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NZSE regrets Lion waiver situation

By Phil Boeyen, ShareChat Business News Editor

Monday 12th February 2001

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The NZSE's Market Surveillance Panel is defending its decision to allow brewer Lion Nathan (NZSE: LNN) to make a stand in the market for Montana (NZSE: MON) shares at an increased price without waiting the usual 48 hours.

The decision to waive the usual conditions is being blamed for smaller shareholders being left out in the cold after Lion announced it would pay $4.65 for Montana shares to grab a majority shareholding.

However the Panel says while it regrets the situation that has arisen from granting the waiver, it is satisfied of the grounds for acting as it did on the information, which it had available.

The panel says LNN requested the waiver on the grounds that the market was fully informed about Montana, that the independent directors had already stated that a lower price than LNN would pay was fair, and that there was therefore no reason to prevent LNN from trading in the market until 12 February when Allied could do so from 9 February.

LNN claimed it would be disadvantaged because Allied Domecq alone was able to buy in the market on 9 February and able to raise its bid price on only two hours notice.

"Because the terms of the request focussed solely on competing in on market bids, the Panel accepted that LNN would be disadvantaged in that respect," the NZSE said in a statement.

"The Panel treated LNN's waiver request as relating to trading on the market from the opening on 9 February, and its intention in granting the waiver was to put the two bidders on an equal footing when the market opened on that day."

However the Panel says there was nothing in the terms of the request, or in the surrounding circumstances that suggested that any waiver would be used to pursue off market transactions before the market opened on 9 February.

"The effect of the waiver was to shorten the time in which Allied could consider its position in respect of LNN's raised offer from 40 hours to 16 hours, ie from 8.30am Thursday when LNN announced its revised bid until midnight that day instead of midnight Friday 9 February."

Although Allied and Montana asked the NZSE to revoke the waiver, the Panel says it sought legal advice and found that waivers can be revoked retrospectively only if the Panel acted on incorrect information.

"The Panel has reviewed the information provided to it and concluded that, whilst the terms of the LNN request caused the Panel to focus solely on achieving a position of competitive neutrality for on market bidding, it did not contain any incorrect information."

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