Takeovers panel rules against ARN over Southern Cross buyout

The news: ARN Media's planned takeover of Southern Cross is up in the air after the Takeovers Panel found unacceptable circumstances in ARN buying stock from fund manager Allan Gray. Allan Gray had stakes in both companies and increased its voting power in Southern Cross to above 30% after the purchase.

The numbers: Directly before ARN's purchase, Allan Gray had voting power in 21.71% of Southern Cross and in 20.04% of ARN. After market close on 19 June, ARN bought 14.8% of Southern Cross shares, lifting Allan Gray's voting power in Southern Cross from 21.71% to 31.24%, meaning 6.83% of ARN's shares were acquired in breach of section 606 of the Corporations Act, the Takeovers Panel said. Alan Gray subsequently bought another 0.08% of Southern Cross, also in contravention of the Act, ahead of a subsequent bid from ARN and Anchorage Capital to buy 100% of Southern Cross through an arrangement scheme.

The context: Allan Gray and ARN have defended the breaches as inadvertent, and the Takeovers Panel is giving the involved parties until next Wednesday for submissions on the next steps.