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Arthur Barnett Limited – Insider Trading Inquiry

Arthur Barnett Limited – Insider Trading Inquiry

The Securities Commission has completed an inquiry into share trading in Arthur Barnett Limited.

On 6 August 2002 Arthur Barnett announced that a takeover offer for all the company’s shares was likely in the next ten days at a price significantly higher than the current market price. Shareholders were told not to sell pending further advice.

Between 15 and 31 July, 604 Arthur Barnett shares were traded on the New Zealand Stock Exchange at 72 cents. On 1 August 15,000 traded at 78 cents. The following day 15,273 traded at an average price of 82 cents. Accordingly, between 15 July and 2 August, the Arthur Barnett share price increased by some 14%.

Subsequently Arthur Barnett Limited was taken over by Belwalsh Holdings Limited at a price of $1.40 per share.

The Commission’s inquiry considered whether anyone with inside information about the proposed takeover offer may have bought shares, either directly or indirectly, or may have tipped another person about the proposed takeover offer, before the 6 August announcement.

The inquiry found that all the Arthur Barnett shares traded between 15 July and the 6 August announcement (30,877 shares) were bought by one person. On the evidence, these shares were bought as part of an original order (placed with a broker at the beginning of the year) to acquire 100,000 Arthur Barnett shares.

The Commission questioned the person about the circumstances of the trading, his knowledge of the company and reasons for buying, as well as any links that he may have had with the parties involved in the takeover. The person’s broker was asked about the circumstances in which the purchase order was placed.

On the evidence the Commission could not establish that the person who bought the Arthur Barnett shares had inside information about the possible takeover.

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