NZ takeovers panel issues its draft ruling on NZME battle

NZME is the largest listed media company across the Tasman with radio, print and online real estate assets.

The plans of a wealthy private equity tycoon to overthrow the board of the Australian and New Zealand-listed NZME may have hit a stumbling block following a draft takeovers panel ruling.

DataRoom understands that a ruling has been released by the New Zealand Takeovers Panel to certain parties.

It warns the panel could find that James Grenon, who owns about 10 per cent of NZME, may have been acting in concert with at least one other investor from March 4.

If the panel finds that to be the case, Mr Grenon would need to offload the 1.2 million shares he traded after March 4, equating to 0.64 per cent of the company.

He owns about 19 million in total.

The understanding is that while the draft ruling warns that could be a finding from the investigation, it did not yet have evidence to conclude such an outcome.

However, DataRoom understands that Mr Grenon would be able to buy back the shares after a specific period of time, and there is an expectation by some this would likely be before the June annual general meeting.

The understanding is that the wealthy Canadian born but New Zealand-based investor, who has made his fortune from turning around distressed companies, has been asked whether he would accept the outcome or go to a hearing should the ruling surface, and he plans to challenge.

Mr Grenon has previously taken on legal cases against the Canadian Tax Foundation relating to his investments, so for some it would be no surprise that he would be up for challenging the decision.

Australian institutional investor Spheria Asset Management, which holds close to 19 per cent in NZME, and Troy Bowker’s Caniwi Capital, with 3.5 per cent, have publicly backed Mr Grenon’s move to sack directors and bring fresh talent into the boardroom.

Mr Grenon has nominated himself as chairman, a move which has raised concerns among members of New Zealand’s media industry who fear he will assert editorial control over the country’s largest newspaper, The New Zealand Herald.

But activist investors have confidence they have the numbers to win when shareholders vote at the AGM.

The panel has been looking into whether activist investors are working together to overthrow the board of the $200m loss-making Australian and New Zealand-listed media company.

If that is found to be the case, it can be that it requires a buyout proposal if shareholders collectively own more than 19.9 per cent of the stock.

An investor cannot go beyond this point without making a bid unless they’re increasing their interest through creep provisions.

Until the New Zealand Takeovers Panel makes its ruling, shareholders are banned from trading their stock and the investigation was set to wind up by the end of the week.

Legal experts say that typically, shareholders communicating their intended trading actions does not involve acting in concert.

But if they pre-agree to act in a certain way, the panel would consider that to be a move of acting together and may warrant the need for a takeover bid or a share selldown.

The battle over NZME escalated this week when the board responded to an attack on its performance and claims of poor cost control with a 15-page slide pack.

It outlined why the company was outperforming the media industry despite its $NZ16m loss last year and stagnant share price performance, and defended its efforts to lift the quality of the Herald’s content.

It also outlined concerns about poor corporate governance and the media company’s financial future with a James Grenon-led board.

NZME has delayed its AGM from April 29 to June 3 and DataRoom understands it has now hired a third-party public relations firm as it remains under pressure.

NZME also owns the One Roof online real estate business and the country’s largest radio network, including the No.1 talkback station, NewstalkZB.