Director slams law

Press, 23 January 1988, Page 30

Director slams law

PA Wellington The chairman of Kupe Group, Ltd, Mr Peter Grayburn, has launched a campaign against New Zealand’s take-over laws and called on other company directors to support him.

Mr Grayburn wants to see the law changed so that any company wanting to buy a stake of 30 per cent or more in another must make a takeover offer for all the remaining shares. The proposal is aimed at preventing companies from taking control of other companies without ever making a formal take-over bid.

Mr Grayburn is sensitive to the issue because Kupe fell under the control of a major shareholder, Judge Corp, Ltd, a relationship that led to huge losses for Kupe.

His call for a law change is timely considering the suspension of investment company Rada Corp, Ltd. Rada holds large stakes in a number of companies such as Newmans Group, Ltd (of

which Mr Grayburn is chairman), NZ Forest Products, Ltd, Crown Corp, Ltd, and Prorada Properties, Ltd.

In most cases Rada holds less than 50 per cent of the shares, yet it has assumed almost complete control of the companies, especially Forest Products, without ever having made a full take-over bid.

Mr Grayburn says deregulation has brought the growth of influence and control by one company over another through the mechanism of part ownership. "Although this influence may be beneficial, it may also have disastrous results, as the events of late 1987 and early 1988 have amply demonstrated,” he says. Kupe itself suffered a paper loss of almost $lOO million last year because Judge took over Kupe’s board and pushed the company into making investments in Judgerelated companies, before the sharemarket crash. Judge gained control by

buying large parcels of Kupe shares, building up a stake of 53 per cent. But it never presented minority shareholders with a formal take-over offer. In an article in “Boardroom," the Institute of Directors magazine, Mr Grayburn says it is not enough to say directors representing, say 45 per cent of the shareholding, will act always in. the best interests of all shareholders. “Although this may be the original intention, other pressures of influences may subvert this intention to the pursuit of self interest,” he says. "Cash-rich associate companies are particularly vulnerable. "It is probably an opportune time for the Institute of Directors to study overseas take-over regulations to find a model more protective of the minorities than currently applies in New Zealand, and then promote the model to the Government through the Law Commission and the Securities Commission.”