ALF
15/01/2014 11:11
WAV/RULE
REL: 1111 HRS Allied Farmers Limited
WAV/RULE: ALF: ALF - Waiver from NZX Main Board Listing Rule 9.2.1
NZX Regulation Decision
Allied Farmers Limited (ALF)
Application for waiver from NZX Main Board Listing Rule 9.2.1 (a)
15 January 2014
Application - Waiver from Rule 9.2.1 (a)
1. On the basis that the information provided to NZX Regulation ("NZXR") is
full and accurate in all material respects, and subject to the condition in
paragraph 2 below, NZXR grants Allied Farmers Limited ("ALF") a waiver from
NZX Main Board Listing Rule ("Rule") 9.2.1 (a) so that ALF is not required to
obtain shareholder approval before entering into the Transaction (as that
term is defined in Appendix 1).
2. The waiver in paragraph one is granted on the condition that the directors
of ALF certify to NZX, in a form acceptable to NZX, that:
a. Nelson Speirs took no part in the negotiation of the Transaction on behalf
of ALF;
b. The terms of the Transaction were negotiated on a commercial and arms'
length basis;
c. Entry into the Transaction is in the best interests of all shareholders of
ALF; and
d. ALF was not influenced in its decision to enter into the Transaction by
the relationship between ALF, Mr Speirs and Speirs Group Limited ("SGL").
3. The information on which this decision is based is set out in Appendix One
to this decision. This decision 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 for waiver decision
5. In reaching the decision to provide the waiver, NZXR has considered that:
a. The policy behind Rule 9.2.1 is to provide shareholder protection in the
form of a requirement for shareholder approval for transactions where there
is, or may be a perception of, undue influence by a Related Party on an
Issuer's decision to enter into a transaction or its terms and conditions.
NZXR may waive the requirement to obtain shareholder approval 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;
b. It is unlikely that Mr Speirs or SGL could have influenced ALF's decision
to enter into the Transaction because Mr Speirs' connection with the ALF
group of companies is minimal for the reasons set out in paragraph 3 of
Appendix 1;
c. The terms of the Transaction have been negotiated on a commercial and
arms' length basis and Mr Speirs has had no involvement in the negotiation or
establishment of the terms of the Transaction on behalf of ALF or SGL;
d. The Transaction will result in the write-off of the liability to SGL in
ALF's balance sheet from $2 million to $500,000 (the parties have agreed that
the indebtedness to SGL will be $1 million if the Cash Instalment is not paid
by 30 April 2016) and will increase ALF's equity by approximately $530,000.
ALF has submitted, and NZXR has no reason not to accept, that these terms are
materially beneficial to ALF;
e. The certificates provided by the directors as a condition of the waiver
provide comfort that the Transaction was negotiated and entered into on a
commercial and arms' length basis and that neither Mr Speirs nor SGL has
exercised any undue influence over ALF in its decision to enter into the
Transaction or its terms and conditions; and
f. There is precedent for this decision.
Appendix One - Background Information
1. Allied Farmers Limited ("ALF") is a Listed Issuer with ordinary shares
Quoted on the NZX Main Board.
2. On or about 25 July 2008, ALF entered into a conditional agreement with
Speirs Group Limited ("SGL") to acquire its finance division at a transaction
price of $5,500,000. The transaction price was payable by way of $3,000,000
cash and $2,000,000 of new shares in ALF issued to SGL. Of the $3,000,000
paid in cash, SGL immediately invested $2,000,000 in non-transferable
perpetual bonds ("ANF Perpetual Bonds") issued by (then) Allied Nationwide
Finance Limited (now NFA Limited (in Liquidation) ("NFA"). This acquisition
settled on or about 30 September 2008.
3. NFA was placed in receivership on 20 August 2010 and in liquidation on 31
October 2012. The directors of NFA, including Mr Speirs, have had no control
or influence over NFA since NFA was placed in receivership. The Board of NFA
has not met or made any decisions or taken any action in the name of NFA
since the receivership. Mr Speirs has not received any information relating
to the affairs of any ALF group company since the receivership, and in
particular has not received any information relating to the Transaction.
4. ALF and SGL entered into a Put & Call Option Agreement dated 29 September
2008 (the "Option Agreement") in respect of the ANF Perpetual Bonds and a
specified investment property in Palmerston North (the "Property"). The
Option Agreement included the following options which were required to be
exercised no later than 30 September 2013:
a. Option 1 - a put option enabling SGL to sell its ANF Perpetual Bonds to
Allied for either $2,000,000 or the transfer of the Property free of
encumbrances;
b. Option 2 - a call option which enables Allied to buy back from SGL the ANF
Perpetual Bonds for either $2,000,000 or the transfer of the Property free of
encumbrances; or
c. Option 3 - A call option which enables SGL to buy back the Property for
$2,000,000 at any time prior to 2 February 2014.
5. On 30 September 2013, the documents required to settle Option 1 were
delivered to ALF on behalf of SGL pursuant to, and in accordance with, the
Option Agreement.
Conditional Settlement
6. ALF and SGL have agreed to settle any obligations arising from the Option
Agreement on the terms set out in a Settlement Deed (the "Deed"). An
announcement in relation to the settlement was made to NZX on 20 December
2013.
7. The Deed is conditional on ALF obtaining the waiver the subject of this
decision, and SGL obtaining shareholder approval or completing the Pre-break
Announcement process in accordance with the NZAX Listing Rules and also
obtaining any requisite waivers.
8. The Deed includes the following principal terms:
a. ALF issuing 14,799,167 new ordinary shares to SGL ("New Shares") on or
before 31 January 2014 pursuant to Rule 7.3.5, being approximately 16.3
percent of ALF's issued shares at the date of the Deed ("Placement");
b. The New Shares will rank pari passu in terms of rights, entitlements and
voting with existing ordinary shares;
c. ALF paying $500,000 in cleared and irrevocable funds on or before 30 April
2016 ("Cash Instalment");
d. The Cash Instalment shall be unsecured and non-interest bearing up to the
payment date; and
e. If the Cash Instalment is not paid by 30 April 2016 the indebtedness owed
by ALF to SGL will be $1 million.
9. The Placement and the Cash Instalment are together referred to as the
"Transaction".
Related Parties
10. Nelson Speirs was a director of NFA from 6 October 2008 until 31 October
2013. Accordingly Mr Speirs is a Related Party of ALF under Rule 9.2.3(a). Mr
Speirs is also a director of SGL, which means that he is an Associated Person
of SGL and therefore SGL is a Related Party of ALF under Rule 9.2.3(c).
Material Transaction
11. Based on ALF's share price at the date of this decision, the New Shares
will have a value of approximately $700,000. On this basis the Transaction
will have a value of approximately $1.2 million.
12. As at 20 December 2013, the date of the Transaction was announced, ALF's
Average Market Capitalisation was approximately $3.3 million. Therefore the
Transaction exceeds 10% of ALF's AMC and constitutes a Material Transaction
with a Related Party for the purposes of Rule 9.2.1.
Appendix Two - NZX Main Board Listing Rules
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;
...
unless that Material Transaction is approved by an Ordinary Resolution of the
Issuer."
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 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 (as defined in Rule 7.3.6) of the Issuer are to be taken into
account; or ..."
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
...
(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:00246079 For:ALF Type:WAV/RULE Time:2014-01-15 11:11:38
