Ann: GENERAL: MTF: Turners ordinary share offer and Heartland proposal

• Release Date: 23/10/15 16:27
• Summary: GENERAL: MTF: Turners ordinary share offer and Heartland proposal
• Price Sensitive: No
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					MTF
23/10/2015 16:27
GENERAL
NOT PRICE SENSITIVE
REL: 1627 HRS Motor Trade Finances Limited

GENERAL: MTF: Turners ordinary share offer and Heartland proposal

This release has two key purposes:

o To summarise the outcome of the Turners Finance Limited (Turners) offer
o To update you on the proposal from Heartland New Zealand Limited
(Heartland).

Turners offer:

Turners made an offer to ordinary shareholders of $1.15 per ordinary share
and was seeking to acquire up to 20% of MTF's ordinary shares. The offer
closed on 17 October 2015.

The Board confirms that Turners received valid acceptances for 6.67%
(1,539,052) of the ordinary shares in MTF.  This will take Turners' total
holding of ordinary shares to 7.62%.

The MTF constitution contains a restriction on any shareholder or associated
party holding in excess of 10% of the ordinary shares. Turners received valid
acceptances that would increase its holding to less than 10% of MTF shares,
so the transfer of shares must be registered by the Board, subject to certain
criteria. Consequently, the Board has reviewed the acceptances received by
Turners and yesterday passed a resolution approving registration of the
transfers, subject to any cancellations, of 6.67% of the ordinary shares to
Turners.

All ordinary shareholders, including Turners, may continue to buy and sell
ordinary shares they hold in excess of their minimum holding, subject to
Board approval of the transfers being registered. Should any shareholder or
associated person hold in excess of 10% of the voting shares in the future
the Board will need to form a view on the merits of that position, and both
Board approval and a special resolution of shareholders would be required.

Possible takeover offer from Heartland:

Following Turners' offer to MTF shareholders, the Board and shareholders
received a letter dated 18 September 2015 from Heartland New Zealand Limited
expressing interest in making a full takeover offer for MTF.

On 13 October 2015 Heartland sent us a further letter confirming that it
remained interested in pursuing a full takeover offer for MTF and stating
that it would be likely to offer more than $1.50 per share if it did so;
however, any such offer would be subject to a significant due diligence
process.

Heartland has engaged with the board of MTF over the past week to agree the
process and protocols for conducting due diligence.  A confidentiality
agreement was completed with Heartland yesterday to allow it to commence due
diligence with a view to making a full takeover offer if it chooses to do so.

Following consideration of the likely merits of any partial offer from
Heartland, the Board formed the view that it would not be in the best
interests of MTF for Heartland to acquire 10 - 20% of the ordinary shares in
MTF - in particular, because it was difficult to see Heartland adding any
value to the MTF business at such a level and because such a shareholding
would give Heartland a strategic "blocking stake" through an offer that not
all MTF shareholders would have the opportunity to participate in.

Should Heartland present a full takeover offer following its due diligence
process, the Board will respond to that offer in accordance with its legal
obligations, including obtaining a report from an independent reporter on the
merits of the offer.

There are three other important points to note in regard to any future full
takeover offer that might arise:

o If Heartland makes a full takeover offer, it must receive acceptances in
excess of 50% before it can acquire any shares under that offer, and if
Heartland wishes to acquire 100% of MTF it must receive acceptances in excess
of 90%, at which point it could compulsorily acquire all the outstanding MTF
shares.  Heartland could choose to waive the 90% acceptance condition and
acquire a shareholding less than that level, in which case it could not
compulsorily acquire all of MTF's shares.

o To the extent that the commission payments received by originating
shareholders are greater than payments originators might receive from a
competing finance provider (i.e. they are 'above-market'), this above-market
element could be at risk in the event of a successful takeover offer as
control of MTF changed and the new owner could seek to maximise returns to
equity by reducing commissions. Accordingly, there is a value to originating
shareholders' control of MTF (and thereby control of the equity/commission
structure) that is not recognised in the value of a dry ordinary share. A
future takeover offer could look to preserve the current arrangements or to
compensate originators for changes the acquirer wished to make to the
commission structure.  Originators should be aware that, in the latter event,
they would likely receive a value per share that is significantly greater
than our valuation of a dry share. Presently, the Board has not received any
indication from any party that an offer which includes the significant
premium that would be required to compensate originators for changes to the
commission structure and loss of control is likely.

o The approval of the Board and a special resolution of shareholders at a
meeting on the matter are required before a party could hold more than 10% of
MTF's shares.  A shareholding by Heartland could also require amendments to
the MTF constitution.

Other relevant information:

The Board believes that the interest being shown in MTF by both Heartland and
Turners reflects the fact that the business is in good health and is
operating well in an extremely competitive environment. Both parties see
benefits in working with and/or owning MTF and there is potential for some of
those benefits to flow through to shareholders. The company continues to have
competitive, low cost funding, with strong investor demand on the wholesale
funding side of the business. It has a strong focus on providing leading
technology and systems to meet customer and originator demand. In an economic
environment where consumer confidence has flattened, it maintains good market
share and continues to produce excellent profit for originators. Shareholder
return on equity, after commissions, is superior to many in the industry,
including Heartland's, at a time when competition has never been stronger.

More generally, we caution shareholders not to accept at face value
commentary or press coverage that you may read or hear in relation to the
approaches by Heartland or Turners. It is inevitable that some press
commentary or coverage will be designed to serve the interests of others and
some will be not well informed. Your board is best placed to advise you on
the merits of any offer or approach made, given its duties to MTF and its
shareholders, and its knowledge of the business and its value to your
business and to you as a shareholder.

The Sportzone case, on which Heartland is seeking to undertake due diligence
before making any takeover offer, relates to various fees charged in 39
credit contracts in the period 2006 - 2008. A hearing will be held in the
Supreme Court on 10 - 11 November 2015, with the outcome unlikely to be known
until early 2016. The case is significant in that it will set a precedent for
all consumers and the entire consumer finance industry, not just MTF. The
amount at risk on the 39 Sportzone credit contracts is less than $10,000 and
has been fully provided for. The Board believes that any risk of further
unfavourable consequences arising from the Sportzone case in respect of
consumer establishment and credit fees is low.

No offer or potential offer discussed in this letter would apply to, nor
would any such offer affect the rights of, MTF perpetual preference shares
(NZDX: MTFHC).

For further information please contact:

Stephen Higgs
Chairman
03 474 9716
End CA:00272278 For:MTF    Type:GENERAL    Time:2015-10-23 16:27:55