PPCS lawyer describes share deals

PPCS solicitor David Stock told the High Court at Christchurch yesterday that he was scrupulous in ensuring the company's share transactions were legal because of the close scrutiny they would receive from Richmond.

The Hawkes Bay meat company alleges that Dunedin's PPCS retained a relevant interest in Richmond when it sold its shares to Hawke's Bay Meat (Active Equities) in July 2000, and therefore was still a defaulter under Richmond's constitution.

In June 2000, PPCS was ordered to sell its 33 per cent shareholding in Richmond to an independent party after a committee of independent Richmond shareholders ruled that it had not complied with Richmond's constitution when it bought the shares.

Stock, who had advised PPCS for some years, outlined how the sale to Active Equities and repurchase by PPCS took place.

"I introduced PPCS to Active Equities, whose principals I knew from other business dealings over the years. I was also a small shareholder in Active Equities, which I disclosed at the outset."

As things progressed, he said, he believed Active Equities saw a chance to get funds from PPCS, rather than use its own credit lines.

He knew it was "absolutely critical" that PPCS dispose of all its relevant interest as defined under the Securities Amendment Act 1988.

The proposal was that PPCS would give a cash shortfall indemnity to Citibank to support Active Equities' borrowing of $18 million, and subscribe to $12.5 million of preference shares in Hawke's Bay Meat Holdings, owned by Active Equities.

"I had specific instructions to draft the indemnity in such a way that it could not possibly give PPCS any right or interest in the Richmond shares."

He said he knew Active Equities was a trader, and that the directors were very experienced and likely to add value to Richmond.

On the repurchase less than a year later, Stock said he sounded out Bruce Hancox of Active Equities at a Christchurch function on whether Active Equities would be interested in selling its Richmond shares.

Hancox said Active Equities would be very unlikely to sell to PPCS because it did not want to enrage the Richmond board and small shareholders.

PPCS had to change tack, Stock said. "I thought it would be useful if PPCS could demonstrate to Active Equities that there was an appetite among the Richmond shareholders to sell if the price was right."

That was when PPCS went about acquiring 16.73 per cent of Richmond.

He said Active Equities understood the message and agreed to sell to PPCS.

- NZPA