PowerCo Takeover Debacle Instructive
Monday 4 Oct 2004
Stephen Franks - Press Releases - Commerce
There is a good lesson to be learned from the Prime PowerCo takeover spectacle, ACT New Zealand Commerce Spokesman
Stephen Franks said today.
"Failure can be more instructive than months of high-principled argument. The lesson is to trust the market more, and
lawyers and regulators less," Mr Franks said.
"It seems the sellers, or their advisors, failed to see an obvious risk to their expectations. Their request for an
exemption then caused another failure, though - to my mind - not a reprehensible one, when the regulator simply failed
to tell the vendors and Prime to trust the market.
"The upside of these failures has been reaped by the brokers, and foreign speculators, who are together clipping the
ticket of exiting Kiwi investors. Ordinarily, takeovers don't generate much brokerage, but this case has been great for
them.
"The efficient, but costly, stampede to a cash exit is the lesson for the takeovers panel: there was no need to craft
an exemption for offshore holders. If it had not been granted, and their local laws prohibited their acceptance of the
offer's junk bonds, they would have been the sellers to speculating Kiwis. Kiwis would have been clipping foreigners'
tickets, instead of the other way around.
"Markets often provide remedies for the failures of lawyers and regulators. Someone usually profits from these hurdles
they create. Why not let the market deal with problem caused by silly foreign securities laws in the first place?
"Let's also ensure that our law is not as silly as their's. Let New Zealanders accept foreign offerings freely, if they
comply with the foreign law of the offeror," Mr Franks said.
ENDS