The primary adviser retains ongoing responsibility for the advisory role throughout the Code transaction. The subcontractor must, like the primary adviser, satisfy the Panel that it is suitably qualified and independent.
In a recent case the adviser seeking the Panel's approval proposed to use a specialist company to provide valuations of the particular assets of the bidder and the target (it was to be a scrip bid). The primary adviser was to be assisted by a specialist asset valuer who was in turn to be assisted by two experts with a close knowledge of the company. One of these experts was closely associated with the target company (named in the annual report). The Panel had to point out that the primary adviser had to be independent and could not use as subcontractors experts too closely associated with the target company.
The Panel's guidance note has been amended to make it clear that the Panel expects the primary adviser to choose its own subcontractors and that its choice should not be dictated by the target company or any other party to the takeover or transaction.
The third issue of concern to the Panel relates to the content of reports about partial takeover offers.
The ability to make partial offers in a takeovers market regulated by a code is unusual in a global context. Most regulated takeover markets do not allow for partial offers. Under the New Zealand Code bidders have the ability to make offers which give them the minimum of legal control (i.e. a holding in excess of 50% of voting rights). They also have the ability, with the consent of the majority of the remaining shareholders (that is, those shareholders other than the bidder and its associates) to make an offer that would result in the offeror holding between 20% and 50% of the voting rights in the target company.
A partial offer that allows a bidder to increase its holding to 50.01% could confer considerable benefits on that bidder. The independent adviser opining on the merits of the partial takeover needs to consider the impact on shareholders of these benefits as well as on the merits for the shareholders.
They could include:
The bidder making only a partial offer will be aware that, as the majority shareholder, it will have to take account of significant minority interests in all the decisions it makes and would not be assured of the ability to pass special resolutions.
Special considerations apply if the bidder is seeking to make an offer that would result in it holding between 20% and 50% of the voting rights in the target company. In such a case the offer document must be accompanied by a separate approval document which offerees should complete and return to the target company before the end of the offer period.
In the case of a partial offer requiring shareholder approval the adviser will need to report to shareholders on both their right to vote for or against the partial offer and their ability to either accept or reject the partial offer.