Court injuncts Bernard Whimp's low share offers

The High Court has granted interim injunctions to stop shares being transferred to limited partnerships associated with Bernard Whimp.

The injunction followed an application by the Securities Commission, which was concerned that the offers were misleading or deceptive in that they initially appeared to be made at above the market value of the shares, but under the fine print the full payment would not be made for 10 years. The net present value of the offer was therefore much less than the nominal offer price.

The injunctions relate to the following offers, all dated on or around 15 - 18 March 2011:

• Carrington Securities LP - offer to buy shares in TrustPower Limited
• NZ Investment Securities LP - offer to buy shares in Vector Limited
• Chase Securities LP - offer to buy shares in Guinness Peat Group plc
• Carlyle Securities LP - offer to buy shares in Contact Energy Limited
• Energy Securities LP - offer to buy shares in DNZ Property Fund Limited
• Fairfield Securities LP - offer to buy shares in Fletcher Building Limited

The court ruled that each of the companies and Mr Whimp are prohibited from acting on any acceptances they have received to those offers until further order of the Court.

A hearing will take place on 9 May 2011 when the Court will determine whether or not the offer was misleading.

The Securities Commission said if the Court decides the offer was misleading the Commission will seek to have the offers cancelled and any shares that have already been transferred returned. If the Court determines that the offer was not misleading the shares will be able to be transferred in accordance with the terms of the offer.

The interim injunctions also prohibit any substantially similar offers being made.

The convener of the Law Society's commercial and business law committee, John Horner, said he was heartened that Cabinet had decided to include rules to address the issues raised by low-ball offers in the current comprehensive review of securities law.

"Healthy capital markets require effective regulation, but not over-regulation - striking the balance is the trick.

"Mr Horner said Commerce Minister Simon Power's announcement that rules would be introduced to protect investors came only days after the latest low-ball offer.

"The tactic of paying above market price for shares, but using fine print to spread the payment over 10 years, was clearly designed to prey on less sophisticated investors. We commend Mr Power and his Cabinet colleagues for their decision to introduce the protections, and for his announcement that these will include protection around the use of information obtained from a public register and content requirements, along with a cooling-off period.

"Until the new rules were in place, Mr Horner said shareholders who received similar offers in the mail should seek advice. Often the best advice was to file the offer in the rubbish bin. Anyone who wasn't sure should definitely consult a lawyer or authorised financial adviser.

The commission earlier ordered Mr Whimp to correct the offers.