Securities watchdog eyes Dorchester deal

By Nick Stride

Friday 1st October 2004

A Takeovers Panel report on dealings between Bridgecorp and Dorchester Pacific managing director Brent King has drawn the attention of the Securities Commission.

"We are looking into the matter," a commission spokeswoman said this week.

The report, released on September 14, gave the reasons the panel ruled a "lock-up" arrangement between King and Bridgecorp breached the Takeovers Code.

King on August 13 sold a 15.1% Dorchester stake to Bridgecorp outright and, under the lock-up, agreed to sell it a further 5.05% stake in the event Bridgecorp made a takeover bid.

The commission may be interested in whether rules governing trading by directors and officers in their company's securities have been complied with.

Under insider trading regulations directors and officers must gain the consent of their company before they can buy or sell the company's securities.

Dorchester chairman Murray Radford has said the board didn't know about King's sale of shares to Bridgecorp until after it had been executed.

There is an exception allowing for directors and officers to trade if they comply with a company procedure designed to ensure no inside information is used when trading.

Such a procedure must be authorised by the commission.

It is unclear whether Dorchester has such a procedure.

Radford declined to comment.

But the exception applies only if the shares are bought or sold in the director's own name, or that of their spouse or child.

In King's case shares were sold by his investment vehicle, Snowdon Peak Ltd.

The commission may also be examining whether the information Bridgecorp received was of a price-sensitive nature.

The report revealed Bridgecorp, during its negotiations with King, conducted "limited due diligence."

Bridgecorp was able to conduct its due diligence because King provided Dorchester board papers.

Bridgecorp in July asked for copies of the minutes of board meetings for the preceding six months; monthly management accounts for April, May, and June; any budget, forecast, or business plan for the year ending March 2005; information on Dorchester's loan portfolio; and information on leases, material contracts, litigation, and employment.

The report noted it was apparent Bridgecorp didn't get all the information it requested, and it was not clear what information it did get.

Eric O'Sullivan, Bridgecorp's finance director, told the panel the company had received management accounts only for the latest month.

"Handwritten notes prepared by [special projects manager Zachary Scott] McHerron included a breakdown of 'business plan 2005' which included 2005 profit and various components, including some detailed division-specific information," the report said.

King told the panel all information he provided to Bridgecorp was "consistent with matters in the public arena under continuous disclosure, if there was any variance then that would have been disclosed to the public."

Comments from our readers

No comments yet