Yarraman substantial shareholding notice needs watchdog's sniff...

Yarraman substantial shareholding notice needs watchdog's sniff

It's arguable that ASIC should require Yarraman to release the actual sale deed with Grape Expectation, writes Bryan Frith
--------------------------------------------------------------------------------

December 22, 2006

THE corporate regulator, ASIC, should take a look at the substantial shareholding notice lodged yesterday by Evans & Tate's bidder, Yarraman Winery Inc, to determine whether it complies with the substantial shareholding provisions of the Corporations Act.
Evans & Tate (ETW) incurred a $64 million loss and is currently working on a proposed balance sheet restructure which would involve a scheme of arrangement under which the company's existing unsecured convertible notes and WinES (Wine Income Exchange Securities - a form of reset convertible preference share) would be consolidated into a new preferred equity instrument, followed by an underwritten capital raising of those new securities.
Yesterday ETW obtained a trading halt and said that it had received a conditional proposal for a merger with Yarraman by way of a scheme of arrangement. ETW gave no details of the offer, in particular the offer terms, but it did say that Yarraman had lodged a substantial shareholding notice stating that it had obtained a relevant interest in 19.9 per cent of the company as a result of an agreement with Grape Expectations Enterprises Pty.

Grape Expectations owns 31percent of ETW and is associated with ETW director Franklin Tate, who last year stepped down as executive chairman.

However, Yarraman issued its own release in which it said that it had made a formal offer to merge with ETW, via a scheme, on the basis of one Yarraman share for every nine ETW shares. The offer would also extend to the WinES, while the convertible noteholders would be offered notes in Yarraman.

Yarraman would also refinance ANZ's $90 million of bank debt. Yarraman shares are currently trading at around $US2.35 ($3.05) a share, which values ETW shares at 34c - 11c, or almost 40 per cent, above ETW's present share price of 23c. The entire package would have have a value of around $US80 million ($105million).

Yarraman shares at present are traded on the Nasdaq OTC (over the counter) market, and are fairly illiquid, but if the merger goes ahead the US company plans to apply for listing on a more senior exchange, either AMEX or Nasdaq, and to also obtain quotation on the ASX.

ETW owns wineries in the Margaret River and Yarra Valley regions, while Yarraman has a winery in the Hunter Valley.

Yarraman's substantial notice stated that the company's relevant interest in 19.9 per cent of ETW was as a result of entering into a "conditional sale deed" with Grape Expectation.

The purpose of the deed was to "document the agreement for Grape to sell, and Yarraman to buy" the ETW share parcel. That's all, no price and no terms of sale.

The substantial shareholding provisions require the details of any relevant agreement through which a relevant interest is obtained and the provision of a copy of any document that contributed to the need to lodge a substantial shareholding notice.

It may be that Yarraman takes the view that the deed is only an agreement to enter into an agreement to buy the 19.9 per cent, on terms to be agreed.

It's inherently difficult to accept that the parties could agree on a sale deed without some understanding as to price, particularly as Yarraman has already announced the terms that it will offer other ETW shareholders. In any case, it's strongly arguable that Yarraman should be required to release the actual sale deed, and that ASIC should require it to do so.

There are suggestions that ANZ has a mortgage over the 19.9percent on which Yarraman has its foot and that Grape will receive the cash equivalent of the scrip terms to be offered to other ETW shareholders, with the funds going to the bank. Release of the sale deed might clarify the issue.

http://www.theaustralian.news.com.au/story...8-16941,00.html