2003 – Sundry Investments Limited - transfer, further acquisitions
In September 2002 Hamish McHardy transferred all but
0.14% of his Kerifresh shareholding to Sundry Investments
Limited (Sundry), his investment vehicle. The Panel did not
pursue the issue of whether this transfer breached the Code as
those shares remained under Hamish McHardy’s control.
However, between August and September 2003 Sundry acquired another 1.18% of Kerifresh from minority shareholders. The following diagram illustrates the shareholding structure following this transaction.
Those later acquisitions of 1.18% of Kerifresh caused Hamish McHardy to breach the Code. They resulted in an increase in the percentage of voting rights he held or controlled to 10.75% which, when taken with the percentage of voting rights held or controlled by his associates, Jonathan McHardy (8.69%), and Alan Thompson (18.49%), exceeded, in aggregate, 20%. No rule 7 exception was used to effect this increase.
2004 – GMS acquisitions and warehousing agreement unwind
Hamish McHardy told the Panel that in early 2004 he
wanted to increase his Kerifresh shareholding. However,
he had become aware that the Code applied to Kerifresh
and that he and his son were probably associates. With an
aggregate shareholding between them of 19.44%, he would
be prohibited from acquiring much more of Kerifresh. He
therefore sought to unwind the warehousing agreement
(which accounted for more than 3% of this shareholding).
This was problematic because:
- Under the terms of the warehousing agreement he had no right to simply transfer the shares back to Alan Thompson;
- Even if he could, this would cause Alan Thompson to increase his own voting control in Kerifresh to over 20%, in breach of the Code;
- Hamish McHardy had become Chairman of Kerifresh and as such did not want to be seen to be selling down shares.
Graham Cowley had suggested a solution involving his company GMS Fulfilment NZ Limited (GMS). GMS would buy Kerifresh shares with Hamish McHardy’s money and hold those shares for Alan Thompson’s economic benefit pending transfer to Alan Thompson or his nominee. The shares acquired by GMS would replace and release the shares currently subject to the warehousing agreement. This would unwind the warehousing agreement while simultaneously increasing Hamish McHardy’s economic interest in Kerifresh. Hamish McHardy, Alan Thompson and Graham Cowley agreed to unwind the warehousing agreement in this way.
Between July 2004 and June 2005 GMS acquired 245,000 shares representing 3.45% of Kerifresh pursuant to this strategy. Accordingly, only 116,000 of the original 361,000 shares remained subject to the warehousing agreement. The following diagram illustrates the shareholding structure immediately following this transaction.
GMS acquisition causes Alan Thompson to be in breach
of Code
The Panel found from the evidence that Alan Thompson
controlled the shares acquired by GMS.
The Panel considered that GMS and Alan Thompson, and GMS and Hamish McHardy were associates under rule 4(1)(d) of the Code. This conclusion was reached in view of the business relationships they had with each other, directed at unwinding the warehousing agreement.
GMS’ acquisitions caused Alan Thompson and GMS to breach rule 6. Alan Thompson increased his control of the percentage of voting rights in Kerifresh he held to 21.94%. No rule 7 exception was used to effect this increase.
GMS found to be in breach of Code
GMS increased the percentage of voting rights in Kerifresh
it controlled to 3.45% which when taken with the percentage
of voting rights held or controlled by GMS’ associates
Alan Thompson (18.49%) and Hamish McHardy (10.75%)
exceeded, in aggregate, 20%. No rule 7 exception was used to
effect this increase.