Billionaire Jim Grenon is under scrutiny over his moves to overhaul the board of Herald owner NZME.
Share purchases in NZME by billionaire businessman Jim Grenon may not have complied with part of the Takeovers Code, regulators say.
The Takeovers Panel says it will meet to determine whether Grenon’s share purchases at the time he bought them comply with the code.
Grenon, a Canadian who lives in New Zealand, is attempting to overhaul NZME’s board.
His efforts have attracted the attention of the Takeovers Panel, which said in a statement it was aware of Grenon’s recent purchase of NZME shares.
“The panel has made preliminary inquiries as to whether Mr Grenon was an associate of Caniwi Capital Partners Limited and Spheria Asset Management Pty Limited for the Takeovers Code at the time Mr Grenon acquired the securities.
“On the basis of the information available to the panel, the panel considers that there is reasonable possibility that the parties were associates and therefore certain share acquisitions by Mr Grenon may not have been in compliance with rule 6(1)(a) of the Takeovers Code.
“The panel met today and agreed to convene a meeting under section 32(1) of the Takeovers Act 1993 in order to make a determination about compliance with the code.”
New Zealand Shareholders Association chief executive Oliver Mander said it’s a high threshold to be deemed to be acting in concert.
“It’s a valid question for the Takeovers Panel to be asking and there will be a lot of interest in the outcome.”
He said the panel will be interested in the sequences and timing of the discussions between the parties, the market announcement signalling director nominees and the later acquisitions of NZME securities by Grenon.
“From a risk mitigation perspective, it’s interesting that Grenon continued to purchase shares after the announcement in early March. That action helps to open up the question now being considered by the Takeovers Panel.”
Troy Bowker of Caniwi Capital told the Herald he hadn’t been contacted by the Takeovers Panel since he gave initial evidence and he hadn’t been invited to any meeting.
“I have not been told there’s a hearing. But I’m very curious what they find and the evidence they have. There’s nothing to suggest anyone’s been acting in concert.”
Bowker said he understood the panel’s interest involved only 1.2 million shares. He said he’d had just one conversation with Spheria.
“There’s going to be a meeting, but I’ve heard nothing from [the panel].”
Grenon told the Herald he had asked for the issue to go to a hearing as soon as possible.
“I want it resolved as it can discourage shareholders from talking to me because they are leery about getting roped in.
“A major shareholder that would add to my support has already cancelled a meeting with me, on the advice of their counsel, even though my counsel assures me there is nothing wrong with having such meeting.
“This is an advantage to incumbent directors. Presumably the Panel doesn’t intend that and will level the field with a decision as quickly as possible.”
He said the 1.2 million shares in question “isn’t very material”.
“However, I think the precedent is important. I don’t see how constructive conversations with another shareholder, who I otherwise have no connection with, can result in being associated.”
He said it was important to resolve because he might choose to buy or make arrangements covering other shares that would count towards his 20% limit.
“I need to know how much room I have and that there isn’t some sort of poorly defined principle, of creeping ‘association’, hanging over my head.”
MinterEllisonRuddWatts lawyer Isaac Stewart told BusinessDesk last month that to be a breach of the rules, the parties would need to be deemed associated parties with close personal or business relationships.
Stewart said several shareholders agreeing to exercise their votes in a certain way doesn’t in itself breach the rules.
The definition of an associate was open-ended, and the panel would consider the facts and surrounding circumstances to determine the relationship between the shareholders, he said.
The Takeovers Panel is an independent Crown entity and its mandate is to strengthen investor confidence in New Zealand’s capital markets by enforcing the Takeovers Code.
“The code ensures all shareholders have a fair opportunity to participate in control-change transactions (such as mergers, acquisitions, takeovers and allotments) in code companies.”
Approached for comment, NZME referred the Herald to the Takeovers Panel.
Grenon – who owns 9.97% of NZME – is seeking to overhaul the company’s current board, with the aid of other minority shareholders.
When his plans were first revealed, Grenon informed NZME he had the support of about 37% of NZME’s shareholders.
That included the backing of the company’s biggest shareholder, Australian fund manager Spheria Asset Management, which holds just under 20% of the company. Grenon is also backed by businessman Troy Bowker, whose Caniwi Capital business and nominee accounts hold just over 3.5% of NZME.
Grenon’s latest proposal for the composition of the media company’s board was revealed in an NZME letter to the NZX on Monday. On the same day, NZME announced it had delayed its annual shareholders’ meeting from April 29 until June 3.
The proposed board of seven would comprise three members of Grenon’s group, rather than four. In two earlier proposals, Grenon and his team held a majority position.
“My appointees would have been in the minority on that board,” Grenon told the Herald, referring to the third proposal.
As well as the new proposal for the board composition, Grenon said a small editorial board, chaired by Philip Crump, would be established.
“They will also be responsible for raising standards, including a bit of a brain trust to raise the level of insight. They would report to the NZME board.”
NZME’s board has fired back against Grenon’s plan – raising several concerns including governance, editorial independence, gender diversity and what it called a lack of an alternative plan for the business.
In a letter to the NZX, NZME board chairwoman Barbara Chapman said the company strongly rejected Grenon’s “assertions that NZME has not performed well financially in recent years”.
“The media industry both locally and globally has been in turmoil, facing major disruption from global tech competitors and also a depressed economic backdrop.
“Our local competitors have felt this, and many have been in financial difficulty. Within this context, NZME has been a standout performer.
“On a total shareholder return basis, measured across both the last one and five years, NZME has outperformed every listed competitor in the Australasian market. External analysts have been publicly positive around company performance.”
In a response to questions from the Herald, Chapman said the board was “open to further engagement with Mr Grenon and we have communicated this to him accordingly”.
NZME owns the NZ Herald and a suite of regional news brands, Newstalk ZB, BusinessDesk, property portal OneRoof and entertainment radio stations such as The Hits, ZM, Hauraki, Gold, Flava and Coast.
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