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This policy was also applied in respect of an exemption granted to Prime Infrastructure Networks (New Zealand) Limited in respect of an offer for Powerco Limited. The Panel granted an exemption from rule 20 to allow certain overseas shareholders, who at the time of the application held less than 1% of Powerco's total issued shares, to be offered cash provided that an independent adviser certified that the cash amount to be offered was of an equivalent value to the cash and scrip consideration offered to New Zealand shareholders. The Panel took this approach because the scrip offered was new and was not listed and it was considered that the nominee approach adopted in respect of Independent Newspapers and Normandy NFM was not appropriate. Although the certificate as to equivalence was obtained, unfortunately the exemption was exploited because of the view, supported by the rule 21 adviser and actively promoted by share brokers and advisers, that the fixed cash amount was better than the cash and scrip consideration offered to New Zealand shareholders. The number of 'overseas' shareholders increased dramatically as shareholders sought to obtain the benefit of the exemption. The policy behind the exemption was consistent with the Code but unfortunately the conditions were exploited in an unexpected manner as a result of the complexity of the offer to New Zealand shareholders. The Panel will ensure that the conditions of future exemptions from rule 20 in respect of overseas shareholders do not provide the opportunity for such exploitation.
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attaching to securities obtained under the offer and the bidder was obliged under the Code to include those convertible securities in its offer. In addition, in the circumstances of this exemption the increase in voting rights resulting from the exercise of the convertible notes would be the same as if the holders of the convertible notes had first converted them into shares and then accepted the offer in respect of those shares.
CONCLUSION
The Panel is a market panel and part of its role is to facilitate competition for control of code companies. However, it is not the Panel’s role to grant exemptions to allow market participants to deviate from the Code purely on the basis of commercial expedience or to obtain a particular commercial benefit.
Market participants should carefully consider the provisions of the Code when proposing to increase their voting rights in a code company and must seek to structure transactions in compliance with the Code. Also, before applying for an exemption market participants should carefully consider the nature of the Panel's power as outlined in this guidance note. In addition it is important that any application contain full details of the purpose and surrounding circumstances of a transaction in respect of which an exemption is sought so that the Panel understands fully the background to the application.
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