The Auckland networks company wants to buy AGL’s cornerstone shareholding in NGC by acquiring AGL’s New Zealand holding company (AGL NZ Ltd which 64.2% of NGC), and directly purchasing the other 1.8% that AGL owns.

To do this it needs the panel’s exemption from rules that shareholders must sell directly to the company making an offer. However the panel yesterday decided such an exemption would break its own rules.

"The panel considered that the reasons for requesting the exemption, which principally concerned taxation issues and the scale of transaction costs which may be incurred, did not provide a proper basis for the panel to exercise its exemption powers," the regulator said.

The panel said the Takeovers Code provided other mechanisms AGL could use to sell its interest in NGC, but did not specify what those alternatives might be.

Vector chairman Michael Stiassny said he was disappointed by the ruling. However, he insisted it would not short-circuit the company's NZ$3 a share offer.

"We are still bound with AGL and we are looking for another structure."

Stiassny said the ruling was especially surprising because the panel had approved a similar structure when Origin Energy acquired its majority stake in energy player Contact from Edison Mission Energy earlier this year.

He suggested the panel might have taken a different approach because of fallout from a controversial ruling on Prime Infrastructure's bid for Powerco that inadvertently gave overseas Powerco shareholders a better offer than New Zealand shareholders.