Panel Seeks Urgent Comment On Ngai Tahu Exemption
15 December 2003
Panel Seeks Urgent Comment On Ngai Tahu Exemption Request
Ngai Tahu Holdings Corporation Limited (Ngai Tahu) has given notice of its intention to make a full takeover offer for all the shares it does not own in Shotover Jet Limited (Shotover). The offer is expected to be made on Friday 19 December 2003.
Ngai Tahu, with a holding of 88.3%, already has close to the 90% threshold required for it to become the dominant owner of Shotover. If Ngai Tahu reaches the 90% level it would then have 30 days from the day it becomes dominant owner, in which it must issue an “acquisition notice” under rule 54 of the Code. That notice must specify the consideration that Ngai Tahu would pay to outstanding security holders of Shotover for their shares.
of consideration Ngai Tahu would have to pay can be
determined in one of two ways:
- if, by the date Ngai Tahu has to send its acquisition notice to outstanding shareholders, it has received acceptances from holders of more than 50% of the shares under offer (thereby increasing its control of Shotover to some 94.1%) then it must compulsorily acquire shares at the offer price (currently indicated to be $1.03 per share). Outstanding shareholders would have no right to object to that price;
- if, by the date Ngai Tahu has to send its acquisition notice to outstanding shareholders, it has not received acceptances from holders of more than 50% of the shares under the offer, then it must compulsorily acquire shares at a cash sum that has been certified as fair and reasonable by an independent adviser.
- If, 14 days after sending out its notice, holders of 10% of the shares who have not accepted the offer object to that price, then the price to be paid must be set by expert determination by an expert appointed by the Panel.
Ngai Tahu has sought an exemption from the Panel to
allow it to delay sending the acquisition notice until the
- 30 days after receiving acceptances of more than 50% of the equity securities that are the subject of the offer; or
- 30 days after the closing date of the offer.
The Panel is sympathetic to this request. It is
consistent with proposals included in the Panel’s discussion
paper of April 2003 and with its recent recommendations to
the Minister of Commerce for technical changes to the Code.
However the Panel favours an exemption for Ngai Tahu that
would mean that:
- the acquisition notice must be sent within 30 days of the closing date of the offer; and
- consistent with another recommendation made by the Panel to the Minister, the offer period should not exceed 90 days.
The Panel supports an exemption for Ngai Tahu, and a
corresponding change to the Code, because the compulsory
acquisition procedures in the Code do not work well when an
offeror already has close to 90% of the shares in the target
company when it makes its offer. If the offeror then reaches
the 90% level very quickly it must issue its acquisition
- very probably while its offer is still open, which means that shareholders receive an offer and a compulsory acquisition notice at the same time, possibly providing different consideration. This is confusing for shareholders; and
- without necessarily knowing by that time whether or not it will achieve a level of acceptances of 50% of the shares under offer, and therefore not knowing whether or not it must appoint an independent adviser to certify that the consideration provided is fair and reasonable.
If the Panel does not grant Ngai Tahu the exemption sought there could be confusion for shareholders and unnecessary compliance costs for Ngai Tahu. On the other hand, the Panel would not grant an exemption that would remove the need for Ngai Tahu to have to achieve acceptances of 50% of the shares under offer, before it could compulsorily acquire the outstanding shares at its offer price, and with no right of shareholders to object.
If sufficient shareholders resist Ngai Tahu’s offer and thus require Ngai Tahu to pay a compulsory acquisition price that is certified as fair and reasonable by an independent adviser, that right would not be denied them. However, the compulsory acquisition process would not start until after the offer had closed.
Ngai Tahu’s offer is to be made on Friday 19 December 2003 so the Panel needs to settle the terms of any exemption before that date. The Panel welcomes any comments from interested parties on its possible exemption for Ngai Tahu. These should be received by the Panel by 4.00 p.m. on Wednesday 17 December 2003.
Comments should be sent by facsimile letter to 04 471 4619 or by email to email@example.com . Respondents should indicate their interest in the matter, in particular if they are a current shareholder of Shotover.