- Release Date: 23/10/15 16:27
- Summary: GENERAL: MTF: Turners ordinary share offer and Heartland proposal
- Price Sensitive: No
- Download Document 7.68KB
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
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