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Vodka maker 42 Below is facing questions over the terms of a more than $16 million agreement ending its US agent's distribution rights.
As part of the agreement, the principals of the US distributor Panache agreed to sell their 42 Below shares to drinks giant Bacardi, which is in the middle of a $140 million takover offer for the New Zealand firm.
This has sparked questions over whether the Panache principals, Shane McKillen and James Dale, are getting a better price for their 42 Below shares than was available to the vodka maker's other shareholders. Such an arrangement could be in breach of the Takeovers Code. Shareholders association chairman Bruce Sheppard said: "We will be looking into this in more detail."
He said the deal to end the agreement should have been struck independently of Dale and McKillen's acceptance of the Bacardi offer.
42 Below has agreed to pay Panache US$9.76 million ($14.23 million), give up a 25 per cent stake in an internet venture, Clubland, and forgive a US$570,000 loan to the internet venture. After the transaction Panache will have a 50 per cent stake in Clubland.
Meanwhile, 42 Below founders Grant Baker, Geoff Ross and Steve Sinclair have agreed to pay Panache a further $1 million as part of the deal. They agreed to make the extra payment from their own pockets because Bacardi refused to sanction 42 Below paying more.
Ross told the Business Herald the deal would ensure the Panache shares would be surrendered into the offer.
"The value was derived from three components: the money from Bacardi, Clubland ... [on] which we forgave a loan and a top-up payment, from myself Grant and Steve, which meant that the overall value Panache [McKillen and Dale] required was achieved, and then together the overall transaction could be completed, because they would surrender their shares." Ross said McKillen and Dale were not getting a sweetheart deal. 42 Below's independent directors had obtained a supplementary advisers report from Grant Samuel, declaring the payments to Panache did not constitute an extra payment to McKillen, who holds 6.9 per cent of 42 Below, or Dale.
The Takeovers Panel declined to comment. But legal sources say the panel would want to ensure the payment to Panache could be justified on the terms of the distribution agreement alone.
The deal remains conditional on Bacardi getting 90 per cent of the shares on issue. At this level of acceptance it can compulsorily acquire all the outstanding shares. As of last night Bacardi had just under 82 per cent of 42 Below. Its offer remains open until December 15.
