Richmond puts another hurdle in PPCS' path

By PHILIPPA STEVENSON

Takeover target Richmond is attempting to throw another legal hurdle in the path of PPCS just as the determined bidder has kicked off a charm offensive.

Richmond yesterday applied to the Takeovers Panel for rulings on two aspects of PPCS' offer, which went to shareholders this week only after clearing an appeal on similar grounds at the High Court.

A potentially precedent-setting ruling by the panel against PPCS could seriously hamstring the southern co-operative, which is under a tight, court-imposed deadline to takeover Richmond by February 28 or lose voting rights on its existing controlling stake.

If a ruling went Richmond's way, PPCS could be forced to re-start the bid from scratch.

But PPCS has dismissed that possibility.

It said it had carefully considered the issues raised by Richmond at the time it formulated its offer and it was confident the panel would agree it complied with the code.

Like the case before the court on Tuesday, the target Hawkes Bay meat company has sought a panel ruling related to PPCS' ability to waive the 90 per cent minimum acceptance of its $3.05 a share offer.

In a condition which has been standard in other takeover documents, PPCS reserved the right "in its sole discretion" to change the minimum acceptance to 50 per cent.

Richmond has queried whether that breached code rule 25, which states "an offer may be subject to any conditions, except those that depend on the judgment of the offerer ... "

In a second query, Richmond has questioned whether PPCS should have included a bid for its optional convertible notes under code rule 8, which states a full offer must include offers for all equity securities. Richmond staff hold around $1.1 million of the notes.

Panel senior executive Kerry Morrell told the Business Herald the minimum acceptance condition in the PPCS document had been common in other takeover statements. Richmond was the first to appeal under rule 25 of the code.

The panel executive had reviewed the PPCS takeover document "but we don't ever approve a statement, we just don't stop them" going out, Morrell said.

The panel was likely to decide today whether it would make a ruling on the matters raised by Richmond, he said.

PPCS said it would co-operate with the panel to enable the issues to be resolved promptly and avoid any disruption to the offer.

The application to the panel comes as PPCS sent a brochure to farmers nationwide explaining why it wants the northern company.

Headed "You want some answers?" the 15-page, colour brochure follows this month's opening by Dunedin-based PPCS of an office in Hastings.

Chairman Jim Pringle said staff in Hastings would be able to explain "face-to-face" the way a co-operative works, and its philosophy on the benefit of farmers retaining ownership of the meat industry.

In the High Court on Tuesday, Justice William Young dismissed an application by the Bell Group of Richmond shareholders to rule the takeover must be conditional on achieving at least 90 per cent acceptance.

The judge said he had no jurisdiction to prevent PPCS acquiring more shares in Richmond.

And there was "nothing legally objectionable" about PPCS simultaneously pursuing two alternative strategies - going for 90 per cent acceptance to avoid loss of voting rights, or, if that was not possible, acquiring sufficient shares in Richmond to ensure control.

To stop a bid with a lower acceptance level would only prolong the current state of uncertainty.

There was no indication that either Graeme Lowe, who this month took an 8 per cent stake in Richmond, nor North Meats, which took 4.3 per cent, was committed to opposing the takeover, Justice Young said.

Any other contender for control of Richmond was most likely to be flushed out if PPCS was free to compete for the remaining shares in Richmond, he said.

The judge's ruling cleared the way for PPCS to get control of Richmond by getting just 29 per cent of its shares. Its present 43 per cent would have no voting rights if it fell short of the 90 per cent threshold, but it would need only half of the remaining 57 per cent to have control.

Justice Young ruled in November that PPCS forfeit 6.7 million shares for "gross commercial misconduct" in the way it acquired an initial shareholding in Richmond in 1998. The order has since been stayed, pending an appeal to be heard in April, but voting rights on the shares are still prohibited.