I read again the TOP ruling on PGH; a number of things struck...

I read again the TOP ruling on PGH; a number of things struck me.

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Likely to

“The Panel was not satisfied that the circumstances had or werelikely to have an effect on the control, or potential control of Pact or the acquisition, or proposed acquisition, by a person of a substantial interest in Pact.”

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All the complainants believe that delisting was part of a multi-stage plan of softening up or coercing minority shareholders with a purpose eventually of RG making a further offer to acquire 100% ownership. The words “are likely to have” are crucial. The Panel has ignored this aspect, and Pact and Kin limited the debate to the current and past status- they made no comments about the future on the topic of ‘likely to have”. I expect that Kin and Pact were very careful to ensure that they could not be accused of misleading the Panel if Kin eventually mounts another takeover, as we expect it will. Of course this is only a hypothesis, but it’s a very strong one given everything that RG has said before. It is unfortunate that the Panel didn’t challenge Kin to deny that it had any thought of making another offer in say the next 12 months. The fundamental question of Kin’s intentions behind the delisting remains untested.

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Pact submissions

It’s notable that Pact (not only Kin) made submissions in paras 52,61,65,71 and 82. I hadn’t expected this. It’s obvious that Kin would make submissions, as would the minority applicants, but in a sense Pact is just the subject matter: it didn’t need to have, or express, an opinion at all. Yet Pact chose to make all these points even though the Panel’s decision wouldn’t affect Pact much either way (except on the spurious grounds of extra cost and compliance if it stayed listed): Pact just couldn’t help itself from supporting Kin’s position in every way. So much for independent directors.

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70. “Mr Raper submitted that a Panel application was one ofthe Remedies listed in the announcement regarding the Proposed Delisting and the Notice of Meeting and that therefore it could not be argued that the Proposed Delisting was a matter outside of the Panel’s jurisdiction. Manipur made submissions of a similar nature. [I AGREE]

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71. “Pact submitted that the [2] Remedies [i.e. stated by Pact itself as the Courts or TOP] had been included in the Notice of Meeting [ONLY] to address a specific disclosure requirement from the ASX in Guidance Note 33”. [This means we only included this comment in the NOM about remedies because we were forced to by ASX, but we didn’t want to and we didn’t really mean it].

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72. “Kin Group submitted that the Panel “should not allow itself to in effect be a small claims tribunal for a shareholder to challenge or second guess legitimate decisions of directors which the shareholder does not like. Even more so when it involves matters which are the domain of the ASX and the Courts.” [Note that they say ASX even though ASX is NOT one of the 2 bodies named for remedies, which are repeated in Para13d as being TOP and the Courts.] Thus even though the listing rules obliged Pact to say that TOP and the Courts are the places to go for remedies. Kin says that TOP should not be of them!]

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67. “The ASX listing rules are designed to ensure market integrity, fairness and investor confidence.” HAHA! They may be designed to be thus, but they are useless if the ASX doesn’t enforce them with integrity and fairness. Since ASX refuses to publish what complaints it has received, TOP probably did not know how many shareholders had complained to ASX about its inaction (although it could have seen that 99.5% of minority holders voted against delisting).

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Conclusions

By looking only at current circumstances, and backwards, the Panel has decided- at least here- that it need not consider whether actions that are part of a chain of plans are likely to lead to changed control of shares in a manner that is- overall- unacceptable. Their reading may be technically correct but it is narrow. At least TOP has left the door open for a future application, if Kin seeks to acquire more shares, beyond the 3% creep, which I am convinced it will do. Round 1 is a win for Kin’s lawyers; Round 2 may not be. It is disturbing that Pact itself took such a one-sided role here, when it ought to have been neutral.