Takeovers Panel sharpens its claws

The Takeovers Panel is taking immediate action to have a say in the High Court on schemes of arrangement bringing companies together - and might make submissions in the Contact-Origin merger deal.

The panel said yesterday that it was concerned about the increasing use of such schemes to avoid Takeovers Code provisions and also had similar concerns about amalgamations.

The panel is also "likely" to recommend legislative changes on schemes and amalgamations.

A scheme of arrangement under the Companies Act can involve bringing companies together and other activities, including reorganisations and accommodations with creditors. High Court approval is needed.

An amalgamation under the act can involve two companies coming together and a third one emerging or one of the merging companies remaining. Court approval is not required for amalgamations.

The panel has decided it will now exercise its right to be heard by the High Court when it considers schemes involving companies covered by the code.

Panel senior executive officer Kerry Morrell said the panel had had the right to do that previously but had not sought to be heard until now. The panel's new move represented a more activist approach.

The panel said submissions on schemes and their shareholder protection provisions, particularly for minorities, could help the court.

The deal to merge Contact Energy with Australian energy company Origin is a scheme of arrangement but Morrell said it was too soon to say whether the panel would seek to be heard by the court on that. "It may depend on the final shape of what's put before the court. But the possibility is there."

Contact spokesman Pattrick Smellie said a panel submission would not be unusual.

"We would expect that the panel would seek to be heard as it thought appropriate."

Morrell said amalgamations could also involve a cash transaction, as in the proposed Waste Management-Transpacific deal, which would see Transpacific buying all Waste Management shares. The proposal has been widely criticised as a takeover in disguise.

Waste Management shareholders vote tomorrow on the plan, which requires 75 per cent approval rather than 90 per cent if the offer was made under the stricter Takeovers Code.

The code's provisions now cover listed companies and other firms with at least 50 shareholders and $20 million in assets (although that asset threshold will disappear once the Securities Legislation Bill completes its way through Parliament).

Morrell said Waste Management-Transpacific was not a scheme and no court approval was required.

But the panel was also proposing to make submissions to the Government on the relationship between the code and the Companies Act rules relating to amalgamations and schemes.

Another measure being taken by the panel immediately is to withdraw the "class exemption" from the code for initial public offers which had been relied on in some schemes of arrangement to effect a merger.

Scheme of things

* Scheme of arrangement: Bringing companies together, and other activities including reorganisations and accommodations with creditors. High Court approval needed.

* Amalgamation: Two companies coming together and a third one emerging or one of the merging companies remaining. Court approval not required