Dated at Wellington this 1st day of July 2010.
The Common Seal of the Takeovers Panel was affixed in the presence of:
K J O'Connor,
Statement of reasons
Note: The following statement of reasons should be read in conjunction with the statement of reasons appended to the:
This notice applies to acts or omissions occurring on or after 1 July 2010 and expires on 30 September 2014.
The Takeovers Panel (the Panel) has granted—
an exemption from rule 7(d) of the Code for Freedom Nutritional Products Limited (FNP) to the extent that that rule requires the notice of meeting approving the allotment of shares to FNP to disclose the exact numbers of voting securities to be allotted, as required by rule 16(b) of the Code; and
an exemption from rule 16(b) of the Code to A2 Corporation Limited (A2C) in respect of the notice of meeting.
A2C is a listed Code company with shares quoted on the NZAX. A2C owns, through a wholly owned subsidiary, 50% of A2 Dairy Products Australia Pty Limited (A2 Australia). The other 50% is owned by FNP, also through a wholly owned subsidiary. A2C and FNP have entered into an agreement under which A2C will acquire FNP’s 50% interest in A2 Australia in consideration for A2C allotting FNP 120 376 950 A2C shares (the initial placement). Following the initial placement FNP will hold 25% of A2C.
The initial placement will result in FNP increasing its voting control in A2C above 20%, causing FNP to trigger rule 6(1) of the Code. Accordingly, shareholder approval under rule 7(d) of the Code is to be sought for the initial placement. No exemption is required for the initial placement because the exact numbers and percentages required to be disclosed in the notice of meeting under rule 16(b) will be known at the time the notice of meeting is prepared.
As part of the wider transaction, A2C will also grant FNP—
an option (the option) to subscribe for such number of shares as will increase its voting control in A2C to 27.5%. That option will be exercisable for 12 months following the initial placement:
an option (the top-up option) to subscribe for shares to maintain its approximate voting control level should any of the 20 million partly paid shares held by the A2C’s executives become fully paid up. Those partly paid shares carry voting rights in proportion to the amount they are paid up. If they are fully paid up, FNP’s voting control in A2C will be diluted. To counter that dilution, the top-up option allows FNP to subscribe, for nil consideration, for such number of shares as represents 25% of the number of the executives' partly paid shares that become fully paid up.
If FNP exercises the option or the top-up option, the resulting allotment will increase FNP’s voting control above 20%, triggering rule 6(1) of the Code. Accordingly, shareholder approval under rule 7(d) of the Code is to be sought for such potential future allotments. However, the exact numbers and percentages required under rule 16(b) of the Code to be disclosed in the notice of meeting will not be known at the time the notice of meeting is prepared. The Panel has granted exemptions allowing potential maxima to be disclosed in place of those exact numbers and percentages.
The Panel considers that it is appropriate and consistent with the objectives of the Code to grant the exemptions because—
the details required by rule 16(b) cannot be specified in the notice of meeting because it is uncertain how many voting securities will be issued to FNP; and
all non-associated shareholders will have an opportunity to vote on the potential allotment of voting securities to FNP; and
if the non-associated shareholders approve the potential maximum allotment of voting securities to the FNP, then, by implication, the shareholders also approve the allotment of a lesser number of voting securities to the option holders.
Note: The preceding statement of reasons should be read in conjunction with the statement of reasons appended to the: