Public market takeover activity has been limited in recent years but it seems logical to assume that the same conditions which are driving an increase in general M&A activity will provide a stimulus to the public markets as well.
One development which might encourage public market M&A is the reform of the laws governing public company schemes of arrangement and the public acceptance by the New Zealand Takeovers Panel that schemes are a legitimate transaction structure, even in situations where the transaction concerned could be effected through a takeover offer regulated under the Takeovers Code. This represents a step-change from the Panel's earlier view that such transactions were "takeovers in drag".
Subject to shareholders being provided with disclosure and explanatory material of an equivalent standard to offers under the Takeovers Code, and shareholder interest classes being properly identified, the Panel has indicated that it will not object to an application seeking court approval for a scheme of arrangement involving the effective takeover of a company subject to the Takeovers Code, including where existing shareholders are squeezed out for cash.
One challenging feature of a scheme involving a public company is the shareholder votes needed for approval. Separate resolutions of each interest group are required, with 75% of the votes of those shareholders entitled to vote and voting needed for passage. Potentially more challenging in some contexts is the additional need for a resolution supported by a simple majority of all votes entitled to vote, regardless of the number of votes actually cast. This second resolution may, depending on the makeup of the relevant share register, require greater proxy solicitation than has been New Zealand practice.
It is unlikely that schemes will immediately assume the prominence they enjoy in Australia. Although now blessed by the Panel, they continue to be regarded with suspicion by some prominent market commentators, and the historical hostility of the Panel may influence the thinking of public company directors. Over time, however, the attractive features of a scheme versus a takeover offer, such as their inherent all-or-nothing certainty and the lower thresholds for approval, could make them a more common feature of the New Zealand markets.
The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.
