Ann: WAV/RULE: BRL: BRL - Application for Waiver

• Release Date: 02/09/13 18:04
• Summary: WAV/RULE: BRL: BRL - Application for Waiver and Ruling
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BRL
02/09/2013 16:04
WAV/RULE

REL: 1604 HRS Bathurst Resources (New Zealand) Limited

WAV/RULE: BRL: BRL - Application for Waiver and Ruling

NZX Regulation Decision
Bathurst Resources (New Zealand) Limited ("BRL")
Application for a ruling under NZSX Listing Rule 7.5
Application for a waiver from NZSX Listing Rule 9.2.1

30 August 2013

Background

1. Bathurst Resources (New Zealand) Limited ("BRL") is primary listed on both
the Australian Securities Exchange and NZX.
2. BRL intends to undertake a placement of BRL ordinary shares to selected
New Zealand, Australian and certain other offshore investors (both existing
shareholders and others) in accordance with Rule 7.3.5 ("Placement").
3. Forsyth Barr Group Limited and the Royal Bank of Canada ("Lead Managers")
will be appointed lead managers for the Placement on terms agreed with BRL
("Lead Managers' Appointment").  As Lead Managers they will commit to
procuring payment to BRL of the moneys due from subscribers in the Placement
and, on a default by a subscriber, will be allotted the BRL ordinary shares
subscribed for by that defaulting subscriber.
4. BRL is also considering the possibility of undertaking a share purchase
plan ("Proposed SPP") in accordance with Rule 7.3.4(c) following completion
of the Placement.  BRL is prudently proceeding on the basis, for these
decisions, that the Proposed SPP will proceed (although these decisions are
not altered if it does not), and the Placement, Proposed SPP (if it proceeds)
and Lead Managers' Appointment are considered to be a related series of
transactions for the purposes of the Rules.
5. BRL has applied to NZX Regulation ("NZXR") for a ruling and a waiver from
the NZSX Listing Rules ("Rules") in relation to the Placement, Proposed SPP
and Lead Managers' Appointment.

Application - Rule 7.5

6. Rule 7.5 requires shareholder approval for the precise terms and
conditions of an issue where there is a significant likelihood of the issue
resulting in any person or group of Associated Persons who hold at least 1%
of the Issuer prior to the issue materially increasing their ability to
exercise effective control of the Issuer.
7. Allotments made pursuant to the Placement are subject to the Takeovers
Code ("Code") which regulates the manner in which a shareholder may increase
voting control above 20%.
8. BRL has applied for a ruling that Rule 7.5 does not apply to the Placement
or to any allotment to the Lead Managers pursuant to the Lead Managers'
Appointment. In support of its application BRL has submitted as follows:
(a) NZXR has recently indicated that it considers the 25% threshold to be a
key control threshold in that it guarantees the holder the ability to
exercise negative control by "blocking" a special resolution (refer NZXR
decision 4 July 2013 in relation to Vital Healthcare Property Trust).  In
addition NZXR has previously ruled that a holding of 20% was a "commonly
understood threshold at which a person may be regarded as having control"
(refer NZXR decision of 23 October 2012 in relation to the Fonterra
Shareholders' Fund). These statements are consistent with the thresholds
prescribed by the Code.
(b) The protection offered by the Code is proposed to be recognised in the
Rules, with the current exposure draft containing proposed amendments to the
Rules ("Proposed Amendments") which include altering Rule 7.5 so that it does
not apply to Code Companies.  The Proposed Amendments recognize that the Code
regulates changes in control of Code Companies rendering Rule 7.5
superfluous; and
(c) If the ruling is not granted, there would be increased costs and delay
for BRL in order to complete the Placement, including the costs and delay
associated with convening a shareholder meeting and obtaining an appraisal
report.  Such costs and delay are unnecessarily prohibitive where there is
already the ability for existing shareholders to increase their holding to
the threshold permitted by the Code through alternative mechanisms (i.e. by
acquiring shares on market).

Rule 7.5

9. Rule 7.5 provides as folllows:
"Issues and Buybacks of Securities Affecting Control
 7.5.1 Notwithstanding the provisions of Rules 7.3 and 7.6, no issue,
acquisition, or redemption of Securities shall be made by an Issuer if:
 (a) there is significant likelihood that the issue, acquisition, or
redemption will result in any person or group of Associated Persons
materially increasing their ability to exercise, or direct the exercise of
(either then or at any future time) effective control of that Issuer; and
 (b) that person or group of Associated Persons is entitled before the issue,
acquisition, or redemption to exercise, or direct the exercise of, not less
than 1% of the total Votes attaching to Securities of the Issuer;
unless the precise terms and conditions of the issue, acquisition or
redemption have been approved by an Ordinary Resolution of the Issuer."

Decision

10. On the basis that the information provided to NZXR is full and accurate
in all material respects, NZXR rules that any BRL shareholder who together
with its Associated Persons (who are "associates" for the purposes of the
Code) following the Placement holds no more than 20% of the ordinary shares
in BRL is not to be regarded as "materially increasing their ability to
exercise, or direct the exercise of (either then or at any future time)
effective control" for the purposes of Rule 7.5.

Reasons
11. In coming to the decision to provide the ruling set out in paragraph 10,
NZXR has considered that:
(a) a 20% ownership holding is a commonly understood threshold in relation to
control as is recognised by the Takeovers Code;
(b) the Takeovers Code will regulate any increases in control in these
circumstances;; and
(c) the decision is consistent with the precedent cited in paragraph 8(a)
above.

Application Rule 9.2.1

12. Rule 9.2.1 requires an Issuer to seek shareholder approval by ordinary
resolution where a Related Party is a direct or indirect party to a Material
Transaction or at least one of a related series of transactions of which the
Material Transaction forms part.
13. The Placement, Lead Manager's Appointment and Proposed SPP are a "related
series of transactions" for the purposes of Rule 9.2.1.
14. BRL is seeking to raise an amount in excess of $16.7 million under the
Placement.  BRL's market capitalisation at close of trading on 16 July 2013
was approximately $146,840,000
15. Rule 9.2.3(b) provides that a person who holds a Relevant Interest in
more than 10% of an Issuer's securities is a Related Party for the purposes
of the Rules. BRL intends to allow such persons to participate in the
Placement and Proposed SPP.
16. Rule 9.2.2(b) provides that a "Material Transaction" is one in which an
Issuer issues Securities having a value of more than 10% of the Issuer's
Average Market Capitalisation. Rule 9.2.2(c) provides that a "Material
Transaction" is one in which an Issuer receives money that is more than 10%
of the Issuer's Average Market Capitalisation. As noted in paragraph 14
above, Securities having a market value in excess of 10% of BRL's Average
Market Capitalisation are expected to be issued under the Placement and to
raise in excess of $16.7 million in cash being an amount of money in excess
of 10% of BRL's Average Market Capitalisation.
17. Rule 9.2.2(e) provides that a Material Transaction is one in which an
Issuer obtains services in respect of which the actual gross cost to an
Issuer in any financial year is likely to exceed 1% of the Issuer's Average
Market Capitalisation. BRL intends to pay the Lead Managers (or related
parties) lead manager and arranger fees in excess of 1% of the Average Market
Capitalisation of BRL.
18. Rule 9.2.4(c) exempts issues of Securities by an Issuer under Rule
7.3.4(c). This exemption will apply to the Proposed SPP.
19. BRL has requested a waiver from Rule 9.2.1 to allow BRL to conduct the
Placement, and enter into the Lead Managers' Appointment, so as to allow
persons who hold 10% or more of BRL's Securities and their Associated Persons
(each such person or Associated Person being a "Substantial Holder") to
participate in the Placement.  No Substantial Holder will be a BRL Director
or an Associated Person of a BRL Director, or otherwise be a Related Party of
BRL for the purposes of the Rules.
20. In support of its application, BRL has submitted as follows:
(a) The policy of Rule 9.2.1 is to regulate transactions whereby a Related
Party to a Material Transaction may gain favourable consideration (or there
may be a perception that a person may gain favourable consideration) due to
its relationship with the Issuer.  This is not the position in relation to
the Placement because all investors who are invited by BRL to participate in
the Placement will be invited to do so on the same terms and conditions, and
for the same consideration per share, as any other investor who participates
in the Placement.
(b) The terms of the Lead Managers' Appointment between BRL and the Lead
Managers' will be negotiated on an arms' length and commercial basis.  No
Substantial Holder will have any involvement in the negotiation of the terms
of the Lead Managers' Appointment.
(c) Given that the policy underlying Rule 9.2 is to safeguard non-associated
shareholders, there is no value in requiring shareholder approval for the
Placement, Proposed SPP and/or Lead Managers' Appointment given that the
status of a Substantial Holder as a Related Party will have no bearing on the
terms or quantum of their participation in the Placement or Proposed SPP.
(d) If the waiver is not granted, there would be increased costs and delay
for BRL in order to complete the Placement, including the costs and delay
associated with convening a shareholder meeting and obtaining an appraisal
report.  Such costs and delay are unnecessarily prohibitive where the policy
behind Rule 9.2.1 is not undermined.
(e) NZX Regulation has previously granted analogous waivers in respect of
Rule 9.2.1 to EBOS Group Limited (29 May 2013) and Argosy Property Limited (1
July 2013).

Rules 9.2.1, 9.2.2 and 9.2.3

21. The relevant Rules provide as follows:
"9.2.1 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; or
...
unless that Material Transaction is approve by an Ordinary Resolution of the
Issuer."

"9.2.2 For the purposes of Rule 9.2.1 "Material Transaction" means a
transaction or a related series of transactions whereby an Issuer:
...
(b) issues its own Securities or acquires its own Equity Securities having a
market value in excess of 10% of the Average Market Capitalisation of that
Issuer, save in the case of an issue pursuant to Rule 7.3.5 where only the
market value of those Securities being issued to the Related Party or to any
Employees (as defined in Rule 7.3.6) of the Issuer are to be taken into
account; or
(c) borrows, lends, pays or received, money, or incurs an obligation, of an
amount in excess of 10% of the Average Market Capitalisation of the Issuer;
or
...
(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; or"

"9.2.3 For the purposes of Rule 9.2.1, "Related Party" means a person who is
at the time of a Material Transaction, or was at any time within six months
before a Material Transaction:
...
(b) the holder of a Relevant Interest in 10% or more of a Class of Equity
Securities of the Issuer carrying Votes; or"

"9.2.4 Rule 9.2.1 shall not apply to:
...
(c) the issue of Equity Securities by an Issuer under Rule 7.3.4(c) or Rule
7.3.11(e);"

Decision

22. On the basis that the information provided to NZXR is full and accurate
in all material respects, NZXR grants BRL a waiver from Rule 9.2.1 so that
BRL is not required to seek shareholder approval for the Placement and Lead
Managers' Appointment to the extent that a Substantial Holder participates in
the Placement, on the following conditions:
(a) each of the Directors of BRL certify to NZXR that:
 i. he is not Interested (as that term is defined in Rule 3.4.3) in the
Placement; and
 ii. in his opinion the entry into the Placement is fair and reasonable to
all shareholders of BRL and is in the best interests of BRL;
 iii. none of the Substantial Holders have been involved with the formulation
by BRL of the Placement, Proposed SPP and Lead Managers' Appointment;
(b) the terms and conditions on which a Substantial Holder participates in
the Placement and Proposed SPP are identical to those offered to others who
participate in the Placement and Proposed SPP, respectively;
(c) none of the Substantial Holders have influenced the decision of the
Directors of BRL to appoint the Lead Managers on the terms proposed;
(d) the Substantial Holders will only be a Related Party for the purposes of
the Rules by virtue of Rule 9.2.3(b) or by being an Associated Persons of a
person referred to in Rule 9.2.3(b), in particular no Substantial Holder will
be a BRL Director or an Associated Person of a BRL Director; and
(e) this waiver and its conditions and effects are disclosed in BRL's half
year and annual reports for the year in which the Placement occurs.

Reasons

23. In coming to the decision to grant BRL a waiver from Rule 9.2.1,
contained in paragraph 22 above, NZXR has considered the following matters:
(a) The purpose of the prohibition in Rule 9.2.1 is to ensure that undue
influence is not exercised by a Related Party to cause a transfer of value to
a Related Party or to cause entry into transactions on terms that are
unfairly favourable to that Related Party without scrutiny. The granting of
the waiver in paragraph 22 will not offend the policy behind Rule 9.2.1;
(b) The Substantial Holders have not participated in the formulation of the
proposal to undertake the Placement, Proposed SPP and Lead Managers'
Appointment;
(c) In this instance it is unlikely that the Substantial Holders could have
influenced BRL's decision to undertake the Placement, Proposed SPP and Lead
Managers' Appointment. NZXR has no reason not to accept that:
      i. The terms and conditions on which Securities are to be offered to
Substantial Holders under the Placement are identical to those offered to
others participating in the Placement and have been set at arms' length; and
      ii.  The BRL Board's decision to undertake the Placement and Proposed
SPP and appoint the Lead Managers has not been influenced by any Substantial
Holder as a Related Party;
(d) There is precedent for the decisions including waivers granted to:
     i. Argosy Limited - 1 July 2013
    ii. Ebos Group Limited - 29 May 2013; and
    iii. Pyne Gould Corporation Limited - 26 July 2011.

Confidentiality

24. BRL has requested that its application and this decision be kept
confidential pending finalisation of the Placement and the Lead Managers'
Appointment and the subsequent announcement to the market.
25. In accordance with Footnote 1 to Rule 1.1.12, NZXR grants BRL's request.
ENDS
End CA:00240552 For:BRL    Type:WAV/RULE   Time:2013-09-02 16:04:30