Takeovers Panel grants exemption to GPG for Tower

15 July 2003

The Takeovers Panel met today and decided to grant an exemption to Guinness Peat Group plc (GPG). The exemption enables GPG to fulfil underwriting commitments it has entered into in respect of the current renounceable rights issue made by Tower Limited to its shareholders.

In reaching its decision the Panel took into account submissions made by a number of interested parties in response to the public invitation for comment made on 10 July 2003.

The essence of the Panel's exemption is that GPG (and its wholly owned subsidiary Ithaca (Custodians) Limited) are exempted from rule 6(1) of the Takeovers Code in respect of any increase in their holding or controlling of voting rights in Tower resulting only from the allotment or transfer of shares to GPG or Ithaca pursuant to an underwriting agreement entered into by Tower and GPG on 4 July 2003.

The exemption is subject to two conditions:

  • That the control percentage of GPG and Ithaca is decreased to 20% of Tower's voting rights within whichever is the shorter of (a) 30 days from the date that GPG takes up their shares pursuant to their underwriting obligations; or (b) the period until Tower holds its next general meeting;

    That the voting rights attached to the securities to be disposed of to meet the first condition are not exercised before the decrease.

The Panel's reasons for granting the exemption are:

  • Tower requires funds urgently to meet the company's banking and other financial commitments;
  • Tower is raising the funds by a renounceable rights issue made to existing shareholders on normal commercial terms;
  • GPG has agreed to provide an underwriting facility which is a normal part of a renounceable rights issue;
  • The terms of the underwriting agreement place greater restrictions on GPG than would be required if GPG was an underwriter relying on clause 19 of the class exemptions(Takeovers Code (Class Exemptions) Notice (No 2) 2001);
  • The Market Surveillance Panel of New Zealand Exchange Limited has granted a waiver to Tower from Listing Rule 9.2 which would otherwise require shareholder approval to any material transaction (the underwriting agreement) to which a related party (GPG) is a party;
  • Although the sub-underwriting arrangements entered into or intended to be entered into appear to make it unlikely that GPG will ultimately acquire more than 20% of voting securities in Tower, it is nevertheless possible for this to occur; and
  • The Panel is not satisfied that GPG is an underwriter for the purposes of clause 19 of the class exemptions.

The Panel considers it is appropriate to grant an exemption, subject to conditions, to GPG from rule 6(1) of the Code to enable GPG to fulfil its obligations under the underwriting agreement.

The conditions imposed on the Panel's exemption are consistent with the conditions contained in the Panel's existing clause 19 class exemption except in relation to the period during which GPG is required to sell-down any shares it acquires in excess of 20%.

While the class exemption provides for a six month sell-down, the Panel is of the view that a shorter sell-down period is appropriate in this case so that all Tower's voting rights are able to be exercised within a quite limited period of the closing of the rights issue, and certainly prior to the next general meeting convened by Tower.

The exemption is consistent with the objectives of the Code because the conditions require that any increase in voting control above 20% is eliminated within the shorter of 30 days after GPG takes up any shares pursuant to its underwriting obligations, and the holding of Tower's next general meeting, and any voting rights above 20% are not exercised in the meantime.

The Panel will publish the exemption notice within a few days.