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Feltex's board was "inherently against" selling the crippled carpet maker to an Australian rival and "unreasonably biased" towards any prospect of selling to New Zealand interests, Feltex's liquidator claims in a $41 million court case against five former company directors.

In its statement of claim, liquidator McDonald Vague outlines the frustration felt by Feltex's bank, ANZ, in the final months before Feltex's receivership. During this period Feltex, which was spending $167,000 a day, was "operating on a knife edge", according to board minutes.

McDonald Vague asserts the directors' actions, or inactions, ultimately meant the deal Australian rival and "logical buyer" Godfrey Hirst signed with receivers McGrath Nicol to buy Feltex on October 20, 2006 was materially worse for Feltex than a deal struck with Hirst in August 2006 before the receivership.

It goes as far as saying the board had failed since 2001 to annually forecast, project or budget "with any reliability" Feltex's financial performance.

In their statement of defence, the former directors Peter David Hunter, former chief executive Peter Thomas, ex-chairman Tim Saunders, John Michael Feeney and John Hagen deny any wrongdoing.

They say they followed the legal advice of Bell Gully and Alan Galbraith, QC, the advice of auditors Ernst & Young on sharemarket continuous disclosure rules and Deloitte on Feltex's solvency.

ANZ, owed A$119.5 million (NZ$150m), pulled the plug on Feltex on September 22, 2006. It has got A$105.5m back.

The receivership came just 27 months after Feltex's June 2004, $1.70-a-share, $254m initial public offering. When the receivers were called in the shares were worth just 3 cents. McDonald Vague, which filed proceedings against the former directors in April, was appointed liquidator in November 2006.

The board's decision to allow Sleepyhead owners Craig and Graeme Turner to do due diligence on Feltex broke the terms of an agreement with Hirst, the liquidator says.

Melbourne-based Hirst, controlled by the expatriate-Kiwi McKendrick family, withdrew its offer in early September 2006, saying it did not want to enter a bidding war with the Turners.

However, Hirst re-emerged to pluck Feltex from the receivers in a $129m deal. McDonald Vague says changes to the final Hirst deal left ANZ A$14m out of pocket, creditors short of $5.7m, staff being owed $523,204 and shareholders missing out on $17.9m via a 12c-a-share payment.

In 2006 Feltex's board had also encouraged interest from Talley's Group, which walked away after doing due diligence and determining Feltex's operating earnings were overstated.
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Further, the liquidator says the directors' legal advice did not state that the Turners should be allowed to do due diligence or support such a decision. McDonald Vague also says the board failed to disclose ANZ's true position, approaches by the Turners, or potential liabilities from breaching the Securities Markets Act.

The former directors counter that their legal advice meant they were obliged to let the Turners look at Feltex's books if there was a credible prospect of the brothers lodging an offer superior to Hirst's. The Turners, meanwhile, suggested they be paid a fee if their involvement led to an improved offer from Hirst or another party.

McDonald Vague says the Turners' public statements created a false impression of their proposal and negative publicity for Hirst. The lack of certainty around the Turners' proposal saw frustration mount at ANZ, which had no desire to remain as Feltex's bank.

"Turners never made an offer to Feltex," the liquidator says.

Citing a 2007 Securities Commission report, the liquidator says Feltex was in breach of NZX continuous disclosure rules from August 23, 2005 till June 30, 2006 for failing to reveal banking covenant breaches, new ANZ loan terms, a forecast earnings deterioration and planned restructuring costs.

The liquidator's claim includes $9.1 million of shareholders' losses between August 25, 2005 and December 31, 2006 when Feltex was allegedly in breach of continuous disclosure rules.

Since acquiring Feltex, Hirst has shut four Christchurch, Kakariki, Foxton and Feilding of Feltex's six New Zealand factories at the cost of about 415 jobs.

Australia's OneSteel is planning to spend about $175 million to take over Wellington-based Steel & Tube Holdings.

OneSteel, which already owns 50.27 percent of Steel & Tube, is to offer $4 a share for the rest. This compares with a price of $3 on the market before the offer was announced this morning. The offer values the whole company at $353 million. The offer will be conditional on the Australian company achieving 90 percent acceptance. Also, and most unusually, the bid is conditional on the NZX 50 index not dropping below 2710 for three consecutive days prior to the bid being declared unconditional.

The NZX 50 is comfortably above that level at the moment - trading above 3200 early today. But the inclusion of such a condition demonstrates nervousness about the current global environment.

The bid comes at a time when Steel & Tube's profitability has taken a hit from the economic downturn. Its earnings slipped 19 percent to $22.5 million for the year to June.

The company said that its three Key market segments of construction, manufacturing and the rural sector, all suffered to a varying degree as the combination of exchange rate volatility, high interest rates and reduced growth in consumer spending slowed the economy. These conditions prevented businesses in general from recovering the increased cost of doing business resulting in a margin squeeze.

OneSteel managing director Geoff Plummer said the takeover would allow OneSteel to simplify its corporate structure and efficiently manage the Steel & Tube business as part of the OneSteel group.

"OneSteel's proposal confirms its commitment to the New Zealand market and to Steel & Tube’s business, employees, customers and suppliers. If OneSteel's offer proceeds, OneSteel intends to retain the Steel & Tube brand, grow the Steel & Tube business and maintain a quality product offering and high level of service."

Pumpkin Patch shares are continuing to surge in value after multimillionaire Kathmandu founder Jan Cameron disclosed a 6.3 per cent interest in the children's clothing retailer.

The shares are now up 12 cents, or 8.5 per cent, to $1.52 from the four-year low of $1.40 hit on Friday shortly before the reclusive Tasmanian resident Cameron disclosed her holding. Cameron is the second wealthy retail investor in a few months to disclose a holding in Pumpkin Patch. The majority shareholder in Briscoe Group, Rod Duke, has built a 10 per cent stake.

Pumpkin Patch chairman Greg Muir said today he was "comfortable" with the new investors. "It is two well placed New Zealand investors who obviously recognise that the company is undervalued at the moment." On Cameron, Muir said: "She's been building that [stake] over many months - we've known about that. We haven't had any dialogue with her at all. It is for her to discuss. We are quite comfortable. We've got no issues with it."

While the moves by both Cameron and Duke will lead to speculation that one or both may seek to assert influence on the future running of Pumpkin Patch, Muir said he believed both might be passive investors. Neither had sought a seat on the board at this stage. "They've certainly made no representations to us in that respect, but I can't answer what their intentions are."

The moves from both the investors come as Pumpkin Patch, a former sharemarket darling, has seen its share price pounded as investors worry about apparent speed wobbles the company is hitting in its US and British expansion. There is also concern about its stock levels, which have risen sharply this year and its debt levels, which may now be as high as $95 million from virtually nothing two years ago.

Cameron sold Kathmandu to private equity partners Goldman Sachs JBWere and Quadrant in 2006, reportedly for about $275 million. Subsequently she has built a 15 per cent stake in Postie Plus. She also recently bought the Arbuckle's stores from Postie Plus. In addition she has opened five homeware stores in New Zealand under the brand name Nood (New Objects of Desire).

Pumpkin Patch's shareholder register is now getting crowded. The biggest individual shareholder is still believed to be South African investor Setar Motani, with about 12 per cent - though this shareholding has reduced in the past few years. Another investor who has reduced his shares since the company floated in 2004 is managing director Maurice Prendergast, who currently owns about 6.2 per cent, down from 8 per cent a few years ago. Fisher Funds Management has recently sold down its stake to around 6 per cent as well.

Pumpkin Patch shares were listed in mid-2004 at $1.25 a share. They rose to as high as $4.95 on a wave of enthusiasm about the company's moves to become a global brand. However, in more recent times the expansion into the US and Britain has appeared to hit speed wobbles.

Market expectations had been for a profit this year of about $22 million to $23 million, down from $27.6 million. But it is likely analysts will further trim earnings forecasts after a recent Asian investor roadshow presentation by the company that talked about tough conditions in Britain and the US.