Code Breach By Montana Group (N.Z.) Limited

23 August 2001

On Tuesday 31 July 2001 Montana Group (N.Z.) Limited sought an exemption to delay the release of its target company statement until Wednesday 8 August.

Montana sought the exemption because of a decision by the Market Surveillance Panel of the New Zealand Stock Exchange on 31 July 2001. That decision related to the timing of the sell-down of securities by Lion Nathan Limited. The Panel was advised that the Market Surveillance Panel's decision was communicated to Montana after 5.00 p.m. on Tuesday 31 July 2001 and that by that time Montana's target company statement had been finalised for printing and distribution to shareholders. The decision meant that significant changes had to be made to the target company statement before it could be sent to shareholders.

Montana submitted that it had insufficient time to make these changes and send the statement to its shareholders by 3 August 2001, the last date available to Montana for the statement to be distributed if it was to comply with the Rule 46 of the Takeovers Code.

The Panel declined Montana's request for an exemption on 2 August 2001. In declining the request the Panel noted that:

  • there were likely to be further ongoing events in the Montana takeover matter;
  • there appeared to be no impediment to Montana making corrective statements to the market and it had an obligation to keep the market informed in a prompt and timely manner;
  • the interests of the market in having the information in the target company statement and independent adviser's report outweighed the interests of Montana in having the timeframe extended by 5 days for sending that information.

Montana failed to despatch the target company statement by Friday 3 August 2001 and, in doing so, breached Rule 46 of the Takeovers Code. The target company statement was not sent to the required parties until Monday 6 August 2001.

Mr David Jones, Deputy Chairperson of the Panel, said "The Panel takes any breach of Rule 46 of the Code very seriously. The requirement for target companies to send their statements to their shareholders within the time periods set down in the Code is very important. It is intended to ensure the target company shareholders are given timely advice from the directors of their company concerning the offer before them. The Panel will not grant exemptions from the timing requirements of the Code readily."

The Takeovers Act 1993 provides for a number of possible remedies where a party is held to have breached the Code or the Act, including applying to the Court for the imposition of pecuniary penalties. In this instance, although Montana acknowledges that it acted in breach of the Code, the Panel has decided that it would take no further action.

In making this decision the Panel took into account:

  • that the directors of Montana and the independent advisers may not have appreciated the Panel's reluctance to grant exemptions from the timing requirements of the Code; and
  • that, once the directors of Montana became aware that the Panel had declined their exemption request, they appeared to have made considerable efforts to have their target company statement finalised and despatched as quickly as possible; and
  • while not agreeing with the Montana directors' decision to delay the issue of its statement, the Panel accepts that they genuinely held the view that their action in delaying the despatch of the statement was necessary in the unusual circumstances surrounding the decision of the Market Surveillance Panel.