower Financial Services Group will be subject to scrutiny. Does the Tower board have control of these shares or will they be voted independently?

If Beyer does not stand for re-election or is defeated he is entitled to a lump sum retirement payment of $338,000 without shareholder approval, in addition to his annual fee.

Another issue that might come up for discussion at the March 27 meeting is Beyer's share trading.

Last February he sold 20,000 shares for $105,440 or an average price of $5.27. This reduced his holding to 45,362 shares but he has subsequently bought back 11,000 shares at $1.65.

PPCS/Richmond



The long-running battle by PPCS for control of Richmond will be a major case study for students of securities law.

Just when PPCS looked as if it was on the ropes it caught the Hawkes Bay company with an extremely effective counter punch. The fight isn't over yet but at this stage the odds are in favour of PPCS coming out on top.

PPCS looked to be in serious trouble at the end of last year after Justice William Young found the Dunedin company in breach of substantial security shareholder notice requirements. He imposed the following penalties:

* PPCS must forfeit 6.8 million (16.8 per cent) Richmond shares currently held.

* Make a full takeover for the Hawkes Bay company and obtain at least 90 per cent - or lose its voting rights on the 14.7 million (35.8 per cent) Richmond shares held on its behalf by Active Meats. After the forfeiture of the 6.8 million shares these 14.7 million shares would represent 43 per cent of Richmond's remaining capital.

The consensus was that PPCS would make a takeover offer conditional on acquiring 90 per cent but this would be almost impossible to achieve because there was a hard core of Richmond shareholders who were utterly opposed to the Dunedin company.

On January 6 PPCS gave notice under the Takeovers Code of its intention to make a full takeover offer at $3.05 a share. The offer documents revealed that the bid was conditional on Richmond achieving 90 per cent but PPCS could waive this requirement.

PPCS accepted that it would be almost impossible to reach 90 per cent and its main objective was to purchase 50 per cent of the voting shares (after the 6.8 million shares forfeited and the 14.7 million disallowed shares). This means that it has to acquire 9.73 million shares to have a majority of the voting shares.

Ferrier Hodgson assessed the value of the company between $3 and $3.67 a share and most of Richmond's independent directors recommended that shareholders accept the offer.

Richmond appealed to the Takeovers Panel against the clause that enables the bidder to waiver the 90 per cent requirement but the panel found in favour of PPCS.

Following this decision on Saturday, Richmond chairman Sam Robinson said "he was aware there was still interest in Richmond shares, and aware of at least one party considering its options". He advised shareholders that the offer remained open until February 26 and they should not rush to accept.

But the prospects of another offer are limited because the 14.7 million non-voting shares held by PPCS are considered voting shares in terms of the Takeovers Code. Thus another bidder will not be able to acquire 90 per cent and move to compulsory acquisition unless PPCS decides to sell. PPCS will want substantially more than $3.05 a share because it has to forfeit 6.8 million shares and the average cost of its remaining 14.7 million shares is $3.57.

PPCS is expected to gain control of Richmond but this fascinating battle could still take another unexpected twist. In view of this, Richmond shareholders should wait until February 26 before they accept PPCS's offer.

Utilico



Utilico's announcement that it had completed the purchase of 174,770 shares from certain shareholders at 68c is a timely reminder of the opportunities offered under Section 110 of the Companies Act 1993.

At Utilico's annual meeting on November 25 shareholders were asked to approve a change to the constitution that would allow the company to become involved in utilities such as roading, waste and water. Shareholders were entitled to require the company to buy those shares that voted against the resolution in accordance with the minority buy-out provisions of the Companies Act 1993.

The company nominated 68c a share and the relevant shareholders accepted. This was an attractive price as Utilico shares mostly traded at 65c-66c about the time of the meeting and have subsequently traded below these levels.

The minority buy-out provisions offer a unique opportunity for shareholders to require a company to buy back their shares when they vote against a special resolution.

This provision can be valuable for large shareholders in companies that are lightly traded on the stock exchange.

Meanwhile, there are two other issues worth noting in relation to Utilico:

* Companies controlled by Duncan Saville inadvertently breached the Takeovers Code when they increased their Utilico holding from 50.99 to 53.14 per cent. The panel ordered them to sell this additional holding - 141,893 shares or 2.53 per cent - by January 31 but no substantial security shareholders notice in relation to these shares has yet been lodged with the Stock Exchange.

* Stocks Convertible Trust, another Saville controlled entity, revealed last week that it has 14.5 per cent of its total assets invested in ERG, the Western Australia manufacturer of automated fare collection equipment. As Utilico has 81.8 per cent of its assets invested in ERG and The Special Utilities Investment Trust, another Saville trust, has 8.1 per cent of its continuation capital pool and 6.7 per cent of its capital pool committed to ERG then Saville's punt on the Perth-based company is even greater than previously realised.

* Disclosure of interest: none

* Email Brian Gaynor