Ann: WAV/RULE: ALF: ALF - Application for Waiver from Rule 9.2

• Release Date: 04/08/14 13:04
• Summary: WAV/RULE: ALF: ALF - Application for Waiver from Rule 9.2
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					ALF
04/08/2014 13:04
WAV/RULE

REL: 1304 HRS Allied Farmers Limited

WAV/RULE: ALF: ALF - Application for Waiver from Rule 9.2

NZX Regulation Decision
Allied Farmers Limited (ALF)
Application for a waiver from NZX Main Board Listing Rule 9.2

31 July 2014

Decision

1. On the conditions set out in paragraph 2 below, NZXR grants ALF a waiver
from Rule 9.2 so that ALF is not required to obtain shareholder approval for
the Transactions to the extent that Agentco and Stockmans participate in the
Share Sale and Garry Bluett, and an Associated Person of Garry Bluett,
participate in the Bond Extension.
2. The waiver in paragraph 1 above is provided on the condition that the
directors of ALF and AFRL (excluding Garry Bluett) certify, in a form
acceptable to NZXR, that:
a. Garry Bluett, and any Associated Persons of Garry Bluett, took no part in
the negotiation of the Bond Extension on behalf of ALF and AFRL;
b. Garry Bluett and any Associated Persons of Garry Bluett, will participate
in the 010 Bond Extension on the same terms as all other holders of the 010
Bonds;
c. the Bond Extension and the issue of the New Bonds will be at market price
and on terms and conditions that are fair and reasonable to ALF and AFRL;
d. the terms and conditions of the Share Sale were negotiated on a commercial
and arms' length basis and are fair and reasonable to ALF and AFRL;
e. neither ALF nor AFRL was influenced in its decision to enter into the
Transactions by the relationships between:
i. ALF and AFRL and Garry Bluett; or
ii. ALF and AFRL and Stockmans and Agentco; and
f. the entry into the Transactions is in the best interests of ALF and all
shareholders of ALF.
3. The information on which this decision is based is set out in Appendix One
to this decision. This waiver will not apply if that information is not or
ceases to be full and accurate in all material respects.
4. The Rules to which this decision relates are set out in Appendix Two to
this decision.

Reasons

5. In coming to the decision to provide the waiver set out in paragraph 1
above, NZXR has considered that:
a. The policy behind Rule 9.2.1 is to ensure that a Related Party does not
exercise undue influence, or use its personal connections, to reach a
favourable outcome or transfer of value from the Issuer to a Related Party,
and that shareholders are given an opportunity to review transactions where
the board may have been subject to actual or perceived influence from a
Related Party;
b. NZXR considers that it is unlikely that Agentco or Stockmans could have
influenced ALF's decision to enter into the Transactions or the terms of the
Transactions for the following reasons:
i. ALF independently decided to sell the Shares to partially fund the
repayment of the CAML Loan and engaged in negotiations to sell the Shares
with the Potential Purchaser;
ii. the Potential Purchaser is a third party and unrelated to ALF, Stockmans
and Agentco;
iii. the price for the Share Sale was determined through negotiations between
ALF and the Potential Purchaser. Agentco and Stockmans subsequently decided
to exercise their pre-emption rights under the Shareholders' Agreement to
purchase the shares at the price that had been agreed between ALF and the
Potential Purchaser. Accordingly there was no scope for negotiation between
ALF and Agentco and Stockmans on the key term of the Share Sale and ALF was
contractually obliged to sell the shares to Agentco and Stockmans at the
price agreed with the Potential Purchaser.
c. The directors consider that the price for the Share Sale is not less than
the market value of the shares. This is reinforced by the fact that the price
was agreed with an unrelated third party (the Potential Purchaser) and
because AHL has also separately recently sold shares in NZFL to Agentco and
Stockmans at the same price. As the Share Sale will take place at market
price there will be no transfer of value to Stockmans and Agentco;
d. Garry Bluett and the Associated Person of Garry Bluett were not involved
in the decision to extend the 010 Bonds and will participate in the 010 Bond
Extension on the same terms as the other holders. There will be no changes to
any terms other than the maturity date;
e. The certifications provided by ALF's directors (excluding Garry Bluett)
give NZX comfort that the Transactions are being entered into on commercial
and arms' length terms, are in the best interests of ALF and its shareholders
and were not unduly influenced by Stockmans, Agentco or Garry Bluett; and
f. There is precedent for this decision.

Confidentiality

6. ALF has requested that this decision be kept confidential until the
Transactions have been announced to the market.
7. In accordance with Footnote 1 to Rule 1.11.2, NZXR grants ALF's request.

Appendix One

1. Allied Farmers Limited (ALF) is a Listed Issuer with ordinary shares
quoted on the NZX Main Board.
2. Allied Farmers Rural Limited (AFRL) is a wholly owned subsidiary of ALF.
3. ALF proposes to enter into the following transactions (Transactions):
a. the sale of 1026 shares (Shares) in NZ Farmers Livestock Limited (NZFL)
(Share Sale) by AFRL on or about 31 July 2014 to:
i. Agent Company Limited (Agentco) - 352 shares for $343,080; and
ii. Stockmans Limited (Stockmans) - 674 shares for $656,920;
b. the agreement with the holders of AFRL bonds issued on 13 September 2013
(010 Bonds) (some of whom are related parties) to the extension of the
maturity date of the 010 Bonds (the amount payable on maturity being $600,000
in total) from 29 August 2014 to 29 August 2015 (Bond Extension);
c. the issue of a minimum of $500,000 of first ranking bonds to unrelated
parties (although some may be participants in the 010 Bonds) on or before 30
September 2014 (020 Bonds). The 020 Bonds will be guaranteed by ALF and
secured over ALF's assets;
d. the issue of $500,000 of first ranking bonds, with an associated share
option allocation, to unrelated parties (although some are participants in
the 010 Bonds) on or about 30 September 2014, being a date by which ALF is
able to do so under Rule 7.3.5 given the associated share options are Equity
Securities (030 Bonds). The 030 Bonds will be guaranteed by ALF and secured
over ALF's assets. The issue of the 030 Bonds is conditional on AFRL raising
sufficient funds to fully repay CAML, mostly likely funded by a combination
of the Share Sale and the issue of the 020 Bonds, together with the issue of
the 030 Bonds.
The 020 Bonds and the 030 Bonds are collectively referred to as the New
Bonds.
4. The proceeds of the Share Sale and the issue of the New Bonds ($2 million)
will be paid to Crown Asset Management Limited (CAML) in full satisfaction of
ALF's on demand loan from CAML as follows:
a. $1 million on or about 31 July 2014, utilising the proceeds of the Share
Sale; and
b. $500,000 on or before 30 September 2014, most likely utilising the
proceeds of the issue of the 020 Bonds; and
c. $500,000 on or about 30 September 2014, utilising the proceeds of the
issue of the 030 Bonds.
5. CAML has requested that ALF either fully repay or substantially reduce the
CAML Loan in the short term. CAML has agreed to repayment of the CAML Loan
for $2 million if ALF can make that payment in the near term.
6. ALF's remaining asset of material value is its shares in NZFL. Accordingly
ALF commenced a process to sell the Shares for the purpose of partially
satisfying CAML's request. ALF engaged in negotiations to sell the Shares
with an unrelated third party (Potential Purchaser) and agreed the price of
$1 million for 1026 Shares.
7. ALF's ownership of shares in NZFL is regulated by a shareholders'
agreement (Shareholders' Agreement) which contains pre-emptive rights in
favour of the other shareholders. Under the Shareholders' Agreement ALF was
required to notify the other shareholders of its intention to sell, including
the price and the name of the Potential Purchaser. The existing shareholders
had the opportunity to purchase the Shares at the agreed price. Agentco and
Stockmans indicated that they would like to purchase the Shares. The other
shareholder, Alan Hiscox Limited (AHL) decided not to purchase its portion of
the Shares.
8. On 2 July 2014, AHL sold 68 shares in NZFL to Stockmans and 35 shares in
NZFL to Agentco at the same price and on substantially the same terms as the
Share Sale.
9. Agentco is a Related Party of ALF under Rule 9.2.3(c) for the following
reasons:
a. a director of Agentco, Simon Williams, is also a director of NZFL, a
subsidiary of  ALF; and
b. Agentco holds over 10% of the shares in NZFL, and AFRL and Agentco are
party to a Shareholders' Agreement in relation to NZFL which affects over 30%
of the shares in NZFL;
10. Stockmans is a related party of ALF under Rule 9.2.3(c) for the following
reasons:
a. a director of Stockmans, Oliver Carruthers, is also a director of NZFL, a
subsidiary of  ALF; and
b. Stockmans holds over 10% of the shares in NZFL, and AFRL and Stockmans are
party to a Shareholders Agreement' in relation to NZFL which affects over 30%
of the shares in NZFL.
11. Garry Bluett and an Associated Person of Garry Bluett hold $250,000 of
the 010 Bonds. Garry Bluett is a director of ALF, and is therefore a Related
Party of ALF for the purposes of Rule 9.2.3(a).
12. ALF's Average Market Capitalisation as at the date of this decision is
$5.1 million.
13. Each of the Share Sale and the Bond Extension is a Material Transaction
with a Related Party for the purposes of Rule 9.2.1. The issue of the New
Bonds forms part of a related series of transactions with the Share Sale and
the Bond Extension.
14. NZXR granted ALF a waiver from the requirement to obtain shareholder
approval for the issue of the 010 Bonds in a waiver decision dated 13
September 2013.

Appendix Two

Rule 9.2
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
(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.
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:
(a) purchases or otherwise acquires, gains, leases (as lessor or lessee) or
sells or otherwise disposes 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 of the Issuer are to be taken into account; or
(c) borrows, lends, pays, or receives, money, or incurs an obligation, of an
amount in excess of 10% of the Average Market Capitalisation of the Issuer;
or
(d) enters into any guarantee, indemnity, underwriting, or similar
obligation, or gives any security, for or of obligations which could expose
the Issuer to liability in excess of 10% 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:
(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); or ...
End CA:00253455 For:ALF    Type:WAV/RULE   Time:2014-08-04 13:04:03