Orion shareholders fall foul of Takeovers Panel

Stuart Corner
Wednesday, 06 September 2006 10:16

IT Industry - Strategy

ASX listed telephony services reseller, Orion Telecommunications, which last year fell foul of the law over its telesales practices, is now a takeover target from a new telco whose parent company has already been in trouble with ASIC over its attempts to gain control of Orion.

Toy Telco Pty Ltd, a company set up on 28 August as a wholly-owned subsidiary of Lewis Securities and whose sole director and CEO is Tony Lewis, made an off-market 23 cents per share offer for all Orion shares on 1 September. They had been trading around the 17 cent mark in the weeks prior.

The previous day the Takeovers Panel issued a statement saying it had found that a significant Orion shareholder, TelEurope, and other shareholders - Lewis Securities and various associates - had formed an understanding to use their combined voting power to influence the composition of Orion's board and the conduct of Orion's affairs without disclosing their association of their aggregated voting power in substantial holding notices.

The Takeovers Panel ordered ASIC to sell approximately 5.4 percent of Orion shares acquired by Lewis Securities and its associates between 24 April and 30 June 2006. The Panel said it "considered that the circumstances constituted by the association of TelEurope and the Lewis Associates and the Lewis acquisitions [the 5.4 percent shareholding] were unacceptable because they constituted, or gave rise to, a contravention of [The Corporations Act]."

Voting rights held by Lewis Securities, its associates and by TelEurope have also been restricted until October 2007 and these entities s have been prohibited from acquiring further shares.

Orion is no stranger to controversy. In late 2005 it was taken to court by Telstra over misrepresentation in its telemarketing and was required to give court undertakings on the conduct of its telesales staff and to maintain its own do-not-call register of former prospects who wanted no further sales calls.

Orion even managed to get into hot water with the ASX for lodging a statement on the outcome of the court action that was somewhat sparing with the truth.

The CEO from that era, Noel Robertson, left in May and is now CEO of MatrixView, a company that claims to have developed revolutionary video compression technology.

Orion this week reported its results for the year, a net loss after close to a $1 million profit for the half year to December. This was announced in February at which time the company warned of the negative impact of the court action on future profitability.

In its annual results, Orion details the gains it made from its aggressive telesales campaign and the strategy is has adopted after being forced to curtail that campaign.