NZX commissions KPMG for speedy audit of Clear amid stoush

NZX commissions KPMG for speedy audit of Clear business amid stoush with founders

July 8 (BusinessDesk) – NZX Ltd. has asked its auditors, KMPG, to run a ruler over the Clear grain exchange business amid a legal stoush with the Melbourne-based company’s founders.

The external audit process is expected to take about 10 working days, NZX said in an unattributed statement. The stock exchange manager “will keep the market informed,” it said. Chairman Andrew Harmos declined to comment on the issue today.

Shares of NZX dropped 4% to $2.40 today after details of a lawsuit over Clear were leaked to the media. The reports say NZX chief executive Mark Weldon told a court in Melbourne that Clear was showing “a substantial economic loss.” Fairfax Media said it may need to write down the value of the asset, eroding first-half profit.

NZX valued the Grain exchange’s software at $7.8 million in its 2010 annual report.

The reports spurred NZX to issue its own statement today saying tactics used by Clear founder Grant Thomas’s lawyer were “unpleasant.”

Thomas, who co-founded the Melbourne-based grain exchange before selling to NZX and becoming an employee, may seek as much as $17 million in earn-outs from the soured contract, Fairfax reported.

A lawsuit from Thomas would come after NZX filed its own action in the High Court this week over its A$6.4 million purchase of the Clear grain exchange in 2009, claiming “breach of warranty and related claims.” That suit named Thomas, grain exchange co-founder Dominic Pym and their companies Ralec Commodities Pty. and Ralec Interactive Pty.

NZX said Thomas’s lawyer, Rob McGirr, had made “exaggerated and inaccurate” statements and suggestions of $17 million of earn-outs were “irresponsible”. Fairfax said NZX was ordered to pay Thomas A$259,705 by a Melbourne court six weeks ago that was due under a settlement deal made last year.

“NZX is fully confident it has discharged its obligations appropriately and reasonably, and is not swayed by tactics of this nature – unpleasant though they may be,” the company said in a statement. “The earn-out targets for the Clear business were ambitious, which is why NZX agreed to these being classified as earn-outs, rather than to augment the original purchase price.”

The grain exchange was set up to take advantage of the break-up of the Australian Wheat Board monopoly, and was looking to capture a slice of the A$100 million to A$150 million growers spent annually on commissions to sell their products.

Grain trading was expected to add another suite to NZX’s agricultural products, and came as it was in the process of setting up its dairy futures trading.

At the time of the sale, NZX said the grain exchange had registered more than 1,100 grain growers, 100 brokers and 200 buyers and bulk handlers across Australia are registered, and was set to link with a further 13,000 growers registered with GrainCorp, that country’s largest grain bulk handler.

(BusinessDesk)

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