Prime confident it has not breached takeovers code

1.00pm

Prime Infrastructure said today it was confident it had acted within the Takeovers Code in its bid for Powerco.

The Takeovers Panel last night said a side-deal arranged by the New Plymouth District Council could contravene the Takeovers Code.

But Australia's Prime said in a statement today it was not party to that deal and could not comment on it. The company said it intended to fully co-operate with the panel, which will rule on the matter next Tuesday. The panel has not issued a restraining order in relation to the takeover in the meantime.

The panel is concerned about a deal struck by NPDC to offload unwanted bonds it may end up with.

Together with Taranaki Electricity Trust and Powerco Wanganui Trust, NPDC has already agreed to sell its combined 53.65 per cent New Zealand-registered stake in Powerco to Prime. The agreement was $2.15 per share, to be paid 62.5 per cent in cash and the remainder in bonds.

But an exemption granted by the Takeovers Panel to offshore investors raised the prospect of the cash/bond ratio having to be scaled, potentially leaving the council with more bonds that it had signed up for.

While domestic investors are to be paid for their Powerco shares in a mix of cash and bonds, the panel granted an exemption which will see offshore investors paid cash only.

This sparked huge volumes of shares being offloaded by local investors and snapped up by buyers who could take advantage of the exemption.

To ensure they ended up with the cash/bond mix they intended, the council's advisers, PricewaterhouseCoopers (PWC), secured a binding agreement to sell any bonds the council received for its Powerco stake beyond the agreed 37.5 per cent of the total price to Sydney-based broker Tricom.

But after meeting yesterday the Takeovers Panel said it considered NDPC's deal with Tricom would: "provide consideration to the controlling shareholders for their Powerco shares that differs from the consideration to be provided to any other shareholders accepting the same option".

The panel said this arrangement may contravene rule 20 of the Takeovers Code, guaranteeing all shareholders equal treatment under a takeover offer.

- NZPA