Friday 27th July 2001 |
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While the Takeovers Code has devalued holdings in listed companies of between 20% and 50%, according to Guinness Peat Group chief executive Tony Gibbs, it may also disadvantage minority shareholders.
Many larger investors reduced their holdings to below 20% ahead of the code's July 1 implementation, not because of any perceived strategic advantage of holding below 20%, but to make it easier to sell their holdings in future.
But Mr Gibbs said because investors were required to buy over 50.1% of a company once the 20% ownership threshold was breached, minority shareholders who wished to sell might miss out if 50.1% of the compcould not be bought.
If the 50.1% ownership threshold is not reached, all shares must be given back and the holding reduced to below 20%.
Russell McVeagh partner Andrew Harmos said the code did allow for less than 50.1% of the company to be acquired if a majority of shareholders supported the move.
He also agreed the new code had devalued the strategic holdings of above 20% and below 50%.
He said investors could no longer charge a premium for holdings above 20% so many had decided they mights as well realise their cash and bring their holdings to a more easily transactable level.
One example was Infratil reducing its holding in Port of Tauranga from 24.7% to 19.99% at the end of May.
Infratil director Lloyd Morrison said while the company was a long-term holder of the stock, if at some future date it wanted to sell its holding the best transactable size was 19.9%.
GPG has taken a different approach by selling a 19.9% stake in Wrightson and retaining 1% to be sold down later.
Mr Harmos said the disadvantage to selling down to below 20% was investors reduced their voting rights and level of influence in the company.
Mr Gibbs also said if an investor was sitting on 19.9% and another player came into the market wanting to increase its shareholding there was no way the first investor could protect its position without breaching the 20% threshold.
The strategic value of holdings of just below 20% would appear to be little unless a company wanted to take over the entire company.
Mr Morrison said it was unlikely investors holding just below 20% of a company would be able to charge a premium for their holdings. He said it could set a benchmark in terms of what investors would have to pay if they then decided to go to 50.1%.
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