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PowerCo Takeover Debacle Instructive

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.


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