Bernard Whimp in legal bid to force through rejected 'low-ball' offers
Thursday, 16 November 2017
A Christchurch businessman who gained infamy for buying millions of dollars worth of shares through unsolicited low-ball offers is going to court to try to force through rejected transactions.
Bernard Whimp rose to unusual prominence back in 2011 when companies he was associated with wrote to thousands of investors across New Zealand, offering to buy their shares.
Generally offering well below market value - which was not disclosed in the offers - the tactics were not illegal at the time, but created controversy because of claims he was preying on investor naivety.
According to court submissions at the time, 1157 shareholders who collectively owned $7.2 million worth of shares accepted the offers.
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Many of the companies Whimp targeted were left furious, because not only were they required to release to Whimp a copy of the share register, they were powerless to inform their investors directly that the offers may not be in their best interest.
But a number of companies confirmed at the time that many share transfers were rejected where information was missing or unclear.
Six years after the episode, Whimp is back, attempting to force the deals though arguing the companies involved acted illegally.
Contact Energy, one of New Zealand's largest electricity generators and retailers, has confirmed it is the subject of legal action from NZ Investment Securities LP, an entity controlled by Whimp.
A conference call between lawyers for the two entities took place this week.
'It relates to unsolicited below market value offers that Mr Whimp made to a number of Contact Energy shareholders before the law was changed in 2011,' a spokesman for Contact said in a statement.
'Mr Whimp this year has sought to pursue share transfers he believes he is due through the courts, more than six years later.'
Contact has confirmed it will fight the bid.
'Our position, backed by legal advice now and at the time, is that Contact acted in a lawful manner. We are opposing his challenge to protect the best interests of shareholders by seeking to protect them from the actions that the law change was intended to prevent.'
Electricity and gas distribution company Vector has confirmed it too is the subject of legal action by Energy Securities LP, a different entity controlled by Whimp.
It is not known how many investors or how many shares are covered by the action, however at the time the companies involved said hundreds of share transfer requests were either rejected or the shareholder was written to and informed they could reconsider.
Auckland barrister Tim Herbert, who was appointed to represent Whimp in the matter against Contact Energy, said he was unable to comment, and that Whimp had advised him that he would not be commenting.
Whimp's offer would not be able to be made in the same way now.
On the day it came into existence in May 2011, the Financial Markets Authority (FMA) made changes to regulations around unsolicited offers, requiring investors to be given information such as how much they would be paid, when they would be paid and who was making the offer.
The FMA later successfully blocked a number of offers on the basis that they were misleading.
While the round of offers were made notionally at above market price, shareholders would have received their money over 10 years, during which time Whimp would get any dividend payments.