CODEWORD

The Panel made a significant decision in February 2006 on the terms of a proposed offer to be made by Rank Group for the remaining shares in Carter Holt Harvey it did not hold.

Rank Group had made a protracted takeover bid for Carter Holt, including the acquisition of the controlling stake sold by United States company International Paper. When the offer closed on 27 January 2006 Rank Group had 85.7% of the shares of Carter Holt.

On 3 February 2006 Rank Group gave notice of a further takeover offer for Carter Holt. This is permitted under the Code. The proposed terms of the offer were a base consideration of $2.70 per share, with an additional 5¢ per share payable to all acceptors if sufficient acceptances were received within 7 business days of the date of the offer, for Rank Group to reach the 90% compulsory acquisition threshold.

Rule 24(2) of the Code requires that an offer be open for a minimum of 30 days. The Panel was concerned that Rank Group’s proposed offer did not comply with this requirement and sought submissions from Rank Group’s legal advisers. On 8 February the Panel convened a meeting under section 32 of the Act to be held on 13 February 2006. Further submissions were received at that meeting.

The Panel issued its determination on 15 February 2006. It said that the limiting terms of the proposed offer, in respect of the full offer price of $2.75, in effect shortened the period for shareholders to consider the whole offer from the required 30 calendar days to 7 business days from the date of the offer.

Neither would the offer comply with rule 24(1) as the offer in its entirety would, in effect, not be open for the 30 day offer period specified in the offer document.

To remedy the breach the Panel accepted an enforceable undertaking from Rank Group to amend its proposed offer to a straight offer at $2.75 per share with no conditions requiring early acceptance of the offer.

This was an important decision for the future makeup of Code offers. The Code is an enhanced participation regime. It is designed to ensure that all shareholders take part in the takeover process. To help achieve this a takeover offer must have provisions to ensure that shareholders:

• have sufficient information on which to determine the merits of a takeover offer; and
• have a reasonable time in which to receive and consider the information and weigh up the merits of the offer.

Rank’s proposed offer sought to avoid the second of these key requirements.