Takeovers Panel Consults on the Use of Schemes And Amalgamations to Take Over Code Companies

 

12 December 2007

The Takeovers Panel has released a consultation paper on the trend to structure takeovers to avoid the Takeovers Code.

In 2006 Transpacific Industries Group used an amalgamation to take over Waste Management NZ Limited, a New Zealand listed company, without having to comply with the Code. The reconstruction provisions of the Companies Act were used instead. Shareholders of Waste Management received cash for their shares. Two other amalgamations occurred in 2006 using the Companies Act for takeovers.

Many market participants, including shareholders and brokers, have voiced concerns to the Panel. They believe that 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 Limited and Dubai Aerospace Enterprise (now aborted) and the Canada Pension Plan Investment Board;
  • Cadmus Technology Limited and Provenco Group Limited's recently announced amalgamation under the Companies Act; and
  • media speculation about the future of The Warehouse Group Limited which indicates that a bidder may use the Companies Act, rather than the Code, for a takeover.

In June 2006 the Panel released its first discussion paper on the matter, 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 could not be dealt with in that Bill. However, in March this year the Minister asked the Panel to reconsider the issue and prepare a regulatory impact statement.

The Panel's paper sets out six options. The Panel considers that the current law creates a significant problem when related to the statutory objectives underlying the Code. The Panel does not have a preferred option yet. All options proposed would result in a greater degree of regulatory involvement in takeover transactions. The Panel invites comment on the options using the questionnaire in the consultation paper. The Panel will take all comments into account before reporting to the Minister.

The consultation paper is available on the Panel's website (www.takeovers.govt.nz). The questionnaire can be be downloaded as a Word document.

Closing date for submissions is 15 February 2008.