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Ralec played up Graincorp relationship, concealed internal grumblings: Weldon

Monday 16th May 2016

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Former NZX chief Mark Weldon says Ralec played up the relationship between the Clear Grain Exchange and Graincorp and concealed internal opposition within Australia's largest bulk grain handler to using the Clear platform.

Weldon appeared for the first time in week three of the lawsuit between NZX and Ralec, the former owners of the grain exchange. Ralec's lawyer has painted Weldon as having been fixated on building Clear into a global commodities powerhouse, ignoring Ralec's advice on the outlook for the business and keeping his own board in the dark.

Weldon told the court today that Ralec's former owners, Grant Thomas and Dominic Pym, had given NZX an annual forecast of 1.5 million tonnes of grain to be traded using the platform for 2010.

"It was very clear in meetings they expected Clear to achieve at least 1.5 million tonnes," Weldon said. "They referred to this several times including at dinner, and separately, Thomas said it was a conservative estimate."

Weldon said Thomas and Pym had characterised the relationship between Clear and Graincorp as positive and NZX wouldn't have gone ahead with the acquisition if that hadn't been the case. A due diligence document from Clear had said Graincorp was targeting volumes of 1 million tonnes to trade on the Clear Grain Exchange, he said.

"If there was one fact which, if we had not believed it to be true we would not have bought Clear, it was whether Graincorp would trade on the market," Weldon said. "All the projections and modelling assumed Graincorp themselves would be trading via Clear, and it was confidence in this, as stated specifically in the due diligence document, that led us to affirm our baseline tonnes traded target. Graincorp trading on the market was absolutely fundamental."

Weldon, who recently resigned his job as chief executive of MediaWorks, said NZX was not told about internal opposition within Graincorp towards trading using the Clear platform. Instead, communications from Clear both in written documents and in the language used in meetings was about the strength of the relationship and the support Graincorp had for Clear.

Ralec is battling stock market operator NZX in what's expected to be a nine-week trial over NZX's purchase of the Australian Clear Grain Exchange in 2009. NZX is suing for between A$20.7 million and A$37.6 million, and Ralec has countered with a suit totalling A$14 million plus bonuses.

NZX claims Thomas and Pym, and their companies Ralec Commodities and Ralec Interactive, misled NZX when it bought the commodities trading platform with “wildly inaccurate” forecasts. Ralec subsequently filed a counterclaim against NZX, later adding the market operator's former chief executive Weldon to the list of defendants. It claims NZX, which bought the platform for A$7 million with the potential for further earnouts, failed to fund the exchange sufficiently. The case pre-dates much of NZX's existing management, having first hit the courts in 2011.

Weldon said he was told by Clear that there wouldn't be any increase in costs to achieve the forecast increase in trading volumes, and this was repeatedly explained at meetings. 

Weldon also denied Thomas had told him, at a meeting on July 17, 2009, that NZX would need to invest A$5 million in marketing and development for Clear. And he said Thomas had emphasised Clear's positive relationships within the grain industry.

BusinessDesk.co.nz

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