FMA takes war on Whimp to the High Court

A series of "low ball" share offers from businessman Bernard Whimp were misleading and should be cancelled, the Financial Markets Authority (FMA) told the High Court in Wellington today.

Lawyer for the FMA, Justin Smith, said that 1157 shareholders had accepted the "low ball" offers on a number of listed company shares worth a total of $7.198 million.

Mr Smith said the offers by limited partnerships associated with Mr Whimp were above market price but were payable over 10 years and dividends were foregone, making them below market price.

The documents sent to shareholders failed to give adequate mention that the payments would be made over 10 years and that the offers were essentially an "unsecured loan to Mr Whimp", he said.

"This meant that the value of the offers would be considerably less than the headline price."

The offers were also "exploitative" because they gave the impression that shareholders only had a limited time to accept.

The court was read a number of affidavits from people who were allegedly misled by the offers, including from an elderly Tauranga man who took up the offer because he "needed the money now" without realising it would be paid over 10 years.

"I reckon I would be dead by then, I am 81 years old and need the money now," the man's statement read.

The court case followed an injunction issued by the High Court on March 24 forcing the limited partnerships associated with Mr Whimp to send corrective statements to the shareholders who had been written to, pointing out the offers were misleading and asking shareholders if they wanted to go ahead with the sale of shares.

Mr Smith told the court 149 of the shareholders chose to go ahead with the offer regardless of the outcome of the court case.

He argued that if the court found the offers were misleading, the sale of shares, excluding the shares of the 149 who chose to go ahead with the sale, should not go ahead.

It said there was no need for another letter to be sent to shareholders allowing them to opt in or opt out of the offers.

Lawyer Nicholas Till, representing Mr Whimp, did not contest that the offers were misleading but disagreed with the FMA's argument that no further letters should be sent to shareholders.

Mr Till said if the court found the offers were misleading a letter should be sent to shareholders who had not responded to the letter following March's injunction making it clear that the payments would be made over 10 years. This would remedy the argument that payments were misleading.

Mr Smith said Mr Whimp's track record, which included 14 convictions under the Companies Act and a conviction for burglary, suggested he would not pay the full amount owed to those who accepted the offer.

The offers were for shares in TrustPower, Vector, Guinness Peat Group, Contact Energy, DNZ Property and Fletcher Building.

Justice Gendall reserved his decision and said an interim order stopping shares being transferred would remain until a decision was reached.