Monday 22nd of December 2003

While the Takeover Panel’s out to lunch, no free lunch for Tri-City investors Panel decided Dominion’s mistake won’t cost it $800,000 Just in case the lay reader of Takeovers Panels decisions thought the panel was good with numbers, in its ruling on a mistake made by Dominion Retail Property Fund Ltd in its offer to Tri-City Properties Ltd securityholders, the panel managed 56 paragraphs generally letting Dominion off the hook. Then it introduced a final paragraph, numbered 38. With a numbering system like that, it’s no surprise the panel found Dominion shouldn’t have to pay all the Tri-City securityholders a year’s interest instead of a quarter’s interest as “an additional amount” – a mistake which would have added more than $800,000 to the takeover payout. Not that the panel says this in its decision, released today. Instead, the panel decided securityholders who have already accepted the offer should be allowed to revoke their acceptance. The effect of that is that they will give up the chance of receiving $475 (a year’s interest) and accept $118.75 (a quarter’s interest to 31 December). Dominion said, and the panel accepted, it would extend the offer to 30 January so it can clarify the amount offered. The panel determined that “the incorrect reference to an ‘additional cash amount’ of $475 resulted in the statement of the consideration being confusing and misleading.” Nonsense, really. The Takeovers Panel didn’t venture into the meaning of the word “additional,” just elected to let Dominion pay less than it mistakenly offered. The offer used the term “additional cash amount” twice. In the initial instance it was said to equal interest accrued but unpaid to 31 December or the acceptance date. Next time it was given a precise number: $475. Interest accrued but unpaid is hardly additional. It’s interest that is rightfully due. Securityholders might therefore have felt they would get an extra quarter’s interest – or, as they were to read in the next clause, $475. Either way, something additional. Dominion will end up paying what it intended, and securityholders can hardly feel aggrieved at that. And the Takeovers Panel might introduce a paragraph 57 to its decision, called “Plain English: The company made a mistake. It wanted to pay $118.75, not $475, in interest. There is nothing additional. If you rushed to accept the higher figure, bad luck. We’ve decided the company only has to pay $118.75.” Dominion Funds faces Takeovers Panel inquiry Mistake would cost Dominion $819,375 Dominion Funds Ltd (Doug Somers-Edgar, Paul Duffy & Alastair Hasell) has run into hot water with its latest takeover bid, offering investors in the target company more than $800,000 above the intended figure then trying to cut the bid. Dominion Retail Property Fund Ltd, incorporated on 12 November, offered investors in Tri-City Properties Ltd (directors Michael Millar & Virginia Laughton) 4 times the amount of accrued interest due, then tried to cut the offer back 3 days later. The Takeovers Panel will meet on Wednesday 17 December in Wellington to determine if Dominion has complied with the takeovers code. Dominion made its offer for all the shares & bonds in Tri-City on 2 December, offering $475/bond more cash for acceptances received before 31 December, to compensate for interest accrued but unpaid. Then Dominion realised $475 was a full year’s interest, and only the December quarter interest would have accrued, so it changed the offer to $118.75 more cash on 5 December. The $356.25/bond difference amounts to $819,375 extra on the whole bid. Mr Millar is a former chief executive of the Palmerston North-based Farmers Mutual Group, which syndicated Tri-City Properties in 1999. It had 2.3 million $1 shares & 2300 mortgage bonds issued at $4000 each. Tri-City was set up to buy 3 Big Fresh supermarkets at Mt Wellington in Auckland, Cameron Rd in Tauranga and Carlyle St in Napier for a total $25 million. Its assets are managed by Investment Services Ltd, Nelson (Mr Millar & Peter Rickards), which runs a $60 million portfolio, according to its website.