PPCS must forfeit shares in Richmond

By JIM EAGLES business editor

South Island meat company PPCS has been told by the High Court that it must either make a successful takeover offer for 90 per cent of North Island rival Richmond or lose all influence in the company it has fought hard to control.

The court has also handicapped PPCS in that exercise by ordering it to forfeit 6.9 million shares in Richmond - worth an estimated $10 million - and pay costs to the plaintiffs in the action.

The latest development in the long and aggressive takeover battle for Richmond emerged yesterday when Justice William Young issued his decision on the penalties he would impose on PPCS following an earlier ruling in the High Court at Christchurch that it had failed to properly disclose its holdings in the target company.

In deciding on the level of penalty, Justice Young said there had been gross breaches of the Richmond constitution by PPCS.

In addition, Richmond had been told a series of untruths about what PPCS was up to.

As a result there was a need to impose a penalty which would have a significant deterrent effect.

The judge formally declared that PPCS was a defaulter in respect of its holdings in Richmond.

As a result, he said:

* The South Island company would forfeit 6.9 million shares it owns in Richmond, either directly or via Twain Investments, amounting to 16 per cent of the company.

The judge estimated that penalty to be worth $10 million. It will also take PPCS' holdings in Richmond from a controlling 53 per cent to a little under 42 per cent, probably enough for it to lose control.

* The exercise of voting rights in respect of a further 14.6 million Richmond shares held by Hawkes Bay Meat and Active Equities (which PPCS has an agreement to buy), amounting to a further 36 per cent of Richmond, would be prohibited with effect from February 28.

That would completely erode the desperate efforts made by PPCS over the past five years to get control of Richmond.

However, the judge also said that the order prohibiting the voting rights would be cancelled if PPCS made a takeover offer for Richmond which was successful in acquiring at least 90 per cent of the shares.

The judge said the offer should be in place before January 1.

However, he indicated that the deadline might be extended.

As part of its takeover efforts, PPCS had earlier agreed to pay Active Equities $3.50 a share for its holding in Richmond.

A PPCS offer at that level might cost it about $50 million to reach the 90 per cent level.

The judge further ordered PPCS to pay the costs of Richmond and the costs of a group of independent shareholders who fought the PPCS takeover.

Richmond had indicated to the court that its costs would be in excess of $1.3 million.

Justice Young praised the actions of the shareholders' group in probing behind the PPCS facade and exposing "gross commercial misconduct."

In doing so, he said, "they have provided a signal public service".