Tricom links to Prime come under spotlight

By Duncan Bridgeman

Friday 8th October 2004

New revelations in the Prime-Powerco saga today link Sydney broking firm Tricom Equities with Prime Infrastructure.

How the Takeovers Panel views this relationship will be critical as it considers whether to approve a last ditch deal stitched on to Prime's bid to buy Taranaki lines company Powerco.

Tricom has intimate business links to Prime Infrastructure's management company, investment and advisory firm, Babcock & Brown, despite being widely portrayed on this side of the Tasman as a friendly stranger stepping in to save the deal:

Tricom was a co-lead broker of this week's Babcock & Brown ASX float;

Tricom has agreed to underwrite a proposed $50 million pro rata rights issue for aged-care operator Primelife, of which B&B owns just under 20%;

The Australian Financial Review opined in July that B&B will be relying on its "pals" at Tricom to offload the $50 million in such a way that will leave B&B money to pay for the re-issue of another $20 million of separate notes; and

Tricom is a Prime shareholder.

On Tuesday the Takeovers Panel will have to decide whether the three parties acted in concert, disadvantaging other Powerco shareholders.

The controversy over how much cash those accepting the cash-and-bonds offer will end up with stemmed from a Takeovers Panel exemption allowing overseas shareholders to be paid in cash only. This sparked a wave of buying from Australian arbitrages, possibly doubling the proportion of bonds the Taranaki councils that own more than half of Powerco would receive.

When the new deal was announced, New Plymouth mayor Peter Tennent said the council's advisers, PricewaterhouseCoopers, had "arranged" a binding agreement to sell all surplus Prime bonds, known as Sparcs, beyond an agreed 37.5% of the total price to Tricom.

This was widely taken by the media and others to mean PWC "found" Tricom.

But Tricom managing director Lance Rosenberg admitted yesterday his firm approached PWC, not the other way around. "We are Prime shareholders and we approached PWC and asked them to approach their clients," Rosenberg said.

Tricom holds about 2% of Prime securities, including share parcels for two of Prime's directors Babcock & Brown chief executive Peter Hofbauer and B&B managing director Phil Green.

While Prime has moved quickly to distance itself from the deal, Babcock & Brown has been silent on the issue, failing to return the National Business Review's calls.

The investment and advisory firm has been busy, raising $A550 million with its float on the Australian Stock Exchange on Wednesday.

Both Prime and Tricom strongly rejected suggestions the three parties acted in concert to push through the deal with Powerco's major shareholders.

"To say that we are associated or that we are being underwritten is a ridiculous notion and will be proved as such in the Takeovers Panel meeting on Tuesday," Tricom's Rosenberg said.

Asked if there was an agreement to underwrite any losses incurred by Tricom in taking on the Sparcs, Prime chief executive Chris Chapman said: "I can only speak for Prime but the answer is categorically no."

The Takeovers Panel said this week the deal with the councils may not be in compliance with rule 20 of the code, under which a takeover offer must be made on the same terms for all shareholders.

Corporate law specialists said there would have to be a connection between Prime or a related party and Tricom for the Takeovers Panel to have an issue with the deal.

"That will be what the panel will be looking at," Phillips Fox's Martin Thomson said.

Having already copped flak over its decision to grant an exemption to allow overseas shareholders to receive cash only for Prime's $780 million bid for Powerco, the Takeovers Panel will not be taking Tuesday's meeting lightly.

A problem for Prime is the Takeovers Code is based on principles rather than black and white rules.

Rosenberg said he would be surprised if the panel found a breach of rule 20.

"Yes, some of our business transactions are related to Babcocks but to deem us associates under New Zealand takeovers law would be preposterous."

But that is something for the Takeovers Panel to decide.

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