Weldon pushed for due diligence on Clear to be finished quickly, former employee says

Monday 13th June 2016

Former chief executive Mark Weldon knew NZX's due diligence team wasn't convinced Clear would be a success but pushed ahead with the acquisition anyway, an ex-NZX staff member has told Wellington's High Court.

The stock market operator is suing Dominic Pym, Grant Thomas, and their companies Ralec Commodities and Ralec Interactive for between A$20.7 million and A$37.6 million, and say they provided “wildly inaccurate” forecasts prior to NZX buying the Australian grain trading platform in 2009. Ralec's counterclaim of A$14 million, for both earnouts, plus bonuses says NZX and former chief Weldon under-funded the business which meant it couldn't meet the earn-out targets.

Rachael Greer, who was a Queensland-based business acquisitions consultant at NZX, has been called by Ralec as a witness. She is appearing by video-link from Christchurch.

Greer, who has been referred to as Rachael Cross by other witnesses up to this point, said in her brief of evidence that there had been time pressure from Weldon during the due diligence process, and she thought that was influenced by Weldon's desire to present the acquisition to the NZX board at upcoming scheduled board meetings.

Greer said Weldon had emailed her in July 2009 saying he was "100 percent there" on purchasing Clear before he had met anyone from Clear, and a factor in this was his desire to get Fonterra Cooperative Group on board with dairy trading markets.

"The timeframes for the acquisition were set by Weldon and I regarded that the Clear acquisition was already determined to be achieved when Weldon had told me he was 100 percent there," Greer said. "I knew there were risks with Clear being a startup and particularly if NZX did not fund it going forward."

Greer said that in September 2009, she had responded to an email from Weldon asking for her 'unspoken assumptions' about the Clear acquisition with a list of issues, including the idea that as NZX was a large business, Clear "would have the impression NZX has money it would like to give out like lollies."

"The problem which I knew from prior experience is when NZX purchased a business it would say it would spend money, but when it came to it the request would be refused as unbudgeted," Greer said. "Nor was it my experience NZX would spend money replacing departed employees from that business. There was considerable friction across NZX businesses about so-called cost-cutting."

Greer recalled a dinner held in late October 2009 after signing for the acquisition of the Clear businesses where Weldon asked the members of the due diligence team present about their perceptions of the likeliness of Clear's success.

"The due diligence team was very reserved in terms of hitting targets - I recall Weldon was annoyed they didn't necessarily think it was going to be a success," Greer said.

Greer is being cross-examined by Alan Galbraith QC, the lawyer representing Mark Weldon, which continues this afternoon.

BusinessDesk.co.nz

Comments from our readers

No comments yet