The action
On 18 December 2006 Maurice Blackburn commenced a class action
against Multiplex Limited and Multiplex Funds Management Limited
("Multiplex") in the Victorian Registry of the Federal Court.
The proceeding is brought by P Dawson Nominees Pty Ltd on its
own behalf and on behalf of all securityholders who purchased or
acquired an interest in Multiplex securities during the period 2
August 2004 and 30 May 2005 and who had entered into a Funding
Agreement as at the date of issue. Current estimates of the
total claim value are between $100 and $150 million.
The Statement of Claim alleges that from 2 August 2004 until 30
May 2005 Multiplex breached the continuous disclosure provisions of
the ASX Listing Rules and the Corporations Act, and or
engaged in misleading or deceptive conduct, by not properly
disclosing to securityholders and the ASX the full story regarding
the material cost increases and delays in the construction of the
Wembley National Stadium and the consequences of those on the
Multiplex Group earnings forecast. Subsequent revelations about the
Wembley project in February and May 2005 led to dramatic falls in
the share price.
ASIC investigations result in Enforceable Undertaking and
Settlement Offer
ASIC has investigated Multiplex's disclosures relating to the
Wembley project. Specifically, it investigated whether
Multiplex had complied with its continuous disclosure obligations
under ASX Listing Rule 3.1 and s.674(2) of the Corporations
Act. As a result of that investigation, on 20 December 2006
Multiplex entered into an Enforceable Undertaking with ASIC,
which included some limited settlement offers for securityholders
who acquired their ordinary Multiplex stapled securities between 3
February 2005 and 23 February 2005. All other Multiplex
securities and or acquisitions are excluded.
ASIC also made findings as to corporate governance, compliance
procedures, reporting and controls which will assist the
securityholder class action. We also consider that the offer
of settlement is a good indication that Multiplex understands the
weakness of its position in this matter.
Securityholders have a strong claim from 2 August 2004 to 30
May 2005
We consider that there is strong evidence to support a finding
that Multiplex knew or ought to have known of the problems that
they were experiencing on the Wembley project, and the likely
consequences of those problems on the Multiplex Group earnings
forecasts, from 2 August 2004. Leading up to this
date, Multiplex had been engaged in an increasingly acrimonious
dispute with one of the primary sub-contractors on the Wembley
project, steelworks contractor Cleveland Bridge UK ("CBUK").
Internal management forecasts as early as 8 June 2004 showed costs
overruns on the steel subcontract of between $60 to $94
million. At the time the Multiplex Group's annual profit
forecast was $131 million. By 30 June 2004 Multiplex
said the project was in delay by 84 days, but on the same day gave
notice to CBUK to cease erection works without a fixed price
contract in place with its replacement sub-contractor. On 2
August 2004 CBUK left the site altogether. By that stage only
8,500 tonnes of a total of 22,000 tonnes of steelwork on the
stadium had been erected. According to Multiplex
announcements, Multiplex subsequently paid the replacement
sub-contractor over $250 million (£100M) to complete the job.
Notwithstanding the above:
- On 18 August 2004 Multiplex announced to the ASX that the
contractual dispute with CBUK would not affect the Wembley Stadium
project program or impact on group earnings. Multiplex also advised
that it would complete the Stadium project ahead of program.
- On 27 September 2004 Multiplex announced a bid for the Ronin
Property Group involving an offer involving Multiplex securities
and cash of $0.08 each. The offer documents were silent as to any
cost increases or delays with the Wembley Stadium project and
values Multiplex securities accordingly.
- On 30 September 2004 Multiplex issued its Annual Report. It is
also silent as to any cost increases or delays with the Wembley
Stadium project.
- On 4 November 2004 Multiplex issued proceedings against CBUK
claiming damages of almost AUD$87.5 (£35M) for costs and delays
allegedly caused to it by CBUK on the Wembley Stadium.
- In November 2004 stock market analysts on a Multiplex investor
and analyst tour visited Wembley Stadium and were informed the
project was back on track.
- In November 2004 Multiplex announced the issue of up to $450M
worth of securities known as SITES.
- In December 2004 Multiplex announced and completed a $120M
institutional placement.
- In December 2004 securityholders were required to pay a final
instalment of $0.97 on their partly paid securities.
- In late January 2005 the Multiplex Wembley Project Director
stated in a memo that losses on the Wembley project could be
between A$116M and A$210M, whilst other company management
predicted a A$37.4M profit.
Throughout the process of capital raising, Multiplex
was either silent as to any material costs and delays with the
Wembley Stadium project, or insisted that the Wembley project was
on time and on budget. They made no disclosure of any cost
increases and delays with the Wembley Stadium which then
existed.
The Commencement of Disclosure
On 24 February 2005, at its half-yearly presentation of results
for the period ending 31 December 2004, Multiplex announced that
they had written back profit on the Wembley project to break even,
but believed Multiplex's claims were sound and that ultimately the
project would exceed break-even. There was no mention of the latest
forecasts by Multiplex's Wembley Project Director made in late
January 2005. Following this announcement, 20 million
Multiplex securities traded and the security price fell 16%,
closing at $4.56.
From 24 February 2005 through to 27 May 2005 Multiplex continued
to assert that the Wembley Stadium project would be "break-even or
better".
On 30 May 2005 Multiplex finally revealed Wembley would make a
loss of $109 million (£45M) and would not be completed until March
2006. When trade reopened over 200 million Multiplex
securities traded in a single day and the security price fell in
excess of 20%, closing at $2.56.
On 18 August 2005 Multiplex announced a further A$8.6M
contingency in relation to the Wembley project.
At the Multiplex Annual General Meeting in November 2005 CEO
Andrew Roberts acknowledged in his address the "extraordinary
impact that Wembley has had on the Group and on [its]
securityholders". Those losses continued, with further
losses on the project announced by Multiplex on 19 December
2005.
Registration of interest
Securityholders who have suffered losses due to the fall in
share price can register their interest in the class action with
Maurice Blackburn. If you acquired Multiplex securities between 2
August 2004 and 30 May 2005 and are interested participating in the
class action, please email us on multiplexclassaction@mauriceblackburn.com.au
with your name and contact details, or register directly now by
following the directions below.
Please note that registration does not obligate you to
participate in any action, and does not obligate you in any way in
relation to legal costs. It will however ensure that you will be
provided with information regarding the progress of the potential
claim and will enable us to provide you with advice regarding
whether you should participate in the claim.