Protection lacking inquiry told

Press, 24 May 1988, Page 24

Protection lacking inquiry told

PA Wellington Present takeover laws in New Zealand appear excessively restrictive, but offer little protection to shareholders, the Securities Commission inquiry into the Lion-L. D. Nathan merger was told yesterday. Professor John Pound of the John F. Kennedy School of Government, Harvard University, presented a research paper recommending series of law changes which he said would both increase the market efficiency of takeovers and improve protection for minority shareholders. Among the measures he advocated was the abandonment of plans to endorse the equal treatment of all shareholders in mergers or takeovers. Professor Pound said different shareholders

brought different motives and different economic benefits to companies and compensation during takeovers should reflect that. He was giving evidence at the inquiry at the invitation of merchant bank, Fay Richwhite, a 35 per cent Nathan shareholder before the merger with Lion. The merchant bank received 920 c a share, plus interest, while other Nathan shareholders got a one-for-one Lion share swap, worth about 550 c a share. Presiding at the inquiry, which is examining the adequacy of New Zealand takeover laws, are Commission members, Mr Colin Patterson (chairman), Mr Bruce Smith and Mr Peter McKenzie. In his research paper, Professor Pound said there was no reason to expect equal treatment of

all shareholders in takeover bids. Such a requirement was likely to deter some bids from taking place, therefore reducing shareholder wealth. Professor Pound said regulations should ensure that shareholders and the economy realise maximum economic benefits from takeovers. “This means that laws should be structured to encourage all takeovers that will increase net economic welfare.” Present New Zealand laws appeared to create significant deterrents to takeovers and provide few protections for shareholders. “Existing New Zealand laws appear to provide relatively few protections for shareholders who are genuinely harmed by takeover and merger transactions,” Professor Pound said.