KEY POINTS:
A new discussion document released by the Takeovers Panel is expected to help clarify who pays the costs associated with a takeover.
But it may come too late to have an effect on the $6 million expenses stoush between Auckland Airport and its failed partial takeover bidder the Canada Pension Plan Investment Board, which is set to head to court.
Yesterday the panel released guidance notes in a bid to update principles initially set in the early 1970s.
Takeovers Panel chairman David Jones said recent cases, including the airport and the dispute between Abano Healthcare and Crescent Capital over takeover expenses had prompted the move.
"The old law is very antiquated. We have tried to update where the court was at 30-odd years ago."
Under rule 49 of the code, a target company may recover from the offerer any expenses properly incurred in relation to an offer or a takeover notice.
But the sticking point in many cases has been what defines expenses that are "properly incurred". At the moment, the principles are based around a High Court case in which the Canterbury Frozen Meat Company took on the Waitaki Farmers' Freezing Company.
Since the 1972 case there have been major changes in compliance to do with the Securities Act, NZX listing rules and continuous disclosure requirements, as well as a more litigious commercial environment.
"One consequence of the above changes is that, to a much greater extent than in past years, the target company may need to engage in professional advisers, consultants and experts to assist it throughout the takeover process.
"As a result it should be recognised that target company in the modern takeover environment may properly incur costs that would not have been incurred or may not have been seen as properly incurred at the time the Canterbury Frozen Meat was decided," the panel stated in the document.
The changes are designed to stop target companies from having to pay for costs incurred during a takeover when they might not have sought or encouraged it in the first place.
The guidance has been welcomed by specialist takeover lawyers.
Chapman Tripp partner Roger Wallis, who last year helped to deal with takeover issues associated with Kerifresh, said it should help narrow and clarify disputes which come up every time there is a failed takeover. "It's guidance in a general form but we are still going to have arguments at the margins. This is more about general categories."
Harmos Horton Lusk partner Andrew Harmos, who acted on behalf of Abano in its cost dispute, believes it would have helped in his case, which was settled without having to go to court.
"I think it would have reduced the gulf between the parties more quickly."
Those wanting to comment on the guidelines have until September 5. Jones said he expected the principles to be finalised by the end of the year.
Update needed
* The takeovers panel is updating guidance on who should pay for takeover expenses.
* Current principles are based on a court case from 1972.
* The changes are designed to modernise the principles and bring them into the current legal and corporate environment.
