Takeovers Panel to meet on GPG and Tower

31 July 2003

News release

Takeovers Panel to meet on GPG and Tower

The Takeovers Panel will hold a meeting in relation to the underwriting by Guinness Peat Group plc (GPG) of the existing pro rata cash offer being made by Tower Limited (Tower) to its shareholders.

GPG is committed to underwriting the issue. By meeting its underwriting obligations GPG’s holding of voting securities in Tower could exceed 20% of Tower’s total voting rights.

The Panel granted GPG an exemption that would enable it to obtain in excess of 20% of the voting rights in Tower as a result of fulfilling its underwriting obligations, subject to selling down its excess shares within a period being the shorter of 30 days or the date of Tower’s next shareholders’ meeting.

GPG has stated that it is entitled to rely on clause 19 of the Takeovers Code (Class Exemptions) Notice (No 2) 2001 (the class notice). This notice provides a sell-down period of 6 months for any excess shares. However to rely of clause 19 of the class notice GPG must be an “underwriter” obtaining voting securities under a bona fide underwriting contract entered into in the underwriter’s ordinary course of business.

The Panel considers that GPG may not be entitled to rely on the exemption in clause 19 of the Class Notice.

On 25 July the Panel was served with High Court proceedings by GPG. These sought a judicial review of what GPG contended was a Panel decision to deny GPG the ability to rely on the class notice.

GPG sought further orders quashing that part of the GPG exemption which required the sell-down of any shares in excess of 20% of the voting rights in Tower within the shorter period of one month or the next shareholders’ meeting.

The Panel has not made any final decision on whether GPG is entitled to rely on the exemption in clause 19 of the class notice and has called the meeting under section 32 of the Takeovers Act 1993 to determine the issue.

The Panel has decided not to issue any restraining orders.

The meeting will be held at 10.00am on Thursday 7 August 2003 in Auckland. The meeting will be a private meeting.

… ends …

NOTICE OF MEETING PURSUANT TO SECTION 32 TAKEOVERS ACT 1993
31 July 2003

TO: GUINNESS PEAT GROUP plc (referred to in this notice as “GPG”)
C/o Minter Ellison Rudd Watts
Barristers & Solicitors
Facsimile: 09 353 9701
AUCKLAND

TOWER LIMITED (referred to in this notice as “TOWER”)
C/o Phillips Fox
Barristers & Solicitors
Facsimile: 04 472 7429
WELLINGTON

NOTICE IS HEREBY GIVEN:
That on 31 July 2003 the Takeovers Panel met to consider whether GPG may intend not to comply with the Takeovers Code in relation to voting rights in TOWER it may acquire in fulfillment of its obligations to underwrite a pro-rata offer of shares currently being made to existing shareholders.
On 4 July 2003 TOWER and GPG announced that GPG had entered into a commitment to underwrite TOWER’s pro-rata offer of shares. It appeared possible, as a result of this underwriting commitment, together with GPG’s ability to purchase further TOWER shares in the market, that GPG could obtain in excess of 20% of the voting rights in TOWER.
On 7 July 2003 the Panel wrote to GPG and asked it to confirm to the Panel that it intended to rely on clause 19 of the Takeovers Code (Class Exemptions) Notice (No 2) 2001 (“the Notice”) to allow its holding of voting rights in TOWER to exceed 20% subject to the requirements of that clause that any holdings in excess of 20% be reduced within six months and the voting rights attaching to those “excess” shares not be exercised in the meantime. Clause 19 applies to an “underwriter” which is defined in the Notice as “a person whose ordinary business includes entering into bona fide underwriting or subunderwriting contracts with respect to offers of securities”.
On 8 July 2003 GPG (through its legal advisers) advised the Panel that it considered itself an “underwriter” and intended to rely on clause 19 of the Notice.
On 9 July 2003 the Panel advised GPG that its preliminary view was that GPG could not rely on the exemption in clause 19 of the Notice. However the Panel also advised GPG that it was prepared to consider granting an exemption to GPG along the lines of the class exemption in clause 19 of the Notice to enable it to acquire in excess of 20% of the voting rights in TOWER if GPG wished to apply for such an exemption. GPG was also told that the Panel would seek public submissions on its proposal.
GPG applied for the suggested exemption on 10 July 2003. The Panel issued a press release that afternoon, seeking public comments by Monday 14 July 2003. Several submissions were received by the requested time.
On 15 July 2003 the Panel advised GPG and the market of its decision to grant an exemption to GPG in relation to its underwriting of TOWER’s pro-rata rights issue. That exemption (the Takeovers Code (Guinness Peat Group plc) Exemption Notice 2003) was on similar terms to the exemption in clause 19 of the Notice except that GPG would only have one month, rather than six months, in which to sell down any shares held in excess of 20% of the voting rights in TOWER. That period could be shorter if TOWER held a shareholders’ meeting before the month had elapsed.
On 25 July 2003 the Panel was served with proceedings by GPG which was seeking a judicial review under Part 1 of the Judicature Amendment Act 1972 of what it contended was a decision by the Panel to deny GPG the ability to rely on the exemption in clause 19 of the Notice. It further sought orders quashing as wrong in law, invalid and of no effect that part of the 15 July exemption which required the sell-down of any shares held in excess of 20% of the voting rights in TOWER within the shorter period of one month or the next shareholders’ meeting.
In its Statement of Claim, and in affidavits filed in support of its application, GPG indicated that it considered it was entitled to the benefit of the sell-down period provided in clause 19 of the Notice. It reiterated these views during a judicial conference held this morning

The resolution of the Panel made on 31 July 2003 is as follows:

GPG has entered into a commitment to underwrite a pro-rata rights issue by TOWER which is currently open for acceptance. As a result of meeting its obligations in terms of that commitment, together with any acquisition of shares in TOWER by other means, it is possible that GPG’s holding of voting securities in TOWER could exceed 20% of TOWER’s total voting rights.

Although the Panel has granted GPG a specific exemption that would enable it to obtain in excess of 20% of the voting rights in TOWER as a result of fulfilling its underwriting obligations, subject to selling down its excess shares within the shorter of one month or the date of TOWER’s next shareholders’ meeting, GPG has indicated that it considers itself to be entitled to rely on clause 19 of the Notice, which provides a sell-down period of 6 months for any excess shares. In order to rely on clause 19 of the Notice GPG must be an “underwriter” (as defined in clause 3 of the Notice) obtaining voting securities under a bona fide underwriting contract entered into in the underwriter’s ordinary course of business.

The Panel considers that GPG may not be entitled to rely on the exemption in clause 19 of the Notice.

The Panel has decided to convene a meeting under section 32 of the Takeovers Act 1993. The Panel considers that GPG, by indicating that it is entitled to rely on clause 19 of the Notice, may intend not to act in compliance with rule 6 of the Code.

The Panel has decided not to issue any restraining orders.

The Panel will hold a meeting for the purposes of determining whether to exercise its powers under section 32 of the Takeovers Act 1993. The meeting will be held at 10.00 a.m. on Thursday 7 August 2003 at the Metropolis Hotel, Courthouse Lane, Auckland. The meeting will be a private meeting.

Attention is drawn to section 31V of the Takeovers Act 1993.

SIGNED for and on behalf of the)
Panel by the Chairperson)
__________________________
J C King
Chairperson

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