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Australian low-ball bidder promises FMA to give investors "fair warning"

Thursday 20th October 2011

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Australian businessman John Armour, whose Stock & Share Trading made a raft of low-ball bids for stricken finance company debentures last year, has promised to give investors fair warning in any future bids.

Last week, Stock & Share Trading made an undertaking to the Financial Markets Authority to include a warning at the beginning of any unsolicited offer, according to a fax published on the regulator’s website. Armour made the undertaking, saying he understood the FMA was “considering whether or not to make an order” against his firm.

The warning will spell out the price per share and compare it to the closing price at the time of the offer if a security is listed. In the case of unlisted securities, the warning will direct investors to seek advice from an authorised financial advisor or to a firm’s receiver’s report.

The Australian company made a series of bids for debenture stock in failed finance companies including Strategic Finance and St Laurence last year at a significant discount to the expected recovery by receivers. St Laurence’s trustee Perpetual Trust panned the offer, and the spate of low-ball bids attracted the ire of FMA-predecessor the Securities Commission, which warned investors about the offers.

Low ball offers by Christchurch businessman Bernard Whimp prompted a crack-down on the predatory practices, with the FMA winning court action to block a bid to buy shares that appeared to be at a premium, but would be repaid over a 10-year period.

In his judgement, Judge Warwick Gendall relied on an Australian case involving David Tweed who fell afoul of the Corporations Act with an offer to buy shares above market rates over a 15-year period.

When Armour was still practising law, Tweed was one of his clients, though Armour told Fairfax Media last year that Tweed has no connection to Stock & Share Trading.

Whimp has since retired from making low-ball offers, and outgoing Commerce Minister Simon Power has introduced legislation and regulation to make it tougher to make heavily discounted unsolicited offers.

In 2004, Armour made a similar discounted offer to buy shares in Australia’s Mildura Fruit Cooperative which was ultimately fended off by shareholders.

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