Warren Buffett’s Berkshire Hathaway bought into the ASX-listed Australia’s IAG insurance group back in June. The deal, which was said at the time to help IAG and Berkshire Hathaway strengthen their long term relationship and create a strategic partnership, was seen as mutually beneficial.
That’s because not only did Buffett’s firm pay $500 million for a 3.7% stake in IAG and give the firm capital flexibility over the 10 years of the deal, it also gave Berkshire Hathaway a launchpad into Asia.
“Our strategic partnership with IAG will help fast-track our entry into this region, and provides us with opportunities too,” Warren Buffett said when the deal was announced.
But Fairfax reports this morning that the fact that the ASX also granted Berkshire Hathaway a waiver on future dealings, which could favour Berkshire affiliate NICO “a privileged ‘insider’ position on any future capital raisings, including consultation in relation to NICO’s participation in any issue and sub-underwriting and cornerstone opportunities”, has proxy adviser group Ownership Matter’s up in arms.
Dean Paatsch, a director at Ownership Matters, told Fairfax that it was an issue of proper company disclosure and questioned the ASX basis for making these type of “special waivers” to companies.
The ASX has granted 12 special waivers over the past 12 months and spokesman Matthew Gibbs said the ASX allowed “listed entities to enter into agreements of this nature with shareholders with whom the entity has a strategic relationship, provided that the shareholder pays the same price as other offerees in an issue of securities. The strategic relationship must encompass more than the investor simply being a major shareholder or source of equity capital.”
On that basis, and given the clear advantage of the deal and relationship it brings to IAG and its balance sheet flexibility, it would appear Berkshire qualifies.
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