PPCS chief accuses Richmond of laying trap

North Island meat company Richmond tried to make Dunedin's PPCS an "insider" to slow down its share buying, PPCS chief executive Stewart Barnett alleged in the High Court at Christchurch yesterday.

Each company has accused the other of dirty tactics during PPCS's five-year battle to acquire a controlling shareholding in Richmond.

Richmond alleges that PPCS breached the rules of its own constitution when it bought back a controlling parcel of shares a year after it had been ordered to sell them.

As well, a Richmond shareholder group, R.J. Bell and others, alleges that PPCS breached the Securities Amendment Act.

Barnett, who was on the stand yesterday, referred in his affidavit to a letter sent to him by Richmond chief executive John Loughlin after PPCS had acquired 16.73 per cent of Richmond's shares in May last year.

"Mr Loughlin's letter of May 21 appeared most odd to me and out of character."

Barnett said he had not expected Loughlin to be especially forthcoming about things, particularly as PPCS had just acquired those Richmond shares.

"He had spent a good portion of the previous year assisting the board to expel PPCS from Richmond, so his charm offensive seemed peculiar."

The letter contained comments about the financial performance of Richmond.

"I confess that I felt Mr Loughlin was trying to set me up in some way, but it was not apparent to me what the tactic was."

Barnett said it soon became apparent. On May 22, PPCS lodged a restricted transfer notice that it would attempt to buy up to 60 per cent of the shares in Richmond.

The main reason for the notice was to encourage Active Equities (which had 33 per cent of Richmond shares after PPCS was forced to sell them a year earlier) into discussion with PPCS.

On May 24 Richmond complained about PPCS's restricted transfer notice, saying among other things that PPCS could not proceed any other way than as an "insider" because PPCS had been "inadvertently made party to information of a price-sensitive nature in respect of the profitability prospects of Richmond in the current year".

"I realised the effect and probably the purpose of the letter was to try to make me an insider and thereby to slow PPCS down through the notice and pause period required of insiders, namely 15 days," Barnett said.

PPCS and Richmond had tussled before, "but this was beyond anything I had previously experienced".

PPCS wrote to the market surveillance panel of the New Zealand Stock Exchange, asking whether price-sensitive information had been received through Loughlin's letter. The panel ruled that PPCS was not in possession of relevant infor-mation.

On the reasons for PPCS's long-running chase for a significant shareholding in Richmond, Barnett said his big picture for the best interests of the New Zealand meat industry was two big players plus some smaller boutique operations.

The big players would be PPCS-Richmond, and Affco-Alliance.

He said Richmond had long been identified by PPCS as a potential partner in the North Island because of the overseas and local synergies that could be achieved.

As well, production was falling in the South Island and access to North Island suppliers was increasingly important to PPCS.

"Richmond offered a particularly good fit with PPCS because PPCS is primarily sheep-based in products, whereas Richmond is primarily beef-based."

Barnett said it was important for the meat industry to remain in New Zealand hands. If a New Zealand company passed into foreign hands, the control and value of that company's quota would be delivered to overseas owners.

The case before Justice Ronald Young is continuing.

- NZPA