Richmond goes to court over 'warehousing'

Friday 19th April 2002

PAUL COLLINS: Accused of 'warehousing'

Richmond's application to the High Court at Dunedin for a declaration on matters surrounding the acquisition by rival meat company PPCS of a controlling shareholding goes to the heart of corporate takeover ethics.

Farmer-shareholders opposed to PPCS want Richmond and the High Court to settle the facts surrounding an allegation of "warehousing" by PPCS with the aid of Paul Collins' Active Equities.

Having been forced by the company constitution in July 2000 to divest its 36% stake in Richmond, the allegation is that PPCS did a deal with Active Equities and was able to repurchase a year later, that in effect it never lost interest in those shares sold to Active Equities.

It is alleged that PPCS did this by guaranteeing a Citibank loan for Active Equities.

The group of farmer-shareholders, including some who formed Richhold to battle PPCS for control of Richmond in 1999 and 2000, have asked questions under sections 28 and 29 of the Securities Amendment Act on the issue of "relevant interest" by PPCS in Richmond shares.

Under the company constitution, answers to those questions have been sought by a committee of independent Richmond directors, so far without resolving the dispute.

Active Equities signed a statutory declaration after buying the PPCS shares that PPCS "had no relevant interest" in those shares. Richmond farmer-shareholders thought they had beaten off the southern raider.

Subsequently, PPCS returned to the Richmond share register by buying on the open market and acquiring 10% owned by corporate farmer Peter Spencer.

Less than a year later Active Equities sold 49% of its Hawke's Bay Meat subsidiary to PPCS, which lifted its stake to 34% of Richmond.

Moreover, it has an option from Active Equities to buy before September 2003 the remainder of Hawke's Bay Meats, then giving PPCS over 50% of Richmond, and effective control.

Independent Richmond directors Sam Robinson (also chairman) and Jim McCrea are now seeking to take this divisive issue out of the boardroom and into the High Court, going straight to the highest authority on corporate takeovers and shortening what is a festering dispute.

The High Court can also ask for non-party discovery orders, such as the security behind Citibank's loan to Active Equities. PPCS says it is "very comfortable with the matter going to an independent body, the High Court."

PPCS chief executive Stewart Barnett is a Richmond director, along with Mr Collins and Mr Hancox, representing Active Equities.

Mr Robinson expects the High Court to take months to make a declaration. "These matters are sufficiently important and fundamental for Richmond and all its shareholders to seek a definitive ruling. While they are being resolved, it is business as usual for the board and company," said Mr Robinson.

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