In April this year the New Zealand government indicated that
it intended to implement a takeovers code, under the Takeovers
Act 1993, based on the draft Takeovers Code proposed in 1995.
Despite opposition from the Stock Exchange, the Business Round
Table and others, the Takeovers Code is almost here. The Code
will come into force on July 1 2001, once some legislative
changes, necessary for the Securities Commission to provide
administrative services and support to the Takeovers Panel,
which will administer the Takeovers Code, have been
The Takeovers Code is designed to ensure that, on a change
of effective control, all shareholders will have the
opportunity to participate, and at the same price for the same
class of security. It is also intended to prevent strategic
pressure (by use of minimum offer periods and notice), to
spread the premium for control (by requiring equal pricing
within a class), and to enhance control contestability
(preliminary notice). There are extensive disclosure
requirements to ensure an informed market, and no defensive
tactics are permitted whereby the directors of a target company
could frustrate the offer, or prevent shareholders from
All of these things, in the view of the New Zealand
government, will improve the lot of small investors.
The Takeovers Code will only apply to takeovers of code
companies, which are:
- public issuers (listed on a Stock Exchange at the
relevant time or in the previous 12 months); or
- large companies (50 or more shareholders and NZ$20
million ($8.5 million) or more assets).
The fundamental rule of the Takeovers Code is that, without
complying with it, no one may:
- acquire more than 20% of a code company's voting rights,
either on their own account or with associates; or
- if 20% or more is already held or controlled, acquire
further voting rights.
As with existing takeovers rules in New Zealand, the
Takeovers Code will not apply to acquiring a shareholding of
less than 20%. Although the rule applies to acquisitions of
voting rights in a code company, in most cases, the only voting
rights will be shares.
The Takeovers Code allows acquisitions:
- through an offer to all shareholders on the same terms
for all shares in the target company (a full offer), or for a
lesser percentage (a partial offer), as long as the offer is
conditional on the offeror acquiring enough shares to take it
- if the acquirer already holds more than 50%, and
- makes a partial offer; or
- "creeps" no more than 5% in a 12-month period;
- if the acquirer already holds more than 90%;
- with the approval of the majority of the other target
- under an exemption from the Takeovers Panel.
There is no restriction on the price that may be offered in
a full or partial offer, except that the same price must be
offered to all shareholders.
Accordingly, the Takeovers Code will introduce, among other
things, the following notable changes to market rules and
- Offerors will not be able to creep above 20% in a target
company until they acquire more than 50%; and
- Offerors required to make a full or partial offer will
not be able to offer more to large shareholders than to
others; all shareholders must receive the same offer.
The Takeovers Code will alter the way some buyers and
sellers of interests in code companies proceed with their
James Aitken and Hamish Walker