Unions find mystery buyer for Aulsebrooks

Press, 17 August 1978, Page 1

Unions find mystery buyer for Aulsebrooks

In a surprise move yesterday the Canterbury Trades Council announced that it had a prospective buyer for 72 per cent of the shares of A.B. Consolidated Holdings, Ltd, which produces Aulsebrooks goods.

The shares are held by Food Holdings, Ltd, which is 50 per cent owned by A. S. Paterson and Company, Ltd, and Brierley Investments, Ltd. This holding amounts to a little more than seven million shares, with a nominal value of $3.5M, and a present market value of about $3.2M. A part of the deal was that the company would give the council full access to its books, management, accountants and auditors, but the council refused to identify its prospective buyer. The secretary of the council, Mr L. G. Morel, would not say whether the buyer was local, national, or international, or whether it was a company, individual, trade union, or the council itself. But he denied it was a bluff. “We’re serious,” he said. The chairman of directors of A. B. Consolidated Holdings, Mr B. R. Judge, said that no responsible board could disclose the confidential ' information without knowing to whom it was to be available. He said the “illegalities and inconsistencies” in the

offer also meant that it could not be considered. Mr Judge said that the purchase of 72 per cent interest by any party intent on preserving “a major loss-making aspect of the company” would obviously cause the minority shareholders to risk losing their total capital, in the hands of an undisclosed party whom they had had no chance to accept or reject. Such a position could not be tolerated by the board of A. B. Consolidated Holdings, and would be totally irresponsible to the minority shareholders. Workers at the Aulsebrooks, Ltd, biscuit and confectionery factory in Christchurch met yester-. day afternoon and voted to do anything possible to save their jobs, but stopped short of deciding to take direct action. The workers had given the Canterbury Trades Council authority to take whatever steps were necessary to save the jobs of 250 workers through the rationalisation of the company’s business. The council voted last Thursday to recommend direct action, but since then the coun-

cils executive has modified this stance, advising caution. Mr Morel said that the workers were advised at their meeting yesterday not to take direct action at this stage. He said the Canterbury council had not heard from the Auckland Trades Council yet whether it was prepared to give support to help save Christchurch jobs. The lay-offs, which might cost up to 250 workers their jobs, are mostly the result of a reduction in the number of confectionery lines in the Christchurch plant. In its letter, the Canterbury Trades Council noted that Food Holdings wanted out, and that the council had found a solution. It had found a prospective buyer to purchase the Food Holdings shareholding, who would not only provide the necessary funds, “but has assured us no jobs need be lost,"- Mr Morel said. But before an offer was made the council wants full disclosure from A.B. Consolidated. Part of the prospective offer would be that Brier-

leys take back Asparagus, Ltd, and Big Apple Products, Ltd, as a deposit on the purchase price, and similarly that A. S. Patersons take over the two flour mills as a deposit. In his reply, Mr Judge denied that Food Holdings wanted to withdraw from A.B. Consolidated. He was surprised at an offer involving a transfer of control to an undisclosed principal on the basis of payment within one year, he said. Shareholders would be paid from the sale of their own assets, which was illegal, he said, another reason why this offer could not be considered. The directors of A.B. Consolidated would genuinely like to save jobs, and would co-operate with any buyer prepared to make a firm offer. To save jobs the company would consider generous terms for the Christchurch confectionery business* The rest of the company had nothing to do with Christchurch employment, and was not for sale, Mr Judge said.

The following is the text of a letter, dated August 15, from Mr L. G. Morel, secretary of the Canterbury Trades Council to Mr B R. Judge, A. B. Consolidated’s chairman: "The Canterbury Trades Council still has a fundamental difference of opinion with your board concerning the viability of the Christchurch operations of Aulsebrooks, Ltd. As we see it, your major shareholder, Food Holdings, Ltd, wants to virtually quit the Christchurch scene for a number of reasons:

"(1) An injection of finance is needed, and they are not prepared to put up more money. "(2) The Christchurch end of the trading company’s operations are claimed to be making a loss, particularly in the confectionery lines “(3) Any continuation of Christchurch operations look bleak, especially because of the short to medium term economic outlook. “For these and possibly other reasons, Food Holdings, Ltd, wants to get out and not lose its investment. “Not wishing to see any jobs being lost, either in Christchurch or elsewhere in the companies that make up the A. • B. Consolidated group, the Canterbury Trades Council has searched for ways to overcome the current situation. We now believe that we have found a realistic and equitable solution. “We have found a pros-

peetive buyer for the A. B. Consolidated Holdings, Ltd, shares new held by Food Holdings, Ltd. This potential buyer not only can provide the necessary funds and management required, but

has assured us no jobs need be lost. However, before any serious offer can be made we want to have a further look at the books to establish for the party associated with us that it is all OK. In particular, our request at this stage is: “(1) Full access to the books, your management and accountants, and your auditors, (Messrs Clark, Menzies and Company). “(2) A letter from you, addressed to your staff and auditors, indicating that all staff will assist us in our investigations and give full and frank information.

“(3) A copy of your organisation chart along with the necessary letters of in troduction, plus your acceptance of the possibility that we may have to do some of our work at your auditor’s premises. “(4) During the period of our investigation, we would like Messrs Binning and Hancox to be available if needed. (Mr R. J. Binning is the company’s managing director, while Mr B. Hancox is general manager of the Christchurch factory of Aulsebrooks, Ltd).

“We envisage that this investigation would take no more than three days, possibly less. Time is of the essence but we must be able to build up the genera! feelings of the interested buyer. If, as an outcome of our investigation, we find that a serious offer cannot be made, then we will not disclose our findings to anyone. In fact, we would be prepared to agree with yourself on any future course of action. “The basis of the offer, if made, at this stage is as follows:

“(1) Food Holdings, Ltd, would be paid back, within one year, what Brierley Investments, Ltd, and A. S. Paterson, Ltd, paid for the shares in the first place. This will mean that they will not lose one cent on their investment. “(2) That a suitable trustee for the A.B. Consolidated Holdings, Ltd, shares now held by Food Holdings, Ltd, be agreed upon to ensure that during this 12-month period. “(a) Food Holdings gets back the purchase price paid for the shares they now hold; and “(b) no action is taken that would preclude the settling up as outlined in this letter. “To this end, we consider thst the very people that you have faith in — your auditors, Messrs Clarke, Menzies and Co. — would be suitable. “(3) As a deposit on their shares, Brierley Investments, Ltd, agree to take back both Asparagus, Ltd, and Big Apple Products, Ltd, for their original consideration. Ownership of these two companies cannot be seen to help the continuance and viability of the main activity. “(4) As a deposit on their shares A. S. Paterson, Ltd, will be sold, at book value, A.B. Consolidated Holdings’ interests in the two flour mills. This makes sense in that Paterson’s have expertise in this area and the company’s resources need to be confined to the main activity.

“We trust that you will give this offer your urgent and serious consideration. We make it in the knowledge that any further delay on either your part or ours could well jeopardise the current situation, and await your response which we trust will be received within the next few days.” In a reply to Mr Morel, dated August 16, Mr Judge

said that the directors of A.B. Consolidated Holdings, Ltd, would co-operate with the council in every possible way, “consistent with economic common sense and sound business practice, in your efforts to preserve employment at our Christchurch factory.

“Food Holdings, Ltd, objective has always been to stay with its shareholding in A.B. Consolidated Holdings and to re-establish that company as a profitable organisation. Already, in biscuits, we have improved our market share against our major competitors, both wholly overseas owned. “It is surprising that you ask us to open entirely our [books, accounts, staff and auditors for an investigation on behalf of an unnamed principal. No responsible board could disclose that confidential information without knowing to whom it is to be available. “You have also surprised me in expecting us to take seriously a possible offer to hand over control of our company — which we directors virtually hold in trust for our shareholders — on the basis that an unnamed principal may pay shareholders within one year. The only security offered to shareholders is that their shares will be held in trust, but in the meantime those shares could well become worthless.

“My position, as chairman erf the board, requires me to consider the interests of all

shareholders. The purchase of a 72 per cent interest by any party intent on preserving a major loss-making aspect of the company would obviously cause the minority shareholders to risk losing their total capital, in the hands of an undisclosed party whom they have had no chance to accept or reject. Such a position could not be tolerated by my board. “The Trades Council’s proposition involves the immediate disposal of the po= tentially more profitable aspects of our current business and apparently the minority shareholders are to have no say in this. “Obviously then the reason that no cash consideration is being given is that your principal has no cash — or is not prepared to put it up — and that the shareholders will be paid from the sale of their own assets.

“The provision of the deposit on the shares being paid by the transfer of A.B. Consolidated Holdings’ own assets to the major shareholders is contrary to the provisions of section 62 of the Companies Act, 1955. Being illegal it is not a proposition we can consider and makes one wonder whether proper professional advice has been sought to this proposal, which involves the purchase of metre than S2OM worth of assets. “The illegalities and inconsistencies in the present offer obviously mean that it could not be considered.

“The A.B. board is, however, keen to assist anyone! — whether associated with! the Trades Council or not —I who may wish to purchase: the Christchurch con-1 fectionery unit. We would consider generous lease terms on the property and interest-free financing of the purchase of plant to assist anyone with a vaiable proposition which would maintain the present level of employment. “But we must make it quite clear that such an off .r must be berth legal and economically viable and should be restricted to the

Christchurch-based confectionery operation of the company.”