Offeror(s): Associated Shareholders

Independent Adviser(s): Ferrier Hodgson 9Rule 18)

Offer Type: Full

At its 2001 annual general meeting, Utilico International Limited (“Utilico”) shareholders approved an on-market share buyback for 2 out of every 3 ordinary shares, and a further 7 out of every 10 shares at $0.50 per redeemable share (“the buyback”). Part of the reason for the buyback was to allow shareholders who had parcels of shares below a marketable parcel to exit from the company.  

Utilico subsequently conducted the buyback under which 280,310 shares were purchased. 


Special Utilities Investment Trust plc, Stocks Convertible Trust plc (previously the Australian Opportunities Investment Trust) and Eastern States Securities Limited (“Eastern States”) had entered into an Agreement to Associate for the purposes of the Code, and had a combined holding of 53.14% of Utilico’s voting securities.  One of the stated purposes of entering into the agreement was to enable the parties to ‘creep’ under rule 7(c) of the Code.


By reason of being a substantial shareholder of Eastern States, Walbrook Trustees Limited was also an associate. The four parties (together “the Associated Shareholders”) did not accept the buyback offer and as a result, their combined shareholding of the Associated Shareholders increased from 50.99% to 53.14% of Utilico shares on issue (an increase of 2.53%).

The Panel noted that the Associated Shareholders did not utilise either clause 4 or clause 5 of the Takeovers Code (Class Exemptions) Notice 2001 when increasing their combined percentage of voting rights in Utilico in the mistaken belief that as associates they could use rule 7(e) of the Code to “creep”.As such, the Associated Shareholders’ increase in voting rights arising from the buyback did not comply with the Code, and they were required to undertake remedial action.

The Panel was satisfied that the failure to comply with the class exemption was unintentional, and that the increase in voting control was relatively small.  Additionally, the aggregate shareholding of the Associated Shareholders was already over 50% prior to the buyback. Consequently, the Panel accepted undertakings from the Associated Shareholders to sell 141,893 shares (2.53% of Utilico shares on issue) no later than 31 January 2003, which would restore the combined shareholding of those shareholders to the level held before the buyback. The Panel also accepted an undertaking from the Associated Shareholders not to exercise the voting rights attaching to the excess shares in the meantime.

Ferrier Hodgson prepared a rule 18 independent adviser’s report on the merits of the allotment.