Force investors in the dark

By BRIAN GAYNOR

Force Corporation chairman Evan Davies will not win any awards for good communication.

He has failed to keep shareholders updated on the company's performance, and they lack the information to make an informed decision whether to withdraw their mandatory convertible notes application money.

The notes issue, which will raise $31 million, was originally due to close on January 18 but was extended to February 1. It has now been extended for a further week and will close at 5 pm on Friday.

As part of the agreement to extend the closing date, Force was required to offer shareholders who had already accepted the offer the option to withdraw their application money.

A letter and application form were mailed on Friday and the application withdrawal forms have to be lodged by Friday at 5 pm.

But shareholders have been given no updated information on Force's performance. For example:

* Did the company meet its contractual agreement to pay MTM Funds Management $53 million for the Force Entertainment Centre on January 31?

* What has been the impact of the enormously successful Harry Potter and Lord of the Rings movies?

* How did the group perform in the six months to December 31?

* What is the situation regarding its Argentinian operations - have they been affected by the country's economic problems?

Full disclosure is important because Sky City owns 50.2 per cent of Force, is underwriting the notes issue and Mr Davies is managing director of the casino operator.

Sky City could end up with 95 per cent of the cinema operator on a fully diluted basis if there is a huge notes issue shortfall.

The controlling shareholder could then make a low-priced takeover offer for Force and convert its mandatory convertible notes into ordinary shares. That would allow Sky to move to compulsory acquisition, even if minority shareholders do not accept the offer.

Force should disclose far more information to shareholders because the note issue will allow Sky City to take an important step towards 100 per cent control of the cinema operator.

Australian rules A great deal of fuss is being made over proposed changes to Australian Stock Exchange rules because they will force a number of New Zealand companies off the exchange.

The ASX is proposing that all foreign companies must fit into one of two categories. These are:

* Companies with net tangible assets of $A2 billion (previously $A50 million) or an operating profit for each of the past three years of at least $A200 million ($A10 million) will be given foreign exempt status. These companies will be required to comply with the rules of their home exchange but not with the ASX.

* All other foreign companies must comply with the rules of the Australian exchange.

Until now, New Zealand companies have been able to list on the ASX without meeting the size criteria or having to comply with its rules. The ASX is concerned that its foreign exempt listing rules allow too many small companies to list on its market. It is also concerned that the home exchanges of many of these companies have lax regulations, particularly in relation to continuous disclosure.

The proposed changes seem to be aimed at New Zealand because nearly one-third of all foreign companies listed on the ASX are based on this side of the Tasman.

Under the proposed changes only two of the 27 New Zealand companies on the ASX - Telecom and Carter Holt - can remain listed with a foreign exempt status. The remainder will be forced to delist or comply with the more demanding regulatory regime across the Tasman.

But why are New Zealand companies so keen to list on the ASX when they are unwilling to comply with Australian rules and their shares are sparsely traded?

For example, since January 1 only 3.7 million Auckland International Airport shares, 35,000 Genesis and 269,300 IT Capital have traded on the ASX.

To take full advantage of their Australian listing our companies should be falling over backwards to comply with ASX rules. After all, how many of us would invest in a Fijian company if it listed on the NZSE but was required only to comply with the rules of its home exchange?

Otter Gold Mines

The takeover offer for Otter, which has been extended to February 15, has reached a very interesting stage.

Acceptances have slowed to a trickle and in the past five trading days Normandy NFM has increased its holding by just 2.4 per cent to 77.4 per cent.

The would-be buyer has adopted an aggressive advertising campaign, including newspaper ads that claim it has reached certain shareholding thresholds before these figures have been released to the Stock Exchange.

Another feature of the offer is that it was declared unconditional on December 28 after the bidder reached 50 per cent. On the same day, the four existing directors resigned and were replaced by five Normandy nominees.

On Friday, Otter released an encouraging quarterly report. Gold production at Martha Mine was 19 per cent above budget and it continues to receive excellent drilling results from the Favona prospect at Union Hill.

The early release of the interim report to December 31 would help shareholders decide whether to hold or sell before the offer closes on February 15.

The trouble is that all the independent directors have resigned and the Normandy representatives have no incentive to keep remaining shareholders fully informed.

Many remaining Otter shareholders are aware that investors have benefited from rejecting a number of takeover offers as in the case of Asia Pacific Breweries' offer two years ago for the DB Group and Eric Watson's offer for Pacific Retail.

* E-mail Brian Gaynor