Gaynor: Secrecy rules in Bendon battle

By BRIAN GAYNOR

The battle to control Bendon is unfolding under a veil of secrecy. This is because the original bidder chose to circumvent the requirements of the Takeovers Code and Bendon's directors have kept their shareholders less than fully informed.

Pacific Retail is now in the driver's seat, but the Hugo Venter-AMP Henderson consortium is still in the contest, particularly as Bendon's directors seem to favour this offer.

On November 30, Bendon's directors announced that they had reached agreement in principle to sell the operating assets of the company to a consortium headed by managing director Mr Venter for $38.5 million.

After the sale the company would be liquidated and the $38.5 million plus an additional $17.5 million held by the company would be returned to shareholders.

This works out at $1.81 a share, compared with a sharemarket price of $1.83 before the deal was announced.

Bendon's shareholders have to approve the sale, but this process would allow Mr Venter's consortium to gain full control with a 75 per cent approval, compared with 90 per cent required for compulsory acquisition under the Takeovers Code.

Bendon directors said they were pleased to accept the low-priced offer, even though they are forecasting a better profit performance for the second half of the March 2002 year and expect longer-term benefits from the expansion into Britain.

On December 21 AMP Henderson, which owned 25.9 per cent of Bendon, announced it was the principal backer of Mr Venter's bid. An AMP spokesman said the announcement had been delayed for three weeks because the investment giant had taken a while to decide which division of its organisation would support Mr Venter.

On January 14, Bendon told the exchange that another party had made an offer for the company's assets and the board intended to allow this party to undertake due diligence.

Neither the party's name nor its offer price has been disclosed.

Two days later, Eric Watson's Pacific Retail entered the fray when it bought 15.5 per cent of Bendon from Tower Asset Management at $2 a share. National Mutual also gave Pacific Retail an option to buy a further 3.55 per cent at $1.90 a share.

On January 18, Pacific Retail gave notice of its intention to make a full takeover offer at $1.90 a share. Pacific Retail said this was conditional on reaching the minimum threshold of 50 per cent required under the Takeovers Code.

Bendon's response was downbeat. The directors said they were considering the Pacific Retail offer and were looking to appoint an independent adviser under the Takeovers Code.

Chairman Ian Parton and his fellow Bendon directors, Peter Clapshaw, Trevor Kerr, Richard Smith and Hugo Venter, have not handled the competing bids in a fully transparent and open manner. For example:

* They did not disclose, or insist that Mr Venter disclose, that AMP was his principal backer when the original deal was announced.

* The directors could have insisted that Mr Venter make a takeover offer under the Takeovers Code because this is a more transparent process.

* Bendon should have given an updated assessment of its estimated cash distribution per share after the group's liquidation.

* The directors have not disclosed the name of the second party and its offer price. Mr Parton says the party has requested confidentiality.

* They said they were pleased to receive Mr Venter's offer but have not welcomed Pacific Retail's bid with the same enthusiasm, even though it is higher.

* The directors have not kept shareholders fully informed on the status of the offers.

Pacific Retail is now in the driver's seat. It has exercised its option over National Mutual's shareholding and owns 19.1 per cent of Bendon. This allows it to veto the Venter-AMP proposal because this deal requires the approval of 75 per cent of shareholders and AMP cannot vote.

Mr Watson's bid is not particularly attractive, but he has a good chance of reaching 50 per cent because the major institutional shareholders are placing a low value on Bendon and its market price is below Pacific Retail's $1.90 a share offer.

New Zealand Stock Exchange The winds of change are howling through the New Zealand Stock Exchange in Wellington.

It will be demutualised this year, listed on the sharemarket and its rules will be subject to scrutiny by the Securities Commission under the proposed Securities Markets and Institutions Act.

More important, three new directors - commercial lawyer Andrew Harmos, investment banker Lloyd Morrison and investment banker Tim Saunders - were appointed just before Christmas. They replace three stockbrokers who were first appointed more than 12 years ago: Malcolm Brown in 1988, Eion Edgar in 1987 and Hamish Taylor in 1988.

The board now consists of four stockbrokers, five non-stockbrokers and managing director Bill Foster. This is the first time the NZSE has had more non-broker than broker directors.

In another major step, Mr Foster announced that he would step down as soon as the board found a replacement.

He was appointed managing director in 1989 when the exchange was reeling from the aftershock of the October 1987 crash.

Its settlement system was unable to cope with the market boom and its administration systems needed to be revamped.

The new managing director and chairman David Wale did an excellent job modernising the exchange. They introduced a new electronic trading system and abolished share certificates.

Under Mr Foster's stewardship, it became an efficient and low-cost operation.

But the managing director was a huge disappointment in the area of promotion and marketing. He made little effort to promote the exchange to non-listed companies and took an antagonistic attitude towards individual shareholders.

He was a particularly vocal opponent of the Takeovers Code and other forms of regulatory reform when individual shareholders were clearly in favour of these changes.

He also adopted a confrontational attitude towards the Shareholders Association and the media when a more conciliatory approach would have been in the exchange's best interest.

Mr Foster's replacement will not have to worry about the NZSE's operating systems and cost structure, but he or she will have to put a great deal of emphasis on marketing and the growth of the exchange, particularly in terms of the number of listed companies.

* Disclosure of interest: Brian Gaynor is a Bendon shareholder.

* bgaynor@xtra.co.nz