By Mike Ross
Friday 10th November 2000
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One major criticism of the takeovers code has been the potential loss of a premium otherwise enjoyed by shareholders sitting on a strategic stake.
A takeover rule requiring offers to be held open for all comers means no premium is paid for control.
Chapman Tripp lawyer Roger Wallis points out that the rule does not kick in until the bidder already holds a 20% stake in the target company.
This means raiders can pay a premium when buying an opening stake, up to the 20% threshold.
Writing in Counsel, the Chapman Tripp client newsletter, Mr Wallis says the New Zealand takeover code does not have a "relation back" rule, unlike Australia.
In Australia, takeover bids cannot be made at a price per share less than that offered in the previous four months.
This discourages bidders from paying a premium when building up an initial stake below the Australian 20% threshold.
In New Zealand, bidders are most restricted when controlling 20-50% of a target company.
Offers to buy must be held open for all existing shareholders, with scaling if there are excess acceptances.
Once over 50%, a "creep rule" also operates, allowing bidders to increase their holding up to 5% over a 12-month period without having to offer similar prices to all other shareholders.
This is tougher than most overseas codes, according to Mr Wallis. Elsewhere, a creep rule allows small purchases both under and over the 50% threshold.
Chapman Tripp is warning capital markets that there are no smooth transition rules to govern takeovers spanning the June 30, 2001 start date for the takeovers code.
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