AMP’s responsibility in take-over philosophy

Press, 23 July 1986, Page 38

AMP’s responsibility in take-over philosophy

PA Wellington The AMP Society, as the market’s largest single investor, carried an increasing responsibility for the sharemarket, AMP’s manager for New Zealand, Mr John Dingle, said yesterday. He was spelling out the take-overs philosophy of AMP, which has a share portfolio of $1.25 billion and a stake in 75 companies. “We are acutelly aware of our responsibilities to the rest of the market and to our policy holders, and these are often brought into sharp focus where there is take-over activity in companies in which AMP is a significant shareholder,” Mr Dingle said.

“Clearly the AMP’s investment philosophy can have a substantial infuence on decisions made by both large and small investors, and our decisions can have a bearing on multi-million-doliar take-overs, as well as the buying and selling of small holdings by individual investors.

"We find we have to try and balance our responsibility to our policy holders with our role as a major player in the investment community.

“In the case of a takeover, while the AMP could take advantage of a quick capital gain, we recognise a responsibility to act fairly so far as both the target company and the smaller shareholders are concerned.” Mr Dingle said the

AMP had guidelines for action when it received an Initial approach, normally by a broker acting on behalf of a bidder.

“The AMP’s policy is to request that the bidder discloses his identity in confidence, and when the bidder’s identity is made known we will then listen to the proposal and assess the price offered for our shares,” he said. The AMP had a policy that it did not sell until it had first contacted the target company. Generally the AMP’s preference was to sell later in a take-over situation, and thus to be able to assess the situation more accurately. Mr Dingle said that there were two schools of thought associated with take-overs, one the “speed and secrecy” approach and the other the “pause and publicity” philosophy.

“While the first certainly gains the best advantage for a company seeking to take control of another, the second may provide greater information for both the target company and the small shareholder,” Mr Dingle said.

“While there is probably no perfect solution, the ‘pause and publicity’ school of thought offers, we believe, suitable protection without resorting to undue regulations, and anyway we support it because it ties in with our policy of encouraging a well informed market.”

Mr Dingle said another

aspect of take-overs which had occupied the society’s thinking was that of the escalation clause, where larger investors were often offered a price escalation clause for their early acceptance. “Quite clearly, a guarantee of a higher price for volume shares is a distinct advantage to the larger investor over the smaller shareholder,” Mr Dingle said. “The AMP has a preference that such clauses should be outlawed because they are usually offered only to larger shareholders. However, while they exist and are offered, we will accept them because we feel it would be unfair to policy holders to disregard the advantage available for their benefit.”

Mr Dingle said' some flexibility in take-over situations was available to the society by virtue of the fact that it operated two funds, the main fund and the investment-linked fund.

Generally the main fund was a long-term growth-orientated fund and may, in taking a longer-term view, not necessarily accept a particular offer. The current market value investment-linked fund, on the other hand, took a more flexible and aggressive approach to investment management as its success was measured against such factors as the quarterly inflation rate, and would therefore be

more likely to take a shorter-term profit. Mr Dingle said AMP had Invested $lOO million in the New Zealand sharemarket during the first six months of 1986. Investment in two companies, Fletcher Challenge and Brierley Investments, now exceeded $2OO million each, while a further two shareholdings, Carter Holt Harvey and NZ Forest Products, were worth more than $lOO million each.