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Opus relents on JV capital plan, vows to consult minorities over future spending

Wednesday 12th June 2013

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Opus International Consultants, the NZX-listed engineering consultancy, has relented on plans to seek approval to make capital contributions to a Middle East joint venture in perpetuity.

Chairman Kerry McDonald said Opus will seek approval from minority shareholders for any contributions to a JV with Opus International (M) Bhd (OIMB) that exceed 20 percent of its market capitalisation. The change of heart came after discussion at the company's annual meeting yesterday, he said.

OIMB is part of the Malaysian group that also owns 60 percent of Opus International Consultants and is ultimately controlled by Khazanah Nasional Bhd.

When the JV was first proposed, Opus had wanted open-ended authority to contribute to the joint venture without having to return to shareholders each time.

"To be clear, the provision or receipt of services by Opus to, though or by the joint venture would not be included within the scope of future shareholder approval," Opus said.

The proposal for the JV itself, a material transaction with a related party under NZX rules, was approved by 97 percent of eligible votes cast at yesterday's meeting.

The announcement was welcomed by the NZ Shareholders Association, which in April had criticised the original plan as potentially locking minorities into an arrangement "that effectively disenfranchised them forever." The association isn't opposed to the JV in principle, with the Middle East seen as a logical market for expansion.

"We are encouraged that the Opus board has been willing to engage with the NZSA and ultimately make a voluntary undertaking to seek shareholder approval for investments in the JV greater than 20 percent of market capitalisation," said NZSA chairman John Hawkins. "This is a good outcome for everyone."

The NZSA has also referred the issue to the stock exchange because it wants to see a change to listing rules and says the NZX gave an undertaking to review the rule.

"The current situation where decisions can remain in perpetuity in some circumstances, based on a single vote is completely unsatisfactory," Hawkins said.

He also voiced concern about an independent report commissioned by Opus for minority shareholders, which didn't adequately explain the perpetual nature of the original plan and said the situation raised a broader issue about such reports and whether they should be brought into the regulatory framework.

The JV will get seed funding of $150,000 from each partner, and will target consultancy and project management work in Saudi Arabia, Qatar, the United Arab Emirates, Bahrain, Kuwait and any other countries the Opus companies agree on. It will have two directors from Opus and three, including the chairman, from OIMB.

Opus' shares were unchanged at $1.71 and have declined 22 percent in the past year. The stock is rated a 'buy' based on the consensus of four analysts polled by Reuters, with a median price target of $2.20.

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