ARG
19/12/2012 09:51
WAV/RULE
REL: 0951 HRS Argosy Property Limited
WAV/RULE: ARG: ARG - waiver from NZSX Listing Rule 9.2.1
NZX Regulation Decision
Argosy Property Limited ("ARG")
Application for Waiver from NZSX Listing Rule 9.2.1
Background
1. Argosy Property Limited ("ARG") is a Listed Issuer with ordinary shares
("Shares") Quoted on the NZX Main Board.
2. ARG is considering entering certain transactions to acquire a property or
properties ("Property Acquisitions"). It is intended that the Property
Acquisitions will be part funded by way of:
(a) a placement of shares to institutional and other qualified investors (the
"Institutional Placement"); and
(b) a share purchase plan ("SPP") under which ARG shareholders will have the
opportunity to subscribe for up to $15,000 of Shares.
3. The placement will involve the issue of new Shares in ARG, having an
aggregate subscription price of up to $80 million under NZSX Listing Rule
("Rule") 7.3.5. At ARG's closing share price on 10 December 2012 of $0.95 per
Share, this represents 14.9% of the issued share capital of ARG immediately
preceding the Institutional Placement. The SPP will raise a maximum of $20
million.
4. The Institutional Placement will be conducted by way of a fixed price book
build managed by First NZ Capital Securities Limited ("First NZ Capital") on
behalf of ARG, under which the subscription price which participants in the
Institutional Placement will pay will be determined in advance by the ARG
Board in consultation with First NZ Capital, and the volume of Shares which
participants will receive will be determined by way of a bid process
undertaken immediately after the announcement of the transactions. All
Institutional Placement participants will be required to bid for Shares and
in the event of oversubscriptions any decision as to allocation and scaling
will be at the discretion of the ARG Board.
5. It is expected that the offer of participation in the Institutional
Placement will be made to both existing institutional shareholders in ARG,
including MFL Mutual Fund Limited ("MFL"), and new institutional and other
qualified investors (the "Eligible Investors").
6. MFL is a Related Party of ARG within the meaning of Rule 9.2.3 because:
(a) It is the holder of a Relevant Interest in more than 10% of ARG's issued
share capital (as at 10 December 2012 MFL held 14.98%); and
(b) Mr. Mark Cross (the "Interested Director") is a director of MFL and ARG.
7. The Institutional Placement will constitute a Material Transaction as it
will involve the issue of Shares having a market value in excess of 10% of
ARG's Average Market Capitalisation ("AMC") (as at 10 December 2012, ARG had
an AMC of approximately $522 million). ARG wishes to invite MFL to
participate in the Institutional Placement. However, if MFL participates in
the Institutional Placement, then shareholder approval under Rule 9.2.1 will
be required.
8. Rule 9.2.1 prohibits an Issuer from entering into a Material Transaction
if a Related Party is, or is likely to become, 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 the
Material Transaction is approved by an ordinary resolution of the Issuer.
9. Each of the Property Acquisitions will also likely be a Material
Transaction as each is expected to involve the acquisition of an asset by ARG
having an Aggregate Net Value in excess of 10% of ARG's AMC. If the
Institutional Placement is considered to be one of a related series of
transactions together with the Property Acquisitions for the purposes of Rule
9.2.1, then shareholder approval under Rule 9.2.1 will also be required for
the Property Acquisitions if MFL participates in the Institutional Placement.
Application
10. ARG has applied to NZX Regulation ("NZXR") for a waiver from the
requirement in Rule 9.2.1 to obtain shareholder approval for the
Institutional Placement and Property Acquisitions so that MFL may participate
in the Institutional Placement and to the extent that the Institutional
Placement forms part of a related series of transactions with the Property
Acquisitions.
11. In support of its application ARG notes the following:
(a) "The purpose of the prohibitions in Rule 9.2 are to ensure that undue
influence is not exercised by a majority shareholder or other related parties
to cause a transfer of value to the related person without scrutiny by and
approval of the minorities." (Paragraph 16(a) of the NZX Regulation AFF
waiver decision released on 11 April 2007);
(b) "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." (Footnote 1 to Rule
9.2.1); and
(c) "Any waiver application from NZSX ... Listing Rule 9.2 ... needs to
provide adequate reasons why NZX should grant the waiver. For example, NZX
will usually require comfort, including disinterested Director certification,
that the Material Transaction was for fair value and the decision to enter
the Material Transaction was made independently without undue influence by
the Associated Persons." (The NZX Policy Statement Policy on applications for
waivers in associated party transactions (dated 31 March 1993, Restated
September 2005)).
12. ARG submits that the policy grounds behind Rule 9.2.1, as set out above
in paragraph 11(a), will not be offended by the granting of a waiver from
Rule 9.2.1 because:
(a) MFL will not be a party to, or have any involvement in, the Property
Acquisitions. Its only involvement is as a possible participant in the
Institutional Placement, which will be undertaken to part fund the Property
Acquisitions;
(b) The ARG Directors are not associated with MFL, save for the Interested
Director, who is also a director of MFL. While the full ARG Board has
considered its balance sheet position and funding options with respect to the
proposed Property Acquisitions, no decision has yet been made to proceed with
the Property Acquisitions or the Institutional Placement. If the waiver is
granted, the ARG Board may continue to discuss and consider funding options,
but the Interested Director will not participate in further discussions
around, or vote on, any ARG Board decision in respect of the Institutional
Placement. Accordingly, the Interested Director will not exercise any
influence (let alone undue influence) in respect of ARG's decision to proceed
with the Institutional Placement or the terms thereof;
(c) MFL will be invited to participate in the Institutional Placement on the
same terms, conditions and for the same consideration per Share as every
other Eligible Investor who participates in the Institutional Placement and
therefore will not be favoured; and
(d) The purpose of the Property Acquisitions is to acquire property assets at
an attractive price and the purpose of the Institutional Placement is to
raise funds to part fund the Property Acquisitions. None of these
transactions is designed to transfer value to MFL, and MFL will not be paid
any fee or made any payment by ARG in connection with the Property
Acquisitions or the Institutional Placement.
13. ARG submits that the criteria set out in Footnote 1 to Rule 9.2.1, as set
out above in paragraph 11(b), are satisfied and that there is unlikely to be
any influence brought to bear by MFL to secure an undue advantage because:
(a) The Institutional Placement will be undertaken at a price and on terms
set by ARG, and at levels of subscription by Eligible Investors determined by
book build process. In the event of oversubscriptions, any decision as to
allocation and scaling will be at the discretion of the ARG Board (excluding
the Interested Director);
(b) Identical terms will be offered to all the Eligible Investors (both
Related Party and non-Related Party) who participate in the Institutional
Placement. There will be no opportunity for MFL to participate in the
Institutional Placement other than on an arm's length basis; and
(c) In addition, as noted above, the Interested Director will abstain from
board decisions, and will not participate in board discussions around the
Institutional Placement.
14. ARG has also submitted that the conditions contained below in paragraph
20(b) establish appropriate and sufficient shareholder protections that are
consistent with the NZX policy statement as set out in paragraph 11(c) above.
Furthermore, shareholders who do not participate in the Institutional
Placement will have the opportunity to participate in a SPP for the same, or
less, consideration per Share as offered pursuant to the Institutional
Placement.
Rules
15. Rule 9.2.1 provides:
"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
(b) in the case of a guarantee or other transaction of the nature referred to
in paragraph (d) of the definition of Material Transaction, a direct or
indirect beneficiary of such guarantee or other transaction,
unless that Material Transaction is approved by an Ordinary Resolution of
the Issuer."
16. Footnote 1 to Rule 9.2.1 provides:
"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."
17. Rule 9.2.2 provides:
"For the purposes of Rule 9.2.1, "Material Transaction" means a transaction
or a related series of transactions whereby an Issuer:
(a) Purchases or otherwise acquires, gains, leases (as lessor or lessee) or
sells or otherwise dispose of, assets having an Aggregate Net Value in excess
of 10% of the Average Market Capitalisation of the Issuer; or
(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;"
18. Rule 9.2.3 provides:
"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:
(a) a director or executive officer of the Issuer or any of its Subsidiaries;
or
(b) the holder of a Relevant Interest in 10% or more of a Class of Equity
Securities of the Issuer carrying Votes; or
(c) an Associated Person of the Issuer or any of the persons referred to in
(a) or (b), other than a person who becomes an Associated Person as a
consequence of the Material Transaction itself (or an intention or proposal
to enter into the Material Transaction itself);"
Decision
19. On the basis that the information provided to NZXR is full and accurate
in all material aspects, NZXR grants ARG a waiver from Rule 9.2.1 so that ARG
is not required to seek shareholder approval for the Institutional Placement
and Property Acquisitions in the circumstances where MFL participates in the
Institutional Placement.
20. The waiver granted in paragraph 19 is granted on the following
conditions:
(a) In respect of the Institutional Placement, the Directors of ARG, other
than the Interested Director, certify to NZX that:
(i) they are not Interested (in terms of Rule 3.4.3) in the Institutional
Placement;
(ii) the entry into, and performance, of the Institutional Placement is fair
and reasonable to all ARG shareholders (including those who are not
associated with a Related Party) and is in the best interests of ARG;
(iii) ARG will receive fair value under the Institutional Placement;
(iv) the decision to proceed with the Institutional Placement was approved by
the Directors other than the Interested Director; and
(v) the Interested Director abstained from, and did not participate in
discussion in respect of, Board decisions to proceed with, or relating to the
terms of, the Institutional Placement; and
(b) The Interested Director abstains from, and does not participate in
discussion in respect of Board decisions to proceed with, or relating to the
terms of (including in relation to any decision as to scaling in the event of
oversubscription), the Institutional Placement;
(c) The terms and conditions on which Shares are to be offered to MFL under
the Institutional Placement are identical to those offered to the other
Eligible Investors participating in the Institutional Placement (save as to
allocation in the event of oversubscription, which will be at the discretion
of the Directors of ARG other than the Interested Director);
(d) MFL and its respective associates' maximum potential shareholding after
any allotment due to their participation in the Institutional Placement, will
be less than 20%; and
(e) The waiver, its conditions and its effects are disclosed in the half year
and annual reports for the year in which the transactions take place.
Reasons
21. In coming to the decision to grant the waiver in respect of Rule 9.2.1,
NZXR has considered that:
(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 those Related Parties without scrutiny. The granting
of the waiver in paragraph 19 will not offend the policy behind Rule 9.2.1;
(b) The terms and conditions on which Shares are to be offered to MFL under
the Institutional Placement are identical to those offered to other
institutional investors participating in the Institutional Placement (save as
to allocation in the event of oversubscription, which will be at the
discretion of the Directors of ARG, other than the Interested Director) and
have been set at arms' length terms;
(c) MFL and the Interested Director have not participated in the Property
Acquisition negotiations, price setting or formulation of the terms of the
Institutional Placement. MFL will only participate in the Institutional
Placement on the same terms as all other participants.
(d) The conditions set out in paragraph 20, above, provide comfort that MFL
has not influenced the formulation of the terms of the Institutional
Placement, other than the extent to which MFL may participate in the
competitive bid process to determine the subscription price of the
Institutional Placement;
Confidentiality
22. ARG has requested that its application and the decision be kept
confidential pending any agreement on the Property Acquisitions and the
subsequent announcement to the market.
23. In accordance with Footnote 1 to Rule 1.11.2, NZXR grants ARG's request.
ENDS.
End CA:00231347 For:ARG Type:WAV/RULE Time:2012-12-19 09:51:16
