Researchers believe they may have uncovered irregularities in a web of events surrounding the purchase and sale of land in the Manawatu after the collapse of carpetmaker Feltex.
University of Sydney accountancy academic Associate Professor Sue Newberry and economics researcher Dr Bill Rosenberg, of the Campaign Against Foreign Control of Aotearoa in Christchurch, are concerned about their findings. They have been investigating the downfall of Feltex and links with Godfrey Hirst, the Australian carpet company that targeted it for acquisition.
They say special companies 100 per cent-owned by Godfrey Hirst chairman and chief executive Kim McKendrick actually bought the two Feltex sites, not the company itself. McKendrick is an expatriate Kiwi living in Melbourne. Godfrey Hirst is owned by the McKendrick family.
The spectacular collapse of the New Zealand Stock Exchange-listed Feltex in September last year is still having repercussions. Thousands of out-of-pocket shareholders are planning to sue directors, vendors, issuers and promoters involved in the public float of the company in 2004 for as much as $250 million. The latest liquidator's report shows shareholders and unsecured creditors are owed at least $21m.
Newberry and Rosenberg are demanding answers to what they believe are two major concerns raised by Companies Office records and material released under the Official Information Act. The first is that the sale of two Feltex properties totalling 42ha in Marton and Foxton, which required Overseas Investment Office (OIO) clearance, was not to Godfrey Hirst – as publicly stated – but to McKendrick, through two companies, Kakariki Equities and Foxton Equities, which were set up in September last year, and are 100 per cent-owned by McKendrick.
Companies Office data shows both companies were established on September 7, the day after Feltex announced that Godfrey Hirst had pulled back for the time being from its $141.8m takeover offer. The second is the price paid for the properties. The OIO shows the sale to McKendrick's two companies was for $5,861,058, but the price of the planned re-sale of the larger, Marton, site to a company, Kakariki Industrial Park, established on December 15 last year, is unknown, as is the level of profit on it and where the money went.
Newberry and Rosenberg believe a third concern is the corporate ownership of Godfrey Hirst New Zealand through a Vanuatu company, Olympic Pacific, owned by the McKendrick family. Vanuatu is a well-known South Pacific tax haven favoured by Australian corporates.
According to the OIO, the application by Kakariki Equities and Foxton Equities to buy the two sites was made on October 2, and said the applicants intended to close the Kakariki scouring plant at Marton. The plant closed last October with the loss of 44 jobs, even though OIO approval was not granted until March 30 this year.
The Feltex deal was made by John Strowger and Andrew Jessop, of Chapman Tripp in Auckland. Strowger, who was named New Zealand's dealmaker of the year at the 2007 Australasian Law Awards this year, did not answer questions emailed to him by The Press.
The Press also put questions on the land deal to McKendrick through Godfrey Hirst's New Zealand public relations adviser, Senescall Akers, but McKendrick declined to comment. PR spokesman Geoff Senescall said that was because Godfrey Hirst was a private company and under no obligation to answer or disclose the information. To all intents and purposes, McKendrick and Godfrey Hirst were the same thing, Senescall said.
However, Newberry disagreed, and cited work by two Sydney University professors, Frank Clarke and Graeme Dean, which said "the notion that private companies' affairs are private, and public companies are public, is utter nonsense". Newberry said: "Applied to this situation, it is worth noting that Feltex was a major public company and Feltex's shareholders and creditors have lost a considerable amount of money in this debacle. "Godfrey Hirst might regard itself as a private company, but the matter is one of considerable public interest, as evidenced by the news reports and court cases." Any suggestion that the company and McKendrick were one and the same in the land deal was flawed, Newberry said.
"It is not correct to say that McKendrick himself is Godfrey Hirst (GH), especially because the claims made before this buyout proceeded was that GH was buying Feltex as a going concern, suggesting that Feltex would continue in operation. "Had it been disclosed that Feltex was being broken up in the buyout and that McKendrick himself was buying parts of it separately for on-selling, I suspect there would have been even greater public concern about what was happening. "The reality is that at least these two properties were split off from the deal and McKendrick purchased them himself. McKendrick is a related party of GH, but he is not GH," Newberry said.
Rosenberg said there were questions over whether Feltex shareholders were given a "fair deal". "The sales to McKendrick's two companies broke up Feltex's assets, apparently with McKendrick being the sole beneficiary. "If the company was to be broken up, presumably because the assets were worth more individually than as a going concern, the receiver could have realised a greater return and the Feltex shareholders may well have been the beneficiaries. "But there was considerable public interest in it not being broken up and it is disturbing to learn that, in fact, part of it was," Rosenberg said.
