ALF
23/10/2013 13:15
WAV/RULE
REL: 1315 HRS Allied Farmers Limited
WAV/RULE: ALF: Waiver from NZSX Listing Rule 9.2.5
Waiver from NZSX Listing Rule 9.2.5
Background
1. Allied Farmers Limited ("ALF") is a Listed Issuer with ordinary shares
quoted on the NZX Main Board.
2. ALF has operated a bobby calf business since 2001 which involves the
purchase of bobby calves from farmers, contracted processing, and on-sale of
products. Following a re-structure, the bobby calf business is now operated
by ALF's partly-owned subsidiary, NZ Farmers Livestock Limited ("NZFL"). NZFL
operates the business through its subsidiary Farmers Meat Export Limited
("FMEL").
3. To assist with funding the bobby calf business for the 2013 and 2014
seasons, on 23 August 2013, FMEL entered into a working-capital facility for
not more than $1.5 million per annum with Garry Bluett and another funder who
is not a Related Party (as joint lenders) (the "Loan"). The purpose of the
Loan was to fund the working capital of FMEL, which is required to purchase
inventory (being bobby calves) and cover costs related to such inventory.
4. Rule 1.6.6 extends the definition of Issuer to include, as the context
permits, all members of any group of companies of which the Issuer is the
holding company or otherwise has a controlling interest. FMEL is a subsidiary
of ALF as it is 100% owned by NZFL, which is 67.73% owned by Allied Farmers
Rural Limited ("AFRL"). AFRL is 100% owned by ALF. Accordingly, entry into
the Loan by its subsidiary, FMEL, constituted entry into a transaction by ALF
for the purposes of Rule 9.2.1.
5. The value of the Loan exceeded 10% of ALF's AMC, and was therefore a
Material Transaction for the purpose of Rule 9.2.1(a). Gary Bluett is a
Director of ALF and therefore the entry into the Loan was a Material
Transaction with a Related Party for the purposes of Rule 9.2.1.
6. On 22 August 2013, NZX granted ALF a waiver from Rule 9.2.1 to allow ALF
to enter into the Loan without the prior approval of shareholders, on certain
conditions. One of those conditions was that ALF obtained shareholder
approval for the drawdown by FMEL of funds under the Loan for the 2014 season
in accordance with Rule 9.2.1, before FMEL makes any drawdowns under the Loan
for the 2014 season.
7. ALF is now seeking the shareholder approval described in paragraph 6, at
its 2013 AGM.
8. Rule 9.2.5(b) requires that where an Issuer is seeking shareholder
approval pursuant to Rule 9.2.1, that an Appraisal Report accompany the
notice of meeting. ALF has sought a waiver from the requirements of Rule
9.2.5(b) so that it is not required to provide an Appraisal Report with its
2013 notice of meeting in relation to the resolution tabled under Rule 9.2.1
to approve and ratify the entry into the Loan for the purposes of funding
working capital for the 2014 bobby-calf season.
Application
9. In support of its application, ALF has made the following submissions:
(a) ALF expects that the cost of an Appraisal Report would be in excess of
$20,000. ALF is operating under tight budgets, which do not contain provision
for this amount;
(b) ALF has entered into loans similar to the Loan with the same funders
(including Gary Bluett and an associated person of Garry Bluett) for the past
three seasons. ALF shareholders have had opportunity at previous meetings,
including the 2012 annual meeting, to ask questions and provide feedback to
ALF regarding this funding, but have not done so;
(c) Information has been provided to the market in relation to the funding
provided by Mr Bluett in relation to the bobby calf business, in the waivers
and announcements that have been released to the market on 22 August 2013 and
25 July 2012 and the 2013 and 2012 Annual Reports; and
(d) The Loan was entered into onto commercial and arms' length terms, is in
the best interests of ALF and its shareholders and was not influenced by Gary
Bluett. The entry into the Loan by ALF does not offend the policy of Rule
9.2.1 which is to provide shareholders with an opportunity to review
transactions where there is an actual or perceived influence from a Related
Party.
Rule
10. Rule 9.2.5 provides as follows:
"The text of any resolution to be put to a meeting of an Issuer for the
purposes of Rule 9.2.1 shall be set out in the notice of the relevant
meeting. That notice shall:...
(b) be accompanied by an Appraisal Report; and...."
Decision
11. On the basis that the information provided to NZX is full and accurate in
all material respects, and subject to the condition contained in paragraph 12
below, NZXR grants Allied Farmers Limited ("ALF") a waiver from Rule 9.2.5(b)
to allow ALF to table a resolution pursuant to Rule 9.2.1 to approve and
ratify the Loan for the purpose of the 2014 bobby-calf season in its 2013
notice of annual meeting, without the need for that notice to be accompanied
by an Appraisal Report in relation to the Loan transaction.
12. The decision contained in paragraph 11 is subject to the condition that
the non-interested Directors of ALF (other than Jeff Keenan, who is currently
incapacitated) certify that the proposed Drawdown under the Loan is fair and
reasonable to shareholders.
Reasons
13. In coming to the decision to provide the waiver set out in paragraph 11
above, NZXR has considered that:
(a) NZX has imposed certification conditions in the waiver decision of 22
August 2013 and this decision. On the basis of those certifications, NZX is
comfortable that the Loan has been provided on commercial and arms' length
terms, is in the best interests of and fair and reasonable to ALF's
shareholders, and was not influenced by Garry Bluett. NZX has previously
waived the application of Rule 9.2.1 in these circumstances. Nevertheless,
NZX considers it appropriate that shareholders be provided with an
opportunity to consider the ratification of the Loan and the entry into the
2014 drawdown, given that this is a seasonal transaction.
(b) The policy behind Rule 9.2.5(b) is to ensure that where an Issuer is
entering into a transaction with a Related Party which is a Material
Transaction, that shareholders are provided with sufficient information to
understand the salient terms of the transaction. NZXR has had the opportunity
to review and approve the notice of meeting for ALF's 2013 annual meeting at
which the resolution will be tabled, and is satisfied that the information
contained in the notice is adequate. In addition, ALF has provided the market
with information as to other rounds of funding that were provided by Mr
Bluett in relation to the bobby calf business. ALF has provided its
shareholders with ongoing opportunity to ask questions regarding similar
loans and to provide feedback to ALF regarding those financing arrangements,
including at the 2012 annual meeting.
(c) The costs of preparing an Appraisal Report are significant to ALF given
its current financial position, where ALF's working capital is fully
committed to existing and forecast obligations.
(d) In these circumstances, where the costs of the preparation of an
Appraisal Report will significantly detriment ALF's financial position and
the notice contains sufficient information for ALF shareholders to determine
whether the terms of the Loan are fair, NZX considers that the costs of ALF
providing its shareholders with an Appraisal Report are disproportionate to
the benefits of that information.
(e) There is precedent for this decision, including the decision of 28
October 2010 provided to Vital Healthcare Property Trust and the decision of
22 September 2009 provided to Rakon Limited.
ENDS
End CA:00242757 For:ALF Type:WAV/RULE Time:2013-10-23 13:15:55
