The New Zealand Herald newspaper says the Accident Compensation Corporation (ACC) – one of Contact’s largest shareholders through its $NZ6.5 billion ($A5.4 billion) investment portfolio – has obtained a legal opinion that throws up questions over the number of shareholder votes needed to give the controversial plan the green light.

The paper says the spectre of a possible legal challenge to the proposed merger may make it more difficult for Origin and Contact to complete the process to create Australasia’s largest integrated energy company, with a market capitalisation of approximately $A6.8 billion.

At present, the merger is to be effected by two shareholder votes on the proposed scheme. The first, a special resolution, requires a 75% majority vote of all shareholders, while the second, an ordinary resolution, requires the support of at least 50% of non-Origin shareholders. Origin already owns 51.4% of Contact.

However, ACC believes the threshold for this second resolution should be 75% of the minority shareholders and it has sent its proposal, which raises the possibility of joint action to modify the vote options, to other fund managers.

Contact general counsel Ross O’Neill has said the proposed arrangement thresholds meet all statutory and regulatory requirements, and are consistent with the New Zealand Exchange listing rules for related party transactions and the Takeovers Code.

Meanwhile, the Sunday Star Times newspaper says recent Contact share trading, at a significant premium to the merger ratio with Origin, may mean financial markets are already factoring in the likelihood Origin will have to improve the merger terms for Contact shareholders.

Two weeks ago that premium was 5.4%, according to Contact’s own figures, though Macquarie Equities said using daily closing share prices rather than weighted average prices showed the premium was closer to 8%.

Previously the share prices of both companies had been trading close to the relative values set by the merger deal, which Origin and Contact said showed investors were treating the two companies as one economic unit, and were assuming the merger would go ahead.

Origin’s share price has slumped this month, reaching $A6.50 early last week, the lowest since the merger was announced in February. Contact shares, which had risen to more than $NZ8 by early April, fell sharply in mid-June to $NZ7.45, recording their biggest one-day decline since December 2002.

Contact shareholders are being asked to swap existing shares with new shares in the merged entity in which Contact will comprise 24.3% of the business and Origin 75.7%.

Origin will “sell” its 51.4% stake in Contact and no longer be a shareholder. The merge entity will be dual listed on the Australian Stock Exchange and the NZX.

Documents outlining the proposal are due to be sent out early next month, with shareholder meetings in early August and, given a successful vote, the completion of transaction by the end of that month.

Institutional Contact shareholders have consistently said the merger proposal is more a takeover by stealth of the New Zealand’s largest listed energy company and significantly undervalues Contact.