Varied views on disclosure rules

During the past four weeks, Alinta Ltd, Multiplex Group and Sydney-based Origin Energy Ltd have highlighted the challenge facing company directors trying to determine the best approach to market disclosure.

Continuous disclosure is considered one of the most difficult issues facing company directors and these examples illustrate the complexities involved.

They also indicate that it is impossible to please all the people all of the time.

In Alinta’s case, former chairman John Poynton and former managing director Bob Browning told their board colleagues last November they were working on a possible management buy-out.

Many commentators have suggested the MBO should have been disclosed immediately to ensure the market was fully informed, but the proposal was considered so ill-defined the board did not think it was appropriate to make a public announcement.

Alinta went public on the MBO proposal on January 9, after its long-time adviser Macquarie Bank became involved as an adviser to the MBO group.

In contrast, Multiplex chose to make a public announcement about a possible acquisition despite the very preliminary status of its discussions.

It announced last Friday that an un-named third party wanted to commence discussions on a confidential basis, which may lead to the acquisition of the company or some of its assets.

“Multiplex is not aware of details of any possible proposal and wishes to emphasise that there is no guarantee that any proposal will be forthcoming,” the company said.

A key aspect of the Multiplex announcement was that the third party had already held discussions with Roberts Family Nominees, the group’s largest shareholder.

“RFN has advised that no firm proposal was put to RFN in those discussions and it is not clear whether any proposal will be put,” Multiplex said.

Does this announcement keep the market fully informed or does it fuel speculative trading in Multiplex shares?

Origin Energy holds firmly to the view that “less is more” when it comes to continuous disclosure.

The Australian Stock Exchange wrote to Origin on December 19 asking if it knew of any reason for a spike in the company’s share price.

Origin said it was not aware of any reason but disclosed three weeks later, following press reports, that it had been approached by AGL Energy about a possible merger.

Origin maintained that the merger proposal was not material information, for several reasons.

It was “indicative and preliminary only and involves matters which are of substantial uncertainty”.

Origin added that it has not entered into any discussions regarding the merger proposal and does not plan to do so until it has completed an evaluation of the proposal.

“There is no certainty the proposal may lead to any transaction,” it said.

In addition, Origin has argued that the proposal should not be disclosed because it involved confidential information and was therefore covered by an exception to the disclosure rules.

Perth mining company Consolidated Minerals Ltd took a contrary approach last October, when it was queried by the ASX about a spike in its share price.

Consolidated advised that it had “received an approach from a third party to enter into discussions on a confidential basis regarding a possible transaction, however no discussions of substance have taken place”.

“As such, the approach is preliminary, incomplete, conditional and confidential.”

Despite all of this, Consolidated informed the market about the possibility, which to date has come to nothing.

In its quarterly report out this week, Consolidated said “discussions are continuing, although no formal proposal has yet been agreed and the discussions remain incomplete, conditional and confidential”.