Takeovers Panel

	TAKEOVERS CODE (UNMARKETABLE PARCELS) EXEMPTION NOTICE 2003

2003/234

Takeovers Code (Unmarketable Parcels) Exemption Notice 2003

Pursuant to section 45 of the Takeovers Act 1993, the Takeovers Panel gives the following notice (to which is appended a statement of reasons of the Takeovers Panel).

Contents

1 Title

2 Commencement

3 Interpretation

4 Exemption from rule 20 of Code

5 Condition of exemption in case of

scrip offer without cash alternative

6 Condition of exemption in case of

scrip offer with cash alternative

Notice

1 Title
This notice is the Takeovers Code (Unmarketable Parcels) Exemption Notice 2003.

2 Commencement
This notice comes into force on 1 September 2003

3 Interpretation

(1) In this notice, unless the context otherwise requires,-
Act means the Takeovers Act 1993

cash alternative means alternative consideration, under a scrip offer, of wholly cash

Code means the Takeovers Code approved by the Takeovers Code Approval Order 2000 (SR 2000/210)

consideration securities means securities that are quoted on a stock exchange and that are offered as consideration under a scrip offer

offer means a takeover offer made under the Code

scrip offer means an offer under which the consideration includes consideration securities (whether or not that consideration also includes cash or any other additional consideration, and whether or not that offer also includes a cash alternative)

security has the same meaning as in the Securities Act 1978
small security holder means a person who would, if that person was offered, and accepted, consideration securities under a scrip offer, receive an unmarketable parcel of consideration securities

stock exchange means, in respect of any consideration securities, the securities exchange that is the primary exchange of the issuer of the consideration securities

target securities means, in respect of an offer, a security of the target company to which the offer extends

unmarketable parcel means a number of consideration securities that is less than the minimum holding of consideration securities specified by the stock exchange

weighted average price, in respect of consideration securities, means the weighted average of the closing prices of those consideration securities on the stock exchange over the period of the 5 trading days immediately preceding the date that is 5 days before the first date when consideration is sent to any offeree who has accepted the offer.

(2) Any term or expression that is defined in the Act or the Code and used, but not defined, in this notice has the same meaning as in the Act or the Code.

4 Exemption from rule 20 of Code
Every person who makes a scrip offer is exempted from rule 20 of the Code to the extent that the consideration offered to small security holders is cash only.

5
Condition of exemption in case of scrip offer without cash alternative
In the case of a scrip offer without a cash alternative in respect of the relevant class of target securities, the exemption in clause 4 is subject to the condition that the cash offered to small security holders in respect of each target security in that class is the sum of-

(a) the weighted average price of the consideration securities multiplied by the number of consideration securities offered generally under the scrip offer for each target security in that class; and

(b) any additional consideration (if any) offered generally under the scrip offer for each target security in that class.

6 Condition of exemption in case of scrip offer with cash alternative
In the case of a scrip offer with a cash alternative in respect of the relevant class of target securities, the exemption in clause 4 is subject to the condition that the cash offered to small security holders in respect of each target security in that class is the greater of-

(a) the cash alternative; and

(b)
the sum of-

(i) the weighted average price of the consideration securities multiplied by the number of consideration securities offered generally under the scrip offer for each target security in that class; and

(ii) any additional consideration (if any) offered generally under the scrip offer for each target security in that class.

Dated at Auckland this 27th day of August 2003.
The Common Seal of the Takeovers Panel was affixed in the presence of:

J. C. King
Chairperson.

Statement of reasons

Rule 20 of the Takeovers Code requires an offer to be made on the same terms and provide the same consideration for all securities of the same class. The effect is that an offeror who makes a takeover offer with consideration that includes securities listed on a stock exchange may be obliged to provide some smaller security holders with an unmarketable parcel of securities. Unmarketable parcels of securities may be difficult for security holders to deal with and are expensive for companies to administer.

Consequently the Takeovers Panel has granted a class exemption to allow offerors to limit the consideration offered to small security holders to cash.

The Takeovers Panel considers that it is appropriate to grant the exemption in the interests of market efficiency.

The Takeovers Panel considers that the exemption is consistent with the objectives of the Takeovers Code because it retains the principle of providing equal consideration to all security holders in the target company while at the same time promoting efficiency in the market and reducing costs for offerors and target company security holders.

Issued under the authority of the Acts and Regulations Publication Act 1989.
Date of notification in Gazette: 4 September 2003
This notice is administered by the Takeovers Panel.