Montana begged Swain for code

By FRAN O'SULLIVAN and KARYN SCHERER

Montana directors asked Commerce Minister Paul Swain last year to urgently introduce the new takeovers code so that small shareholders would be guaranteed a slice of the action if control of the company changed.

Montana executive chairman Peter Masfen revealed that he raised the issue with Mr Swain at an Institute of Directors meeting in Auckland last August.

"I made my view known to Paul Swain," Mr Masfen said. "We've got bad law, it's not equitable and it should have been changed forthwith."

Another Montana director, who did not want to be named, said the company had told the minister it was vulnerable. "We begged him to do it overnight and not wait for months."

Montana directors also lobbied other cabinet ministers after Lion Nathan took a 20 per cent stake in the company last May, and then increased it to 28.2 per cent in September.

A December valuation report, issued by PricewaterhouseCoopers after both Lion Nathan and Masfen Holdings indicated that they wished to get 51 per cent control of Montana, predicted that the July 1 deadline for the new code would give an "added impetus" for any big takeover activity to take place before then.

But Mr Swain has continued to insist that the Government acted as fast as it could on the new code.

The new code will prevent any party from gaining majority control of a company without extending an offer to all shareholders on either a 100 per cent or pro-rated basis.

Mr Swain told the Business Herald that it was rich for critics to claim that the Government was dragging its feet, when the previous Government had toyed with the code for several years "but bailed out of implementing it after bowing to pressure from big sectoral groups."

He said the Government had been advised that the code drafted by the previous Government would need to be updated. That had taken longer than expected.

He acknowledged that Mr Masfen and others had raised the issue last year.

"I was advised that worse than having no code at all, would be rushing it," he said.

Mr Swain said other countries had regretted rushing in new takeover legislation.

"I absolutely share the frustration of people who are saying, 'Look, why couldn't this be done sooner.' But if we had put something in place that was found to be flawed the criticism would be that we had promoted a regime that wasn't robust ... All I can say is that I am as frustrated about the thing as he is.

"A great deal of the criticism of this has got to be sheeted back to the previous Government, who had the thing in place and were bullied by certain sections of the business community to back away."

Mr Swain has labelled the Montana takeover a fiasco and claimed its handling damaged New Zealand's investment reputation.

The Stock Exchange's market surveillance panel has also been criticised for granting Lion Nathan a waiver to enter the market and to contest the Allied bid without first having to undergo a two-day stand-down period.

Lion Nathan gained 51 per cent control of Montana 10 days ago after it fought off a full takeover bid by Britain's Allied Domecq, by stitching up overnight deals with institutional holders at 25c a share more than Allied offered.

Lion Nathan chief executive Gordon Cairns had earlier offered Mr Masfen a shareholder's agreement to control the Montana Group when Lion got its 20 per cent stake.

Mr Masfen would not make a deal which changed control of the company without ensuring that other shareholders had a chance to profit from their long-term investment in Montana.