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5 October 2004
The Takeovers Panel met today to consider an announcement made on 4 October 2004 by the New Plymouth District Council (the Council). The announcement related to the takeover offer of 4 October 2004 being made by Prime Infrastructure Networks (New Zealand) Limited (Prime) for all the shares in Powerco Limited.
In its announcement the Council said that it was to receive 62.5% in cash for the Powerco shares it is committed to sell into the takeover offer, even though the amount of cash it receives may be scaled under the terms of the offer.
The Council said it would achieve this outcome because of a binding arrangement made by its advisers PricewaterhouseCoopers. Under the agreement it appears a third party would purchase, at their par value of $1 each, all of the surplus SPARCs (a quasi-debt instrument to be issued by Prime) above 37.5% that are allotted to the Council.
Prime is party to a lock-up agreement and linked side agreement, both dated 6 August 2004, with three Powerco shareholders, the Council, the Taranaki Electricity Trust and the Powerco Wanganui Trust (the Council Vendors).
The Council has previously stated publicly that it believed the lock-up agreement ensured it would receive 62.5% of cash and 37.5% of SPARCs for its Powerco shares under Prime's takeover offer. Under rule 20 of the Takeovers Code a takeover offer must be made on the same terms and provide the same consideration for all securities of the same class. The Prime offer provides three alternatives for New Zealand shareholders to accept.
With the cash option, and the combination cash and SPARCs option (which the three Council Vendors have undertaken to accept) there is a possibility, depending on the level and type of acceptances received under the offer, that the cash entitlements of accepting shareholders would be scaled back. The reduced cash entitlements would be replaced by SPARCs of equivalent value.
The effect of the arrangement entered into by the Council, (and possibly all the Council Vendors) , with or through PricewaterhouseCoopers, is to provide consideration to the controlling shareholders for their Powerco shares that differs from the consideration to be provided to any other shareholders accepting the same option.
The Panel considers this arrangement may contravene or may intend to contravene rule 20 of the Code. Accordingly the Panel considers that Prime Infrastructure Networks (New Zealand) Limited, the New Plymouth District Council, Taranaki Electricity Trust Incorporated, Powerco Wanganui Trust Incorporated and PricewaterhouseCooper may not have acted, may not be acting, or may intend not to act in compliance with rule 20 of the Code.
The Panel has decided to convene a meeting under section 32 of the Takeovers Act 1993 to determine whether to exercise its powers under that section. The meeting will be held on Tuesday 12 October 2004 in Auckland. It will be a private meeting.
The Panel is issuing summons to a number of parties to attend the meeting. The Panel has decided not to issue any restraining orders in relation to the matter.
The text of the Panel's notice of meeting will be posted shortly on the Panel's website at www.takeovers.govt.nz.