Statement of reasons
This notice applies to acts or omissions occurring on or after 6 March 2013 and is revoked on the close of 31 December 2015.
The Takeovers Panel (the Panel) has granted—
an exemption from rule 16(b) of the Takeovers Code (the Code) to Veritas Investments Limited (VIL); and
an exemption from rule 7(d) of the Code to Mad Butcher Holdings Limited (MBH), Collins Asset Management Limited (CAM), Timothy John Cook (Cook), Mark Charles Darrow (Darrow), and Simon Phillip Wallace and Sievwrights Trustee Services (No. 4) Limited as trustees of the Wallace Family Trust (Wallace) (together the specified allottees) to the extent that that rule requires the notice of meeting to vote on a resolution to approve the allotment of certain voting securities in VIL to the specified allottees to comply with rule 16(b) of the Code; and
an exemption from rule 6(1) of the Code to the trustees of the Michael Morton No. 2 Family Trust from time to time (currently Michael Morton and WBM Trustee Limited) in their capacity as trustees (the trustees) in respect of any increase in their holding of voting securities in VIL that results from a transfer of voting securities in VIL from Wilmat Holdings Limited (WHL) to the trustees.
VIL is a code company with shares quoted on the NZX Main Board. VIL has entered into an agreement (the sale and purchase agreement) to acquire the Mad Butcher business and assets from MBH for a purchase price of $40 million, to be satisfied by $20 million in cash and $20 million in ordinary shares in VIL (the acquisition).
To fund the cash component of the acquisition, VIL proposes to undertake a public offering of up to $25 million of ordinary shares in VIL (the public offer). Allotment of shares under the public offer will occur simultaneously with completion (and allotment of shares to MBH) under the acquisition.
VIL has received firm commitments to subscribe for shares under the public offer from the following parties:
CAM, a 16.93% shareholder in VIL, for $7.5 million of shares:
Ambrosia Trustees Limited, for $2.0 million of shares:
Cook, for $500,000 of shares:
RMI Holdings Limited (RMI), for $200,000 of shares:
Darrow, for $100,000 of shares:
Wallace, for $100,000 of shares.
The public offer will also be partly underwritten as to $12.7 million by Craigs Investment Partners Limited (CIP), which has in turn entered into sub-underwriting agreements with CAM as to $2.5 million and RMI as to $2.0 million (together the underwriting arrangements). Amounts subscribed by CAM, Cook, and RMI as firm commitments, together with the sub-underwriting commitments of CAM and RMI, will fully reduce CIP’s underwriting obligation.
If CAM was required to take up the maximum number of shares that it could be required to subscribe for under the underwriting arrangements, together with the number of shares that it has entered into a firm commitment to subscribe for under the public offer, its holding of voting rights in VIL would be greater than 20%.
VIL and MBH have agreed that MBH will hold less than 50% of the aggregate shares on issue in VIL following completion of the acquisition and the public offer. If the public offer is undersubscribed such that the number of shares to be allotted under it would be insufficient to ensure that MBH will hold less than 50% of the shares on issue after allotment of the shares to MBH under the acquisition, the share and cash components of the purchase price under the acquisition will be adjusted and MBH will receive fewer shares and more cash (or MBH may provide a vendor loan to VIL). Depending on the level of subscriptions under the public offer, MBH could hold up to 49.99% of the voting rights in VIL following completion of the acquisition and the public offer.
Cook is an associate of CAM because Cook is managing director of CAM. Cook and Darrow are directors of VIL and, together with Simon Phillip Wallace, a former director of VIL, were responsible for the development of the acquisition. Darrow and Wallace have agreed to be treated as associates of Cook and CAM for the purposes of these transactions.
At a meeting of shareholders to be held on or about 3 April 2013, VIL proposes to ask shareholders to approve the following allotments of shares in VIL under rule 7(d) of the Code:
the allotment of shares to MBH under the sale and purchase agreement:
the allotment of shares to CAM under its firm commitment under the public offer and the underwriting arrangements:
the allotment of shares to Cook, Darrow, and Wallace, as associates of CAM, under their firm commitments under the public offer.
However, VIL is unable to provide the information that is required by rule 16(b) of the Code to be included in the notice of meeting for shareholder approval because VIL is unable to specify—
the exact numbers of shares that will be allotted to MBH under the sale and purchase agreement and to CAM in aggregate in accordance with its firm commitment under the public offer and the underwriting arrangements (and the related relevant percentages required to be stated under rule 16(b)), because they will depend on the level of subscriptions under the public offer and will not be known until the close of the public offer; and
the exact percentages required to be stated under rule 16(b) in relation to the shares that will be allotted to Cook, Darrow, and Wallace in accordance with their firm commitments under the public offer, as these percentages are dependent upon the level of subscriptions under the public offer and will not be known until the close of the public offer.
The exemptions from rules 7(d) and 16(b) of the Code in clauses 5 and 6 of the notice relate to the disclosure of information in the notice of meeting to consider the allotments to the specified allottees, and the particulars of the voting securities to be allotted to those specified allottees under the sale and purchase agreement (in the case of MBH), the public offer (in the case of CAM, Cook, Darrow, and Wallace), and the underwriting arrangements (in the case of CAM) (together the allotments).
The exemptions are subject to conditions that ensure that the other shareholders in VIL will be given sufficient information about the allotments to enable them to decide for themselves the merits of the proposal.
The Panel considers that it is appropriate and consistent with the objectives of the Code to grant the exemptions because—
it is not possible for VIL to comply with rule 16(b) given the uncertainty over the level of subscriptions under the public offer; and
other shareholders will be given sufficient information about the allotments to enable them to decide for themselves the merits of the proposal; and
other shareholders will have the opportunity to vote on the potential allotment of voting securities to the specified allottees under the allotments; and
if the other shareholders approve the potential maximum allotments of voting securities to the specified allottees, then, by implication, they are able to be taken to approve any lesser number and percentage of voting securities that are actually allotted under the allotments during the period of this notice.
Transfer to trustees
MBH is a wholly owned subsidiary of Wilmat Holdings Limited (WHL), which is itself wholly owned by the trustees.
WHL proposes to liquidate MBH following the expiry of the warranty claims period under the sale and purchase agreement and to transfer MBH’s shares to WHL. Any transfer from MBH to WHL will take place in reliance on the exemption from rule 6(1) of the Code for transfers within wholly owned groups in clause 25 of the Takeovers Code (Class Exemptions) Notice (No 2) 2001 (the transfers within wholly owned groups exemption).
The trustees then propose to liquidate WHL and distribute the shares held by WHL to the trustees. This transfer will not be able to take place in reliance on the transfers within wholly owned groups exemption because the trustees include an individual. To the extent WHL is transferring more than 20% of the voting rights in VIL, this transfer would breach rule 6(1) of the Code.
The exemption from rule 6(1) of the Code relates to the transfer of voting securities from WHL to the trustees.
The exemption also permits the appointment of a new trustee or the reduction in the number of trustees of the Michael Morton No. 2 Family Trust for a bona fide reorganistion of the trust, or that is the result of an event beyond the control of the trustees, where there is no increase in voting control in VIL on behalf of that trust.
The Panel considers that it is appropriate and consistent with the objectives of the Code to grant this exemption because there is no change in the ultimate control of the voting rights, which will remain with the trustees before and after the transfer.