N.Z. ‘better off for raiders’

Press, 12 June 1986, Page 26

N.Z. ‘better off for raiders’

Wellington

On the whole, New Zealand was the better for the takeover raiders and the competition they appear to have provided in the securities market, said the chairman of the Commerce Commission, Mr John Collinge. Addressing a take-over seminar in Auckland, he said shareholders had benefited from the increased prices generated by take-overs. Management was given a challenge to improve performance and directors were made more aware of the totality of their responsibilities.

Mr Collinge said he heard complaints that businessmen were unable to get on with producing goods and services because they were defending take-overs.

The complaint, mostly from companies vulnerable to take-over, was that businessmen were worrying about having to defend their rears at the cost of moving forward.

“The fallacy in this seems to me to lie in the proposition that the market for goods and

services is somehow different from the market in securities,” said Mr Collinge. “The proposition seems to be: We want to compete in goods but we do not want to worry about competition in the securities market, particularly in the market for control of a company. “Perhaps if businesses are looking over their shoulders, that should also give them incentive to improve their performance in producing goods and services and making such performance show in company results and rewards for shareholders,” he said.

Mr Collinge said the Commerce Commission had two main roles in relations to mergers and take-overs:

• To ensure the absence of restrictive trade practices in the market for shares and securities. © To examine the effect on competition of a merger.

"Suppose a number of takeover specialists have an agreement that when one is bidding for a target company the others will not intervene.

“That would be illegal under the Commerce Act, 1986, and would be likely to adversely affect the shareholders concerned.”

Mr Collinge said the Commission would take action against such a practice. Stand-off agreements where companies agreed not to bid for shares in each other may also reduce competition and provide a block against the the capturing of control in the companies. If they did, the Commission should perhaps intervene there also. Mr Collinge said he was unable to endorse the idea that there should be no regulation of competition in the market for securities. Some economists said that if the market was contestable as a whole, then you did not need to worry about restrictive practices within it, since potential new entrants provided the discipline which caused the practice to founder.

Even if this was true, there may still be adverse effects in the short and medium term before the market was, in fact, contested, he said.