Ignominy looms for ASX shift on raising rules

ASX proposals to free up capital raising rules for small and mid-size companies could be headed for a humiliating defeat after John Brogden's (pictured) Financial Services Council weighed, belatedly, into the debate.

ASX proposals to free up capital raising rules for small and mid-size companies could be headed for a humiliating defeat after John Brogden's (pictured) Financial Services Council weighed, belatedly, into the debate.

Accusing the ASX of running a "race to [the] bottom" in its controversial plan to allow the boards of all companies worth less than $300 million to issue an additional 25 per cent of their shares each year, the council has recommended ditching the entire concept.

Even worse for the ASX, and its general manager of capital markets, Richard Murphy, who has been running the "Strengthening Australia's Equity Capital Markets" proposal, the two largest investor lobby groups in the nation are suggesting the exchange did not really consult with them before making its proposals public.

The Australian Council of Superannuation Investors' submission, which unlike the FSC's actually made the ASX's May 14 deadline for semi-public discussion on the listing rules change proposals, claimed that the "consultation process appears to have been predominantly focused on those market participants who stand to benefit from a relaxation of current capital raising rules".

ACSI, which is seen as coming from the left side of the political spectrum because it represents union super funds or "profit for members" groups, reckons none of the funds were consulted.

The FSC, on the "right" side of politics, was less pointed but its pithy, two-page submission said in the final paragraph that "we believe more regular interaction between the FSC's Investment Board Committee and ASX executives would assist when such changes are contemplated".

ASX will no doubt say that it formulated a concept and aired it, and the public consultation process is that discussion time.

To Insider's mind, though, it seems more than passing strange not to sound out funds that invest something like $2 trillion of superannuation money before giving public company directors greater licence to dilute existing investors, even if the ASX's motives were pure.

The FSC's arrival could be the final nail for the ASX proposal.

Macho pitcho

ASX explorers were also being wooed yesterday by Peru's Lima Stock Exchange, which is trying to encourage dual listings.

The LSE (that is Lima, not London) chief executive, Francis Stenning, speaking in Sydney at a conference encouraging Australian investment south of the Panama Canal, made a macho pitcho to turn his exchange into "the equities gateway to Latin America".

Peru's exchange is much smaller than Australia's, with the 34 stocks in its main index having a market worth of about $150 billion, compared with the S&P/ASX 200 index's value of more than $1 trillion.

Still, there is no shortage of Australian explorers running around Peru, and South America in general. Minerals testing group Campbell Brothers has laboratories in the region.

Campbell's, which Insider noted yesterday fell after reporting strong results and increased dividends, yesterday rallied $2.86 to $59.56 amid the general market rise.

Eyes on the index

ALESCO Corporation advisers, and shareholders, ought to be keeping a closer eye on the benchmark ASX index than movements in their own share price.

At the bottom of last week's sharemarket on Friday, the S&P/ASX 200 index had shed almost 9 per cent since Dulux Group launched its $2-a-share offer on May 1.

Why is that important? Because among the host of conditions in Dulux's offer document is the standard "index out" clause, which basically gives a bidder the option of withdrawing an offer if the market falls by more than 10 per cent.

In Dulux's case, it has made its offer conditional on the index not closing below 3950 on three consecutive days. Last Friday, the market sank to within 100 points of touching that level.

A bidder can waive a condition if it wishes, but the fragility, and volatility, of the sharemarket at the moment must be giving Dulux's board cause for concern and Alesco investors should be alert to it, too.

Dulux Group this week put in an amended version of its documents after Alesco's advisers apparently raised a couple of issues including that Alesco shares had mostly traded above the offer price.

The shares shot above the bid almost immediately, presumably due to hedge funds and others punting that the paints and adhesives group would have to raise its bid at some point to win over Alesco's board.

By the time Dulux's revised document was published on the ASX on Monday, however, Alesco's share price was under $2, and try as it might in trading yesterday, it still could not get to that level.

It is questionable whether trading in a target company's shares after a takeover is launched is something that a bidder needs to keep telling target company shareholders. Surely the defending company's board ought to be the body responsible for putting the takeover offer in context.

Amber light

CONSUMER electronics group Ambertech last night warned that it expects to make losses of up to $1.3 million from trading, with a worse outcome possible as it reviews goodwill on its balance sheet.

This follows electrical goods retailer Retravision Southern appointing administrators and Woolworths deciding earlier to close up to 100 stores in its Dick Smith electronics business.

Ambertech, a multi-brand distributor, last year had a more than 90 per cent fall in net profit to $126,000 as sales shrank on both the consumer and professional side of its business.

There were reports the company had reduced staff and cut executive salaries. The latest loss prediction includes $465,000 of restructuring costs plus $300,000 "associated with the move of the business's head office". Ambertech also took a $150,000 hit on the collapse of the WOW Audio Visual chain.

The company said it was testing for the "likely impairment" of goodwill, sitting at $3 million on its most recent balance sheet.

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