Richhold swap seen as negative

By LIBBY MIDDLEBROOK

Hawkes Bay meat processor Richmond is advising its shareholders to reject a share-for-share swap deal offered by Richhold - a holding company set up by farmers to block a takeover by South Island processor PPCS.

In a statement to shareholders, Richmond chairman Bob Croker said there were "clear negatives" for shareholders who accepted Richhold's offer, such as valuation and operational issues.

Richhold, set up by farmers John Cullwick and Tom Crosse and former Richmond director James Aitken, was formed to ensure that farmers retained a substantial block of Richmond shares and to prevent the takeover by PPCS, which wants 51 per cent of Richmond.

Richhold is standing in the market for up to 78.1 per cent of Richmond's 40,985,168 shares, offering the company's 1700 shareholders one share in the holding company for every Richmond share.

While Richhold is expected to list on the stock exchange if the deal gains enough support, Richmond chief executive John Loughlin said operational issues such as tradeability, voting rights and exit mechanisms for Richhold shareholders were unclear.

"The offer has a number of negatives. Shareholders are exchanging a direct interest in a company for an indirect shareholding. The liquidity of the company is yet to be tested."

He said Richhold, which closes its offer on May 22, could also snag Richmond's plans to list on the stock exchange in the future or force it to make a listing more complicated due to the reduction in company shareholder numbers.

"The company could still list on the stock exchange, but if we go from 1700 to 500 shareholders it would become a less easy process."

Richmond has also sought advice from PricewaterhouseCoopers in relation to the Richhold offer. It said the value of an ordinary Richhold share was lower than the value of a Richmond share.

A Richhold spokesman was not available for comment.

Richhold hopes to gain at least 60 per cent of Richmond shares through its share-for-share swap scheme and already claims the support of about 15 per cent of shareholders.

While Mr Loughlin conceded that the holding company structure could have some strategic value in a takeover situation, he said it could only capture about 56 per cent of shares.

Some of Richmond's largest shareholders, HKM Nominees, Toocooya Nominees, PPCS, Rod Pearce and staff shareholders, have already promised to retain their direct shareholdings in Richmond, totalling about 44 per cent of shares on issue.