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

Of these holdings, only shares belonging to the Bain Funds and the PEP Funds were offered for sale in the IPO. A further 490,694 new shares were issued for subscription and included in the share offer. The shares offered for sale by the PEP Funds included 1,726,536 shares acquired by PEP Fund I from Vertex management. As vendors, the PEP and Bain Funds are issuers, sharing responsibility with Vertex and its directors under the Securities Act 1978.

PEP Pty Limited, the manager of the PEP Funds, was the promoter of the IPO. The Commission was advised by lawyers for the Bain Funds that PEP Pty Limited has a co-investment arrangement with Bain Capital Inc., the manager of the Bain Funds, under which PEP Pty Limited seeks out suitable investments in the Australasian region in which it invites Bain Capital Inc. to invest. Lawyers for PEP advised the Commission that the PEP Funds and the Bain Funds often co-invest alongside each other.

The vendors had always considered an IPO as a possible option for exiting their investment. Formal discussions regarding a possible IPO took place at a meeting of the Vertex Board in February 2002.

Five investment banks were approached in February 2002. Of those, four were invited to submit proposals for the IPO. All the investment banks recommended that the IPO should take place in mid-2002.

The Commission notes that the IPO took place at a time when the business was undergoing significant structural change and, particularly in the growth business units of the business, settled patterns were yet to emerge. However, the Commission recognises that the timing was ultimately a business decision for the directors, requiring a balancing of all relevant considerations prevailing at the time.

In March 2002, the Vertex Board decided to proceed with an IPO. JBWere was appointed as lead manager and underwriter, and UBS Warburg as co-lead manager.

In March 2002, PwC was appointed as the independent financial adviser to Vertex for the IPO. PwC had been involved in the due diligence when Vertex was purchased from Carter Holt Harvey. PwC was also Vertex's auditor. For the purpose of the IPO, PwC was engaged in a dual capacity:

to carry out financial, information technology and tax due diligence and prepare a due diligence report on these matters; and

to perform its statutory role as auditor in respect of the financial information to appear in the offer document (including the prospective financial information).

Also in March 2002, Vertex appointed Buddle Findlay as solicitors for the offer, and to carry out legal due diligence. Buddle Findlay had been Vertex's legal adviser since the business had been acquired from Carter Holt Harvey.

In April 2002, JBWere prepared a timetable for the IPO. This contemplated an offer document being ready at the end of May 2002, and the offer being made in June 2002. Regular IPO planning meetings took place.

The final form of the offer document was approved by the Board at its meeting on 7 June 2002. The offer document was registered on 7 June 2002, and the offer opened on 10 June 2002. The new shares were allotted on 1 July 2002.