GFL
10/04/2014 17:08
MEETING
REL: 1708 HRS GFNZ Group Limited
MEETING: GFL: Special Meeting 29 Apr 2014
GFNZ GROUP LIMITED
Notice of Special Meeting
Notice is given that a special meeting of shareholders of GFNZ Group Limited
(Geneva) will be held at Amway of New Zealand, 6a Pacific Rise, Mt
Wellington, Auckland on Tuesday 29 April 2014 commencing at 2 pm.
SPECIAL BUSINESS
1 Approval of Rights Issue
To consider and, if thought fit, to pass the following resolution as an
ordinary resolution of Geneva:
"In accordance with Listing Rule 7.3.1, to approve the issue of up to
202,168,512 new ordinary shares at 3 cents per share pursuant to a
non-renounceable rights issue and on the terms as more particularly described
in the explanatory notes to, and Simplified Disclosure Prospectus
accompanying, this notice of meeting (the Rights Issue)."
2 Approval of underwriting agreement with Federal Pacific Group Limited
To consider and, if thought fit, to pass the following resolution as an
ordinary resolution of Geneva:
"In accordance with Listing Rules 7.5 and 9.2.1 and Rule 7(d) of the
Takeovers Code, to ratify, confirm and approve entry into, and performance
of, the underwriting agreement dated 2 April 2014 between Federal Pacific
Group Limited (FedPac) and Geneva in relation to the Rights Issue as
described in the Simplified Disclosure Prospectus accompanying this notice of
meeting and to approve the issue of shares to FedPac under the underwriting
agreement."
EXPLANATORY NOTES
Majority required
The resolutions required for agenda items 1 and 2 are ordinary resolutions.
Ordinary resolutions will be passed if greater than 50% of the votes that are
cast by shareholders entitled to vote on the resolution and voting, vote in
favour of the resolution.
Quorum
The shareholder's meeting will proceed if at least 5 shareholders having the
right to vote at the meeting are present in person or by proxy.
Exercise of votes
On a show of hands, each shareholder has one vote. On a poll, each
shareholder has one vote for each share held.
Voting of jointly held shares
If your shares are jointly held, only the vote of the shareholder whose name
appears first in the register of shareholders will be counted to the
exclusion of the other joint holder.
Voting by corporations
In order to vote at the meeting (other than by proxy), a corporation that is
a holder of shares must appoint a person to act as its representative.
Proxies and Representatives
You may exercise your right to vote at the meeting either by being present in
person or by appointing a proxy to attend and vote in your place. A proxy
need not be a shareholder of Geneva. You may appoint the chairperson of the
meeting to be your proxy. If you do not indicate how the chairperson will
vote, the chairperson will vote in favour of the resolutions. A body
corporate shareholder may appoint a representative to attend the meeting on
its behalf.
A proxy form is enclosed with this notice of meeting. If you wish to vote by
proxy you must complete the form and send it to Link Market Services Limited,
so as to ensure that it is received by 5 pm, on Sunday, 27 April 2014.
Details of where to send the completed proxy form are set out in the voting
instructions attached to this notice of meeting.
Voting Restrictions
Resolution 1
Under NZAX Listing Rule 9.3.1, no director of Geneva or any shareholder of
Geneva associated with any director, is permitted to vote their existing
shares in Geneva on resolution 1. David O'Connell owns 5000 shares in
Geneva. Associated parties of the other three directors, Messrs Smale, King
and Hutchison, are shareholders in Geneva. These shareholders are:
o DW Smale and EM Smale as partners of the DW and EM Smale Partnership;
o Robin King and Lynn King as partners in the Robin and Lynn King Family
Partnership;
o Robin King and Lynn King as trustees of the Robin and Lynn King Family
Trust;
o Federal Pacific Nominees Limited.
There are no other shares held by the directors or their associated parties.
Resolution 2
Under NZAX Listing Rule 9.3.1, Federal Pacific Group Nominees Limited and any
shareholder of Geneva associated with it, are not permitted to vote their
existing shares in Geneva on resolution 2. Additionally rule 17 of the
Takeovers Code also prohibits Federal Pacific Group Nominees Limited and any
shareholder of Geneva associated with it, from voting their existing shares
in Geneva on resolution 2.
Disqualified persons may not act as a discretionary proxy but may vote in
accordance with express instructions of a shareholder who is not disqualified
from voting.
Listing Rules, Companies Act and Takeovers Code
Geneva is listed on the NZAX market operated by NZX Limited, and must comply
with the NZAX Listing Rules and the Takeovers Code. In addition, various
provisions of the NZAX Listing Rules are incorporated in Geneva's
Constitution. The Companies Act, the Takeovers Code, Geneva's Constitution
and the NZAX Listing Rules contain specific requirements which are relevant
to the proposed resolutions set out in this notice of meeting. These
requirements are addressed in these Explanatory Notes.
What happens if either Resolution 1 or 2 is not passed?
If Resolution 1 is not passed, there will not be a Rights Issue and
Resolution 2 will not be put to the vote and as noted below under "Reason for
the Rights Issue", nether of the stated 2 principal reasons will be able to
be fulfilled. As stated in paragraph 2.4 of the independent adviser report
accompanying this notice of meeting, without the additional funding from the
Rights Issue, Geneva will be able to operate but it will not have as much
equity capital as the directors consider prudent in order to fund the
expansion of Geneva's new business receivables book. Accordingly, Geneva's
ability to enhance its profitability would be diminished and Geneva would
need to raise additional equity in the near future.
If Resolution 1 is passed but Resolution 2 is not passed, the Rights Issue
will proceed but will not be underwritten.
Resolution 1 - Approval of the Rights Issue
Reason for the Rights Issue
Geneva requires additional equity funding for two principal reasons:
1. To fund the expansion of its new business lending program. On the 1 August
2013, Geneva obtained a $30.0m securitisation facility from Westpac. As at
that date the facility was drawn to $17.3m. Under the securitisation
facility, typically each $1.00 of new lending is 78% funded by the facility
with the remaining 22% being funded by Geneva. Approximately $2.0m - $2.5m
of the funds raised through the Rights Issue will be used to fund Geneva's
portion of the expanding new business receivables ledger.
2. To re-strengthen Stellar Collections Limited's balance sheet by $3.5m -
$4.0m. The residual old ledgers which are now held by Stellar Collections
Limited have proved to be an ongoing source of losses for Geneva. Equity
raised under the Rights Issue will both replace the equity eroded by these
losses and repay inter-company debt, thereby lowering Stellar Collections
Limited's funding cost.
Main Terms of the Rights Issue
The main terms of the Rights Issue are as follows:
o Geneva will issue up to 202,168,512 new ordinary shares at 3 cents per
share (payable in full in cash on application);
o the Rights Issue is scheduled to open on 10 April 2014 and close on 6 May
2014. Shares will be issued on 13 May 2014;
o the Rights Issue is subject to the approval of the shareholders by ordinary
resolution (Resolution 1);
o the shareholders are offered 11 new shares for every 18 shares held on 4
April 2014 (the Record Date) (with fractions rounded down);
o Holders of Geneva's options issued under the 2012 rights issue and
employees to whom options were issued on 31 July 2012 are offered 11 new
shares for every 18 options held on the Record Date (with fractions rounded
down);
o the new shares issued under the Rights Issue will rank equally in all
respects, including as to dividends and voting, with the existing shares;
o Rights are non-renounceable, which means that shareholders and
optionholders may not sell or transfer any of their Rights;
o shareholders and optionholders can apply for more than their entitlement.
In the event that more shares are subscribed for than are available under the
Rights Issue, the directors will scale applications, first, after allocating
entitlements, and thereafter in a manner the directors determine is
equitable.
For example, if a shareholder currently holds 1000 shares, the shareholder
will be entitled to subscribe for 611 new shares under the Rights Issue for a
total price of $18.33.
In the 3 months to 31 March 2014, there have been 1,343,153 shares sold at an
average selling price of 4.3 cents per share. The number of shares sold
represents 0.48% of the total shares on issue.
Accompanying this notice of meeting is a Simplified Disclosure Prospectus
detailing the terms of the Rights Issue and a Rights Entitlement and
Acceptance Form setting out the number of Rights to which each shareholder
and optionholder is entitled, determined in accordance with the number of
shares and options held on the Record Date.
Requirements for Resolution 1
Resolution 1 is required by NZAX Listing Rule 7.3.1 which provides that
Geneva cannot issue shares unless the precise terms and conditions of the
issue are approved by an ordinary resolution of shareholders or the issue is
specifically permitted by another Listing Rule. No other Listing Rule
permits a pro rata rights issue to all shareholders where the issue is
non-renounceable.
Resolution 2 - Approval of underwriting agreement with Federal Pacific Group
Limited
The underwriter for the Rights Issue is Federal Pacific Group Limited
(FedPac), a shareholder in Geneva which currently holds 33.67% of the shares
in Geneva. It is likely that the percentage of shares held by FedPac will
increase as a result of its underwriting of the Rights Issue.
Shareholder approval by ordinary resolution is sought in accordance with the
Takeovers Code and the Listing Rules of NZX Limited for Geneva to enter into
the underwriting agreement with FedPac and the potential allotment of shares
to FedPac under underwriting agreement, which may result in FedPac holding or
controlling an increased percentage of Geneva's shares.
Principal terms of the underwriting agreement
FedPac has agreed to underwrite the Rights Issue on the following basis:
o FedPac will accept its full rights entitlement of 78,003,676 new shares on
the basis of FedPac's current holding of 94,561,028 shares and 33,081,352
options;
o FedPac will subscribe for, at the issue price of 3 cents per share and in
cleared funds on the allotment date for the Rights Issue (the Allotment Date)
and receipt of written notification of the shortfall, any shortfall in the
issue below 202,168,512 shares (which includes FedPac's entitlement of
78,003,676 new shares);
o FedPac may apply all or part of its three year $5,000,000 loan to Geneva
(see page 5 of the Simplified Disclosure Prospectus) in payment of shares
issued to it under its entitlement and its underwrite;
o Geneva will pay FedPac a fixed underwriting fee of $75,813 being equal to
1.25% of the total issue price of the shares offered under this the
Simplified Disclosure Prospectus;
o FedPac's underwriting commitment is conditional on:
o the shareholders approving the terms of the Rights Issue and the
underwriting agreement and the issue of shares pursuant to the Rights Issue
and the underwriting agreement;
o any regulatory or stock exchange approvals necessary for the Rights Issue
being obtained on terms reasonably acceptable to FedPac.
o the Allotment Date being not later than 30 June 2014;
o NZX accepting the new shares for quotation;
o NZX not suspending the quotation of shares prior to the Allotment Date;
o the directors of Geneva not withdrawing or terminating the Rights Issue;
and
o the Simplified Disclosure Prospectus not being or becoming false or
misleading in a material particular by reason of failing to refer, or give
proper emphasis, to adverse circumstances whether occurring before or after
the date of the Simplified Disclosure Prospectus, and no material adverse
change occurring in the position or prospects of Geneva.
o None of the following occurring after the date of the underwriting
agreement and prior to the Allotment Date:
? an event or series of events occurs, or FedPac first becomes aware of any
matter or information which it could not reasonably have been aware of before
the date of the underwriting agreement, which in the reasonable opinion of
FedPac:
(i) has, or is likely to have, or once publicly disclosed, will have a
material adverse effect on Geneva or a member of the Geneva Group or on its
business or prospects;
(ii) has given rise to or is likely to give rise to a contravention by FedPac
of, or FedPac being involved in a contravention of, the Securities Act, the
Listing Rules, the Takeover Code or any other applicable law or regulation;
or
? trading in all securities quoted or listed on the NZAX being suspended or
limited in a material respect for at least 2 days on which that exchange is
open for trading except when such trading is suspended or limited by a
technical glitch; or
? any adoption by the Reserve Bank of New Zealand of a significant change in
any policy or direction in respect of which there has not been a detailed
announcement prior to the date of the underwriting agreement which will or
may have a material adverse effect on the New Zealand economy.
If any condition listed above is not fulfilled, or ceases to be fulfilled, or
Geneva breaches any provision of the underwriting agreement, or any warranty
given by Geneva in of the underwriting agreement is incorrect, FedPac may
terminate the underwriting agreement by written notice to Geneva.
Requirements for Resolution 2
Resolution 2 is required by:
o NZAX Listing Rule 9.2.1, which provides that an issuer such as Geneva
cannot enter into a "Material Transaction" if a "Related Party" such as
FedPac is or is likely to become a direct or indirect party to the Material
Transaction or to one of a series of transactions of which the Material
Transaction forms part, unless the Material Transaction has first been
approved by an ordinary resolution of the shareholders of Geneva. The
underwriting agreement constitutes a Material Transaction with a Related
Party because FedPac could be required to subscribe for shares having a
market value in excess of 10% of Geneva's Average Market Capitalisation (as
that term is defined in the NZAX Listing Rules);
o NZAX Listing Rule 7.5 which states that an issuer such as Geneva cannot
issue securities if there is a significant likelihood that the issue will
result in any person, such as FedPac, materially increasing its ability to
exercise effective control of the issuer, where that person is already
entitled to exercise not less than 1% of the total votes attaching to the
issuer's securities, unless the precise terms and conditions of the issue
have first been approved by an ordinary resolution of the shareholders of the
issuer; and
o Rule 7(d) of the Takeovers Code which allows a person holding 20% or more
of the voting rights to take an allotment of voting securities which
increases their voting rights in a code company, such as Geneva, only if the
allotment of voting securities is approved by an ordinary resolution of the
shareholders of Geneva. FedPac currently holds more than 20% of the shares
in Geneva which confer on FedPac more than 20% of the voting rights.
Takeovers Code
Rule 16 of the Takeovers Code requires the following information to be
included in this notice of meeting. The paragraph numbering below
corresponds with the paragraphs of Rule 16.
(a) FedPac (through its nominee Federal Pacific Nominees Limited) is the
proposed allottee of shares, to be issued to it under the Rights Issue and
the underwriting agreement;
(b) the particulars of the voting securities that may be alloted to FedPac
are set out below;
(c) not applicable (as the voting securities to be allotted are not
securities of a body corporate other than a code company);
(d) the issue price:
(i) for the shares under the Rights Issue, is 3 cents per share, payable in
full on application; and
(ii) for shares acquired under the underwriting agreement, is 3 cents per
share, payable on the first business day after the closing date of the Rights
Issue and notification of the shortfall;
(e) the potential allotment of shares to FedPac arises from its commitment
under the underwriting agreement. Geneva's reasons for the Rights Issue are
described on page 2 above;
(f) the allotments of shares to FedPac under the Rights Issue, if approved,
will be permitted under rule 7(d) of the Takeovers Code as an exception to
rule 6 of the Takeovers Code.
(g) Geneva has been advised by FedPac that, except for under the underwriting
agreement, no agreements or arrangements have been, or are intended to be,
entered into between FedPac and any other person relating to:
o the allotment, holding or control of the shares to be allotted to FedPac;
or
o the exercise of voting rights in Geneva.
(h) this notice of meeting is accompanied by an independent adviser report
from Simmons Corporate Finance Limited on the merits of the proposed
allotment of voting securities to FedPac. The report states that after having
regard to all relevant factors, on balance the positive aspects of the
allotment of shares to FedPac under the underwriting agreement outweigh the
negative aspects from the perspective of the shareholders who are not
associated with FedPac.
(i) the directors of Geneva have issued a statement recommending approval of
the proposed allotment of voting securities to FedPac on the grounds that the
Fedpac underwrite will ensure that new equity of $6,065,000 is received which
is an increase of 48.6% of Geneva's equity as at 30 September 2013 and thus a
significant strengthening of Geneva's financial position.
Particulars of voting securities that may be allotted to FedPac
The following information is included as required by Rule 16(b)(ii) of, and
Schedule 5 to, the Takeovers Code. Paragraphs (a) to (g) in the table
provide the information required by paragraphs (a) to (g) of Schedule 5.
(a) The maximum number of shares that can be allotted 202,168,512
(b) The maximum number of shares that can be allotted as a percentage of the
number of shares on issue 72%
(c) 1. The maximum percentage of shares which FedPac could hold after the
Rights Issue
2. the percentage of shares which FedPac could hold after 19 December 2015
1. 61.43%
2. 61.88%
(d) 1. The maximum percentage of shares which FedPac and its associates
could hold after the Rights Issue
2. the maximum percentage of shares which FedPac and its associates could
hold after 19 December 2015 1. 61.43%
2. 61.88%
(e) Not applicable
(f) The date used to calculate the information in this table (the calculation
date) The date of this notice of meeting
(g) The assumptions on which the above calculations are based o none of the
other shareholders take up any of their entitlement under the Rights Issue
and therefore FedPac subscribes for all 202,168,512 shares;
o there is no change to the total number of Geneva's shares from the number
of shares on issue at the date of this notice of meeting and 19 December 2015
other than as a result of the Rights Issue, the underwriting agreement and
the options described below;
o the employees to whom options were issued in July 2012 exercise all of
their options before 31 July 2015 (the date on which those options expire);
and
o when the options issued in 2012 become exercisable in November 2015, the
optionholders (including FedPac) exercise all of their options on or before
19 December 2015 (the date on which those options expire).
Dated 8 April 2014
By order of the Board
MANAGING DIRECTOR
INVITATION: At the conclusion of the meeting, afternoon tea will be served.
End CA:00249367 For:GFL Type:MEETING Time:2014-04-10 17:08:37
(20min delay)