NZE
14/09/2012 10:10
WAV/RULE
REL: 1010 HRS New Zealand Experience Limited
WAV/RULE: NZE: NZE - Waiver from NZSX Listing Rules 3.5.1 and 9.2.1
NZX Market Supervision Decision
New Zealand Experience Limited ("NZE")
Application for waiver from NZSX Listing Rules 3.5.1 and 9.2.1
Background
1. NZE is listed on the NZX Main Board.
2. H Anthony Arrell and Arthur Richard Andrew Scace as executors and trustees
("Trustees") of the estate of George Ryerson Gardiner (the "Estate"), own
74.86% of the shares of NZE.
3. On 3 August 2012, NZE released an announcement to the market stating that:
(a) The Trustees of the Estate had told NZE that they wished a process to be
commenced seeking expressions of interest for their shareholding in NZE (the
"Process") and that they wished NZE to assist in the Process; and
(b) The Directors of NZE had advised the Trustees that they would be willing
to assist, while acting in the interests of all NZE shareholders.
4. On 22 August 2012, NZE released a further announcement to the market to
the effect that:
(a) NZE and the Estate had entered into a process agreement ("Agreement")
whereby:
(i) NZE will assist the Estate with the Process ("Services"); and
(ii) the Estate will bear NZE's actual costs incurred in providing the
Services (including any costs relating to time spent by NZE's Directors) by
reimbursing NZE for the costs; and
(b) Should the Estate receive an offer acceptable to the Estate, then the
bidder would be obliged to make an offer to all NZE shareholders in the form
and manner required by the Takeovers Code unless an alternative form of offer
is presented to the Estate, in which case, the Board of Directors of NZE may
vary this takeover offer requirement if it is in the interests of
shareholders.
5. The Estate is a Related Party of NZE for the purposes of NZSX Listing Rule
("Rule") 9.2.3(b), as it has a Relevant Interest in more than 10% of NZE's
shares.
6. As at the date of NZE's waiver application, NZE's Average Market
Capitalisation was $13.56 million. Therefore, if the total amount paid by the
Estate to NZE for its Services exceeds $135,600, the Services will be a
Material Transaction for the purposes of Rule 9.2.2(e).
7. Under the Agreement, the charges for time spent by the Directors of NZE
in providing the Services to the Estate will be fixed at an hourly rate (the
"Director Costs"). Timesheets recording time spent by the Directors will be
submitted to the Estate with any reimbursement request. The Estate will not
be required to reimburse (or refund) any costs recovered by NZE from bidders
who make a takeover offer. The amount of the Director Costs is at this stage
unknown.
8. Payment by NZE of Director Costs to each Director will constitute the
payment of remuneration to that Director in his capacity as a Director of
NZE. The Director Costs will be in excess of the amount of director
remuneration authorised by the shareholders of NZE under Rule 3.5.1.
9. NZE has applied to NZX Market Supervision ("NZXMS") for a waiver from:
(a) the requirement in Rule 9.2.1 to seek shareholder approval of the
Services to be provided to the Estate; and
(b) the requirement in Rule 3.5.1 to seek shareholder approval for the
payment of Director Costs to the Directors of NZE.
Application One
10. In support of its application for a waiver from Rule 9.2.1 NZE makes the
following submissions:
(a) the policy objective of Rule 9.2 is to prevent a listed company from
entering into a transaction with a Related Party (which may have a degree of
influence over the listed company) that is unduly favourable to the Related
Party;
(b) the Estate will reimburse the actual costs incurred by NZE in providing
the Services. There will be no element of negotiation of the costs between
NZE and the Estate and no opportunity for the Estate to bring pressure to
bear on NZE in respect of the amounts recovered;
(c) it may be that the total costs payable by the Estate for the Services
under the Agreement will not exceed 1% of NZE's Average Market
Capitalisation. If they do exceed that figure, they are not likely to exceed
it by a substantial margin;
(d) if the sale of the Estate's interest in NZE proceeds by way of a third
party making a Takeovers Code compliant offer for the NZE shares, the third
party purchaser will be obliged to reimburse NZE for its costs in dealing
with that offer from the time notice of the offer is given; and
(e) to comply with Rule 9.2, NZE would be required to convene and hold a
meeting of shareholders and to obtain an independent appraisal report. The
cost of doing so would be completely disproportionate to any benefit to
minority shareholders achieved by applying Rule 9.2.
Application One - Rules
11. Rule 9.2.1 states that:
"An Issuer shall not enter into a Material Transaction if a Related Party is,
or is likely to become:
(a) a direct or indirect party to the Material Transaction, or to at least
one of a related series of transactions of which the Material Transaction
forms part; ...
unless that Material Transaction is approved by an Ordinary Resolution of the
Issuer."
12. Rule 9.2.2 states that:
"For the purposes of Rule 9.2.1, "Material Transaction" means a transaction
or a related series of transactions whereby an Issuer: ....
(e) provides or obtains any services (including without limitation obtaining
underwriting of Securities or services as an employee) in respect of which
the actual gross cost to the Issuer in any financial year (ignoring any
returns or benefits in connection with such services) is likely to exceed an
amount equal to 1% of the Average Market Capitalisation of the Issuer."
13. In addition Footnote 1 to Rule 9.2.1 states that:
"NZX may waive the requirement to obtain the approval of a resolution for the
purposes of Rule 9.2.1 if it is satisfied that the personal connections with,
or involvement or personal interest of a Related Party are immaterial or
plainly unlikely to have influenced the promotion of the proposal to enter
into the transaction or its terms and conditions."
Application One - Decision
14. On the basis that the information provided to NZXMS is full and accurate
in all material respects, NZXMS grants NZE a waiver from the requirement of
Rule 9.2.1 to seek shareholder approval of the Services.
15. The waiver in paragraph 14 is granted on the conditions that:
(a) The Directors of NZE certify to NZX that, in their opinion, the Services
to be provided are in the best interests of the minority NZE Shareholders
(being the NZE Shareholders other than the Estate); and
(b) NZE's annual report that relates to the period for which NZE relies on
this waiver will contain a description of this waiver and its effects.
Application One - Reasons
16. In coming to the decision to grant NZE a waiver from Rule 9.2.1 NZXMS
has considered the following matters:
(a) The policy behind Rule 9.2.1 is to ensure that there is no actual, or
perceived, favourable treatment given to a Related Party that is a party to a
Material Transaction. NZXMS takes comfort from the Directors' certificate
that this is not the case. NZXMS is satisfied that, when considering Footnote
1 to Rule 9.2.1, the present circumstances are such that a waiver will not
impugne the policy considerations of Rule 9.2.1, and should therefore be
granted;
(b) NZXMS accepts NZE's submission that, were NZE required to convene and
hold a meeting of shareholders, and to obtain an independent appraisal
report, that the cost of doing so would be completely disproportionate to any
benefit to minority shareholders achieved by applying Rule 9.2; and
(c) NZXMS will receive a certificate from the Directors that the Services to
be provided are in the best interests of the minority NZE Shareholders (being
the NZE Shareholders other than the Estate).
Application Two
17. In support of its application for a waiver from Rule 3.5.1, NZE makes the
following submissions:
(a) The policy underlying Rule 3.5.1 is to ensure that undue influence is not
exercised by a Director to cause a transfer of value from an Issuer to the
Director without scrutiny and approval of the shareholders of the Issuer.
This policy is not offended in this case because:
(i) the Directors will be paid for time and attendances at an agreed fixed
hourly rate. Timesheets recording the time spent by Directors will be
submitted to the Estate with any reimbursement request. Accordingly, the
Director Costs will reflect a genuine reimbursement for the time incurred by
the Directors in relation to the Process (and any transaction that results
from the Process). NZE submits that, in these circumstances, there is
unlikely to be any actual influence brought to bear by the Directors to
secure an excessive or unfair payment;
(ii) there will be no transfer of value from NZE (or its shareholders, other
than the Estate) to Directors as the Director Costs will be paid to NZE by
the Estate;
(iii) there will be no cash-flow or counterparty risk to NZE as NZE will
only pay the Directors the Director Costs once NZE has received payment of
those costs from the Estate;
(iv) immediately after the Board authorises the payment of the Director
Costs, particulars of the payment must be entered in NZE's interests register
in accordance with section 161(2) of the Companies Act 1993 (the "Act");
(v) the Director Costs will be disclosed to the shareholders of NZE in the
annual report as section 211(e) of the Act requires disclosure of particulars
of entries in the interests register and section 211(f) of the Act requires
disclosure of the total remuneration received by a Director, in each case
during the relevant accounting period; and
(vi) the waiver will be disclosed by NZX and in NZE's annual report (as
required by Rule 10.5.5(f));
(b) The following suggested conditions will establish appropriate and
sufficient shareholder protections that are consistent with the policy
grounds behind Rule 3.5.1:
(i) NZE will only pay the Directors the Director Costs:
(A) for actual attendances by Directors in connection with the Process (and
any transaction that results from the Process) at the agreed fixed hourly
rate set out in the Agreement; and
(B) only after NZE has received payment of the Director Costs from the
Estate;
(ii) the Directors sign the directors' certificate required by section 161
of the Act stating that, in their opinion, the payment of the Director Costs
is fair to NZE and the grounds for that opinion, and provide NZX with a copy
of that certificate; and
(iii) the decision to make payment of the Director Costs is unanimously
approved by the Directors;
(c) NZE's next annual meeting is not due until the end of October 2012.
Accordingly, absent a waiver, NZE will need to incur the cost (in both time
and money) of preparing a notice of meeting and holding a meeting of
shareholders in circumstances where there is no actual cost to NZE or the
shareholders (other than the Estate) from the payment of the Director Costs.
NZE submits that the costs involved in convening and holding a meeting of
shareholders in these circumstances would be disproportionate to any
perceived benefit to the shareholders;
(d) the granting of a waiver will have no material adverse effect on NZE
shareholders. To the contrary, it will enable NZE to avoid the costs and
delays associated with convening a shareholders meeting in circumstances
where there is no actual cost incurred by NZE.
Application Two - Rule
18. Rule 3.5.1 states that:
"No remuneration shall be paid to a Director in his or her capacity as a
Director of the Issuer or any Subsidiary, other than a Subsidiary which is
Listed (including any remuneration paid to that Director by a Subsidiary,
other than a Subsidiary which is also Listed) unless that remuneration has
been authorised by an Ordinary Resolution of the Issuer."...
Application Two - Decision
19. On the basis that the information provided to NZXMS is full and accurate
in all material respects, NZXMS grants NZE a waiver from the requirement in
Rule 3.5.1 to seek shareholder approval for the payment of Director Costs.
20. The waiver in paragraph 19 is granted on the following conditions:
(a) NZE will only pay the Directors the Director Costs:
(i) for actual attendances by Directors in connection with the Process (and
any transaction that results from the Process) at the agreed fixed hourly
rate set out in the Agreement; and
(ii) only after NZE has received payment of the Director Costs from the
Estate;
(b) the Directors sign the directors' certificate required by section 161 of
the Act stating that, in their opinion, the payment of the Director Costs is
fair to NZE and the grounds for that opinion, and provide NZX with a copy of
that certificate;
(c) the decision to make payment of the Director Costs is unanimously
approved by the Directors; and
(d) NZE's annual report that relates to the period for which NZE relies on
this waiver will contain a description of this waiver and its effects.
Application Two - Reasons
21. In coming to the decision to grant NZE a waiver from Rule 3.5.1, NZXMS
has considered the following matters:
(a) Payment by NZE of the Director Costs will not result in any transfer of
value from NZE to the Directors because the Director Costs will be paid to
NZE by the Estate; and
(b) NZXMS will receive certification from the Directors that, in their
opinion, the payment of the Director Costs is fair to NZE, and the grounds
for that opinion.
ENDS
End CA:00227309 For:NZE Type:WAV/RULE Time:2012-09-14 10:10:43
