Rubicon takeover blunder excused

Tuesday 7th July 2009

Miscommunication in a partial takeover of biotech company Rubicon by a group of American funds set in train a series of events that allowed the funds to vote their own their shares in favour of the transaction.

The Takeovers Panel this week released its determination into whether funds associated with American David M. Knott breached the Takeovers Code when most of their shares were counted in support of the deal to increase their holding of Rubicon to 28.3% from 18.5%.

Rubicon’s shareholders had to be polled on the transaction under rule 10 of the Code, which relates to partial takeovers that result in control of 50% or less of a company.

The offeror can’t vote their own shares but in this case did, when Alison Chiappone, a clerical worker at Dorset Management Corp., the manager for the funds, failed to stop one of the funds from voting.

The process was further muddied because the shares were held by Knott via “several layers of nominees” meaning Rubicon had no way of knowing who had voted which shares when its share registrar, Computershare, reported the results of the vote.

No harm was done because another Rubicon shareholder, Third Avenue International Value Fund, spotted that more shares had been voted than were eligible and the panel ruled the Knott shares be discounted.

The transaction went ahead because there was enough support even without Knott’s votes.

Rubicon was initially supportive of the transaction but didn’t recommend it to shareholders because an independent adviser valued its stock at $1.15 to $2.26 apiece, as much as three times the 70 cents offered.

The inquiry has prompted the panel to recommend best practice by target companies is to double-check that offerors don’t cast their votes on rule 10 approvals.

The advice is a “strong recommendation” but isn’t binding, said General Counsel Margaret Bearsley. Still, “if it came before the panel again, the panel might take a dim view of it,” she said.

Shares of Rubicon climbed 6.3% to 85 cents today and have gained 33% in the past three months. The company was created when the Fletcher Challenge Group was split up.

Businesswire.co.nz

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