Southern farmers carry huge risk in battle for Richmond

By Nick Stride

Friday 26th April 2002

The latest outburst of hostilities in the long-running battle for control of Richmond could end up costing South Island farmers' co-operative PPCS $69 million.

That's the worst-case result of the tit-for-tat actions filed by Hawke's Bay-based meat processor Richmond, and by PPCS, in the High Courts at Auckland and Dunedin in recent days.

At the heart of the legal battle is the 36% holding in Richmond that PPCS was forced to sell in mid-2000.

It sold the stake to Hawke's Bay Meats (HBM), a subsidiary of Active Equities, the new plaything of former Brierley Investments executives Paul Collins, Bruce Hancox and Patsy Reddy.

In June last year PPCS bought 49% of HBM, giving it, Richmond will argue, an interest in a little less than 18% of the shares.

An option agreement, exercisable in February next year, gives it an interest in HBM's remaining 18%.

Together with the 10% it bought last May from expatriate businessman Peter Spencer, 1.3% already held, and on-market purchases, that would take PPCS' stake to a controlling 50.7%, at a cost of around $69 million.

Richmond's legal action is understood to be built on the allegation HBM was "warehousing" the 36% Richmond stake PPCS was obliged to sell.

Richmond will have to prove to the court that some sort of agreement existed for HBM to sell the shares back to PPCS. If it can, PPCS will have fallen foul of the Securities Amendment Act, which requires agreements of those sorts to be disclosed.

The act allows the court wide discretion to remedy breaches.

At the mildest end of the scale the court can merely order the transgressor to publish its interest.

The most heavy penalty is forfeiture of the shares - without compensation.

Legal sources doubted Richmond's defending shareholders, if they win, would press for the maximum penalty.

They thought in-between remedies, such as the removal of PPCS' right to vote its shares, or a "defaulter" declaration requiring PPCS to sell them, more likely.

Richmond's independent directors have been reluctant to pursue some of their small shareholders' concerns about PPCS gaining control of the company.

Chairman Sam Robinson said the court action was in the company's best interests as it could "resolve once and for all the festering issues between shareholders."

It is unclear why PPCS thinks its own action, in the High Court at Auckland, might produce a decision different from Richmond's Dunedin action.

PPCS chairman Jim Pringle also said the aim of the action was to resolve the issue between shareholders.

Shoeshine

Comments from our readers

No comments yet