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Report on aspects of the initial public offering of Vertex Group Holdings Limited in 2002

THE COMMISSION'S INQUIRY

15. After a preliminary review of the referral, on 11 September 2002, the Commission announced an inquiry into aspects of Vertex's public share offer and offer document. This inquiry has been carried out under section 10(c) of the Securities Act 1978, which provides that it is a function of the Commission to "keep under review practices relating to securities, and to comment thereon to any appropriate body".



16. The quorum considering this matter comprised Jane Diplock (Chairman of the Commission), Colin Beyer, Falcon Clouston, and Elizabeth Hickey (Members of the Commission).



17. Terms of reference for this inquiry were settled on 11 September 2002. The Terms of Reference are set out in Appendix A. This report does not cover issues relating to trading in the shares of Vertex.



18. The Commission's inquiry focused on the matters set out in paragraph 1 of this report. The inquiry did not address the historical financial information contained in the offer document. The Commission's inquiry also did not consider any questions in relation to Vertex's public announcement on 4 September 2002. That announcement was being considered contemporaneously by the Market Surveillance Panel in its investigation into Vertex's compliance with the Listing Rules of the NZSE.



19. The Commission recognises that it is considering this matter with the benefit of hindsight. Nevertheless, the Commission has focused its attention on the circumstances and risks that should have been known to the directors at the time of the IPO, and has reached its conclusions on that basis.



20. The Commission considers that the matters under review raise issues of securities law and practice relevant to participants in New Zealand markets, and upon which it is appropriate for the Commission to comment. The Commission has decided to comment by way of this report.

21. The Commission determined the procedures for this review. The Commission heard evidence on matters relating to the IPO from the following:
    
    
    • Jon Hartley, Chairman of Vertex;
    • Doug McKay, Director of Vertex;
    • Barry Watts, Director of Vertex;
    • Ronald Starnes, General Manager of the Technical Injection business unit of Vertex;
    • Dean Renner, Manager, Sales and Marketing, Technical Injection business unit of Vertex;
    • Miles Patterson, Business Manager, Securefresh business unit of Vertex;
    • George Clark, Chief Financial Officer of Vertex;
    • Jim Bini, Chief Operating Officer of Vertex;
    • Paddy Boyle, Managing Director of Vertex;
    • Simon Pillar, Director and former Chairman of Vertex, Managing Director of Pacific Equity Partners Pty Limited;
    • Leo Foliaki, Partner, PwC;
    • Doug Brown, Manager, PwC;
    • Peter Berney, former Director of Prima Technologies Limited (Prima);
    • Cameron Baudinet, Associate, UBS Warburg;
    • Paul Harris, Head of Investment Banking, JBWere;
    • David Goatley, Investment Banker, JBWere; and
    • Simon Botherway, Brook Asset Management.



22. The Commission received affidavit evidence from Lloyd Edwards, a Partner at PwC.



23. In addition the Commission received documents and information from:
    
    
    • Vertex;
    • Buddle Findlay, Barristers and Solicitors;
    • PricewaterhouseCoopers, Chartered Accountants;
    • Pacific Equity Partners;
    • Bain Capital;
    • JBWere, Lead Manager and Underwriter of the IPO; and
    • UBS Warburg, Co-Lead Manager of the IPO.



24. The Commission during its inquiry received over 3,500 individual documents. The Commission committed significant time and resources to a careful analysis of those documents.



25. Confidentiality orders were in place throughout the inquiry. Hearings were held over four days. Vertex was represented by counsel throughout the hearing of evidence. PwC was represented by counsel during presentation of its evidence. Counsel were advised that they could put questions to witnesses through the Chairman of the Commission. Documentary evidence considered by the Commission was provided to Vertex. Oral evidence was recorded, and transcripts provided to Vertex.



26. After receiving evidence the Commission prepared a confidential consultative report and invited comment from affected parties These parties were given the opportunity to respond with submissions and to provide further evidence to the Commission. An appropriate consultation period was afforded to those parties. Once submissions had been received, it was necessary in the interests of natural justice to then seek further submissions from some witnesses.



27. The Commission has carefully considered all evidence and submissions before publishing this report.