Liberty International under fire

Cape Town - The Shareholders Association of South Africa on Wednesday issued hard-hitting criticism of the mechanics of the Liberty International plc capital raising exercise.

The dual-listed property company, founded by SA assurance tycoon Donald Gordon in the early eighties, announced recently that it would raise £620m (R8.1bn) by placing 200m new shares at an issue price of 310p/share.

Liberty International has its primary listing on the London Stock Exchange, and for historic reasons enjoy a secondary listing on the JSE that is subject to South African exchange control regulations and restrictions. It is believed that South African investors hold as much as 35% of Liberty International.

For statutory reasons, shareholders in certain jurisdictions, the United States for example, has been precluded from participating in Liberty International's capital raising exercise.

SA Shareholders Association chairperson David Sylvester argued that perhaps local investors should perhaps also have been excluded from participating in the fund raising exercise.

"We say this because of exchange control regulations, the fact that Liberty International has no investments or business activities in South Africa and the almost impossible hurdles shareholders have to leap over in order to follow their non renounceable entitlement."

He pointed out that HSBC - the international bank with a primary listing on the London Stock Exchange and a number of secondary listings - recently undertook a capital raising exercise that precluded certain jurisdictions from participation. These shareholders had their rights aggregated and sold on their behalf and were paid out the proceeds.

"For Liberty International shareholders this would not represent the fairest treatment, but under these unusual circumstances it would probably have been the most practical."

Sylvester said that in general there was an expectation that all shareholders would be treated equally. "But for multinational companies this is often problematic as frequently different regulations apply in the different geographies and there are also competing regulatory authorities. Liberty International is a case in point."

Sylvester said the issues that so greatly prejudice South African shareholders were relatively simple. "Firstly, the time constraints are so tight that very few individual shareholders are in a position comply with the mechanics required to accept the offer." He pointed out that the company circulars were still being received by shareholders that required time to consider the contents.

"Secondly it takes time to open custodian accounts with a foreign broker; and there is certainly not nearly enough time for shareholders to meet the formalities of obtaining tax clearances for use of foreign exchange allowances."

He said the closing date of May 19 2009 added insult to injury.

Sylvester argued that ultimately the Liberty International rights issue was confusing shareholders and alienating them. "Under the circumstances of the exceptionally tight time considerations and the regulatory framework, it seems that the logical thing to have done would have been to exclude South African shareholders from participation. This may seem unfair, but it may well be the best way forward simply to pay shareholders out the proceeds of the sale of the rights."

Sylvester asked whether the corporate advisors and regulatory authorities had really done shareholders justice in this issue.

"If I were a South African shareholder in Liberty International I would be voting against the capital raising proposals - fully aware of the implications of the company's capital raising exercise being jettisoned."

- Fin24.com