Exchange investigates after-hours deal for Rubicon stake

By CHRIS DANIELS forestry writer

A storm has erupted over the methods used by investment firm Guinness Peat Group to buy a 19 per cent stake in forestry and biotech company Rubicon.

GPG, controlled by Sir Ron Brierley, bought most of its stake after the market closed on Wednesday, prompting a Stock Exchange investigation into tactics used by broking firm JBWere.

Brokers citing Stock Exchange rules say JBWere should have put at least 20 per cent of the $37.8 million deal through the market, allowing others to sell their Rubicon shares at the 75c-a-share offer price.

JBWere has defended its actions, saying it was acting under client instructions and on legal advice.

Its head of investment banking, Paul Harris, said he was confident it had acted within the rules in buying the 50 million Rubicon shares because it had approached only a select number of institutional shareholders.

Harris said the firm did not "just go through our own client base". The transaction was "a very special case deal, it was an all-or-nothing type deal, it wasn't a market-based deal".

The client had asked the company to buy a certain number of shares, which it had been able to do by contacting a few shareholders.

"That's all it was. The rule is not meant to apply to that."

Here was a company buying a substantial interest in another, said Harris, with a strategic importance beyond the need to say: "Wouldn't it be nice to offer this to some retail brokers in Invercargill?"

One broker challenged the story of JBWere approaching only a small number of institutions, as he knew of a client it had rung at home and been able to sell less than 200,000 Rubicon shares.

GPG director Tony Gibbs said JBWere had acted with absolute integrity, as many of the shares had to be bought from overseas owners, hence the need for the deal to be done overnight.

Gibbs said if the Fletcher Challenge Forests deal to buy the Central North Island Forest went ahead, it would be a good one for Rubicon shareholders. Rubicon owns 17.6 per cent of Fletcher.

But Gibbs said the complex series of interlinked deals around the sale of the forest meant it was unlikely to proceed. "It has a lot of people against it and it may well not occur," he said.

If this happened, GPG would still be happy staying on as a shareholder.



Macquarie Equities senior analyst Arthur Lim said exchange regulations suggested 20 per cent of the 18 per cent of Rubicon bought by GPG should have been bought on the market.

A disciplinary committee of the exchange can suspend or censure companies who break rules and regulations, or fine them up to $1 million.

JBWere's seeking legal advice before the deal has not impressed many in the broking community, some of whom feel it was a wilful breach of their regulations.

It is understood the matter has been referred to the exchange's Surveillance Panel.

The regulation states: "Any Member or Member Firm who receives an instruction to acquire more than 10 per cent of the issued capital of a Listed Issuer in any class of Equity, including options or any other class of security convertible into Equity, shall bid in the market to purchase from other Member Firms at least 20 per cent of the total number of each class of security sought."

Rubicon shares closed up 5c yesterday, at 71c.

Fletcher Challenge Forests shares closed down 1c at 24c.