Published 22 December 2007
The Takeovers Panel has released a consultation paper on the trend to structure takeovers to avoid the Takeovers Code. Submissions close on Friday 15 February.
The paper follows Transpacific Industries Group’s decision in 2006 to use an amalgamation to take over NZX-listed Waste Management NZ Ltd, without having to comply with the code. Instead, Transpacific used the reconstruction provisions of the Companies Act. Waste Management shareholders received cash for their shares. 2 other amalgamations occurred in 2006 using the Companies Act for takeovers.
The Takeovers Panel said many market participants, including shareholders & brokers, had voiced concerns: “They believe the integrity of the New Zealand market will suffer if the code can be avoided by using the Companies Act for takeovers. There is no sign that this activity is abating. For example, in 2007 there have been:
· the amalgamation proposals involving Auckland International Airport Ltd & Dubai Aerospace Enterprise (now aborted) & the Canada Pension Plan Investment Board
· Cadmus Technology Ltd & Provenco Group Ltd’s recently announced amalgamation under the Companies Act, and
· media speculation about the future of The Warehouse Group Ltd, which indicates that a bidder may use the Companies Act rather than the code for a takeover.”
The panel released its first discussion paper on the matter in June 2006 and made recommendations for changes to the law to the Minister of Commerce and to the select committee considering the 2006 Business Law Reform Bill.
The panel’s proposals weren’t dealt with in that bill, but the minister asked the panel in March to reconsider the issue and prepare a regulatory impact statement.
The panel has set out 6 options in its paper. It said the current law created a significant problem when related to the statutory objectives underlying the code and all proposed options would result in a greater degree of regulatory involvement in takeover transactions, but it doesn’t have a preferred option yet.
Attribution: Panel release, story written by Bob Dey for this website.