An institutional investor says appraisal reports for take-over deals are not doing their job well, and changes are needed to ensure investors are getting good advice on whether to sell or not.
AMP Capital Investors deputy head of equities John Phipps cites the Northington Partners report that assessed Metlifecare's planned take-over offer for two other retirement village operators.
It determined the offer as fair, but institutional investors clearly did not agree, and Metlifecare was forced to rejig the deal to get shareholder approval.
Mr Phipps says the report had major shortcomings, and he suggests these reports should carry cover notes that acknowledge their limitations.
He believes an independent report should help shareholders, particularly small shareholders, make a decision about whether the deal is in their best interests.
But Mr Phipps says the Northington Report had a very narrow focus which he believes did not cover a range of major issues generally related to the commerciality of the deal.
He says if reports which are written primarily for the benefit of shareholders do not sufficiently cover the commercial issues, then perhaps they should have a covering note saying that the report is limited in its scope and shareholders should seek further advise before making their investment decision.