Statement of reasons
This notice applies to acts or omissions occurring on or after 11 April 2005 and expires on 31 March 2010 (which is the final maturity date of mandatory convertible notes issued by Urbus Properties Limited (Urbus)).
The Takeovers Panel has exempted ING Property Trust Holdings Limited (ING) from compliance with rules 6(1)(b) and 20 of the Takeovers Code (the Code) in respect of a full offer by ING for all of the equity securities in Urbus.
ING proposes to offer units in ING Property Trust (the Property Trust), a unit trust established under the Unit Trusts Act 1960, as consideration to Urbus security holders for their Urbus securities. Units in the Property Trust would be allotted by the manager of that Trust.
Urbus has 3 types of equity securities on issue—ordinary shares (of which there are 2 separate classes), convertible notes, and mandatory convertible notes (Urbus securities). Urbus has 5 classes of mandatory convertible notes on issue, all of which are issued on identical terms, except for interest rates and maturity dates. Only the ordinary shares carry voting rights under the Code.
Exemption from rule 6(1)(b) of Code
Rule 6(1)(b) of the Code provides that a person who holds or controls 20% or more of the voting rights in a code company may not, except as provided in rule 7 of the Code, become the holder or controller of an increased percentage of the voting rights in the code company.
If ING holds more than 50% and less than 90% of the voting rights in Urbus following completion of the offer, ING is likely to hold convertible notes and mandatory convertible notes issued by Urbus (convertible securities). The conversion of the convertible securities into Urbus shares would be a breach of rule 6(1)(b) of the Code, unless one of the exceptions in rule 7 of the Code applies.
The Takeovers Panel considers that the exemption from rule 6(1)(b) of the Code permitting any increase in the percentage of the voting rights in Urbus held by ING that arises from the allotment of voting securities on the conversion of convertible securities acquired by ING under the offer is appropriate and consistent with the objectives of the Code for the following reasons:
•the increase will be the result of the exercise of rights attaching to securities obtained under the offer, for which ING was obliged under the Code to make an offer; and
•the resulting increase will be the same as if the holders of convertible securities had converted those securities into shares and then accepted the offer in respect of the resulting shares.
Exemption from rule 20 of Code
Rule 20 of the Code requires an offer to be made on the same terms and to provide the same consideration for all equity securities belonging to the same class.
The exemption from rule 20 of the Code applies to the extent that the takeover offer is made to Urbus security holders whose addresses on the Urbus share register, convertible notes register, or mandatory convertible notes register, as applicable, are outside of New Zealand (foreign security holders). It provides that any units in the Property Trust that would otherwise be transferred to foreign security holders who accept the offer (relevant security holders) will be transferred to a person appointed by ING to act as a nominee for the offer. The nominee is required, as soon as is reasonably practicable, to sell the units in the Property Trust and to pay the net proceeds arising from the sale to the relevant security holders.
The exemption imposes conditions to ensure that the nominee is of good standing and that relevant security holders are protected against the nominee's failure to perform the nominee's duties in a proper manner.
The Takeovers Panel considers that it is appropriate to grant the exemption from rule 20 of the Code for the following reasons:
•it is not practicable for ING to make an offer to all of the Urbus security holders within each class of securities on the same terms, as required by rule 20 of the Code, because of the costs of complying with the securities laws that apply in the various jurisdictions other than New Zealand; and
•the conditions of the exemption require that foreign security holders are in effect offered equivalent cash consideration and, accordingly, they are not disadvantaged by not being able to accept the units under the offer; and
•New Zealand security holders are not disadvantaged because they have the same opportunity to realise the consideration they receive.
The Takeovers Panel considers that the exemption from rule 20 of the Code is consistent with the objectives of the Code because—
•the exemption is consistent with the principle of providing equal consideration to all security holders of the same class, while recognising the unreasonable costs of having to comply with the securities laws that apply in various jurisdictions, in circumstances in which securities are offered as consideration and security holders have addresses outside New Zealand; and
•it is important for competition for the control of code companies that offerors are not precluded from offering securities as consideration in takeover transactions.