EBO
29/05/2013 08:32
WAV/RULE
REL: 0832 HRS Ebos Group Limited
WAV/RULE: EBO: EBO: Waiver from LR 7.10.5, 9.2.1 and 7.12.2
Background
1. EBOS Group Limited ("EBO") is an Issuer with ordinary shares listed on the
NZX Main Board. EBO distributes medical and surgical products,
pharmaceuticals and animal healthcare supplies throughout New Zealand,
Australia and the Pacific Islands. EBO proposes to purchase Zuellig
Healthcare Holdings Australia Pty Limited ("Symbion") from Symbion Holdings
Pte Limited ("the Vendor"). Symbion is a privately owned company based in
Australia involved in the supply of pharmaceuticals and medical supplies to
hospitals in Australia, as well as the distribution of veterinary supplies.
2. EBO and the Vendor have reached a purchase price for Symbion of $865
million ("Purchase Price"). EBO will satisfy the Purchase Price through the
issue of fully paid ordinary shares in EBO to the Vendor worth approximately
$498 million ("Consideration Shares") and a cash payment of approximately
$367 million ("Consideration Cash"). The issue of the Consideration Shares
will result in the Vendor and associates holding 40% of the total shares on
issue in EBO (together "the Transaction").
3. EBO is to fund the Consideration Cash by:
(a) Completing an underwritten placement of EBO ordinary shares worth
approximately $90 million to new and existing institutional investors (the
"Placement");
(b) Undertaking an underwritten, 7 for 20 pro-rata renounceable rights offer
worth approximately $149 million (the "Entitlement Offer"); and
(c) Additional debt facilities of approximately $140 million.
4. EBO wishes to offer EBO shareholders who accept their Entitlement Offer
entitlement in full the option to apply for additional rights not taken up by
other shareholders by way of an oversubscription facility. This option will
be to the extent of any shortfall in acceptance of the Entitlement Offer
("Oversubscription Facility").
5. UBS New Zealand Limited and Forsyth Barr Group Limited (the
"Underwriters") are to act as underwriters for the Placement and Entitlement
Offer.
6. EBO shareholders are scheduled to approve the Transaction during a Special
Meeting to be held on 14 June 2013. If the Transaction is approved, EBO will
be the continuing entity and will continue as a Listed Issuer on the NZX Main
Board.
7. EBO intends the Placement bookbuild to occur on 29 May 2013 with allotment
of the Placement on 7 June 2013, before shareholders consider the
Transaction. EBO advises if EBO shareholders do not approve the Transaction,
EBO will apply the money raised in the Placement to transaction costs,
repayment of debt and general corporate purposes.
8. The Transaction is a Material Transaction under NZX Main Board Listing
Rule ("Rule") 9.2.1 as the Transaction is a purchase of assets that have an
Aggregate Net Value in excess of 10% of EBO's Average Market Capitalisation,
currently around $518 million.
9. Rule 9.2.1 requires that an Issuer shall not enter into a Material
Transaction if a Related Party is a party to at least one of a related series
of transactions which form part of the Material Transaction unless the
transaction associated to the Related Party is approved by an Ordinary
Resolution of the Issuer. As the Placement and Entitlement Offer form part
of the Transaction, each is considered part of a related series of
transactions.
10. Two companies that are Related Parties of EBO wish to participate in the
Placement and act as sub-underwriters to the Entitlement Offer. Whyte Adder
No 3 Limited and Herpa Properties Limited (the "Related Companies") are both
a Related Party under Rule 9.2.3(a) as two directors of the Related
Companies, Mr Peter Kraus and Mr Barry Wallace, are both directors of EBO.
Together the Related Companies hold 8.43% of EBO's shares on issue. The
Placement and sub-underwriting form part of the related series of
transactions of the Material Transaction, being the Transaction.
11. Prior to the Placement, Entitlement Offer and issue of Consideration
Shares, EBO is to undertake a bonus issue of EBO shares ("Bonus Issue") to
allocate imputation credits to EBO shareholders. The Bonus Issue will result
in EBO shareholders receiving two new EBO shares for every 53 EBO shares held
at the Bonus Issue Record Date of 6 June 2013.
12. EBO has approached NZX Regulation ("NZXR") for a waiver from Rules 7.10.5
and 9.2.1 in respect of the Transaction and a waiver from Rule 7.12.2 in
respect of the Bonus Issue.
Application One - Rule 7.10.5
13. EBO has approached NZXR seeking a waiver from the requirements in Rule
7.10.5, so that the Entitlement Offer may include the Oversubscription
Facility.
14. In support of its application for a waiver from Rule 7.10.5, EBO submits
that:
(a) The provision of an oversubscription facility is seen by the directors of
EBO as "good governance", as it enables existing shareholders to increase
their investment in EBO in a cost effective manner.
(b) Rule 7.5 will continue to apply. The directors of EBO do not perceive
any risk of any participant in the Entitlement Offer materially increasing
its ability to exercise control over EBO by way of participating in the
oversubscription facility.
(c) There is well-established precedent for this decision. Similar waivers
have been granted to Pike River Coal on 14 January 2007, Life Pharmacy
Limited on 20 August 2008, Metlifecare Limited on 24 February 2009, Skellerup
Holdings Limited on 2 September 2009 and Kiwi Income Property Trust on 10
November 2009.
Rule - 7.10.5
15. Rule 7.10.5 provides:
Renounceable Rights shall not entitle the holder of the Right to apply for
more than the entitlement of Securities except to enable acquisition of the
number of Securities needed to give that holder a Minimum Holding.
Decision One - Rule 7.10.5
16. On the basis that the information provided to NZXR is full and accurate
in all material respects, NZXR grants EBO a waiver from Rule 7.10.5 to enable
EBO to offer the Oversubscription Facility in relation to the Entitlement
Offer subject to the following conditions:
(a) To the extent available, and pro rated to the extent not, allocations
under the Oversubscription Facility are made to any shareholder participating
in the Oversubscription Facility who would otherwise hold less than a Minimum
Holding after the Entitlement Offer to the extent to allow them to hold a
Minimum Holding; and
(b) In respect of any remaining rights, in the event that demand for the
Entitlement Offer exceeds supply, participants are to be scaled on a pro rata
basis in accordance with their shareholding at the Record Date for their
entitlement.
Reasons - Rule 7.10.5
17. In coming to the decision to grant EBO a waiver from Rule 7.10.5 NZXR has
considered the following matters:
(a) The conditions to the waiver from Rule 7.10.5 will ensure that, to the
greatest extent possible, rights are issued under the Oversubscription
Facility in proportion to the number of existing shares held by applicants at
the Record Date;
(b) The provision of the Oversubscription Facility will increase the
likelihood of EBO raising the necessary capital sought, and will ensure that
existing shareholders obtain any benefit through the Entitlement Offer to the
fullest extent possible;
(c) Rule 7.5 continues to apply and specifically restricts the issue of any
shares that could be significantly likely to result in any person or group
materially increasing their ability to exercise effective control of EBO; and
(d) There is precedent for granting waivers from Rule 7.10.5.
Application Two - Rule 9.2.1
18. EBO has approached NZXR seeking a waiver in respect of the requirements
in Rule 9.2.1 so the Related Companies can participate in the Placement and
act as sub-underwriters to the Entitlement Offer without obtaining
shareholder approval.
19. In support of its application for a waiver from Rule 9.2.1, EBO submits
that:
(a) Critically, EBO's Board needs funding certainty before announcing the
Transaction. Without a committed sub-underwrite of the Entitlement Offer
being in place this certainty cannot be delivered and EBO will not be in a
position to proceed with the Transaction (funding certainty being a key
requirement of the Vendor and therefore a key driver of the Entitlement Offer
being underwritten). Although an EBO shareholder meeting is being held at
which Rule 9.2.1 approval could theoretically be obtained, it cannot be held
prior to the Transaction's announcement, which is the point at which funding
certainty is required.
(b) The sub-underwriting arrangements between the Underwriters and the
Related Companies will be negotiated on an arms-length basis on usual
commercial terms and will not be influenced by the Related Companies being
Related Parties of the Company, or by the status of Messr's Kraus and Wallace
as directors of EBO.
(c) The terms of the sub-underwriting arrangements between the Underwriters
and the Related Companies will be materially the same as those which will be
negotiated with the other parties who will also be invited to sub-underwrite
the Entitlement Offer. The Related Companies will not be the beneficiaries
of any "special treatment", either as to terms or quantum.
(d) Given that the policy underlying Rule 9.2 is to safeguard non-associated
shareholders, there is no value in requiring shareholder approval for the
sub-underwriting by the Related Companies, given that their status as Related
Parties will have no bearing on the terms or quantum of their participation.
(e) EBO's shareholders will still be required to approve the Transaction by
special resolution. Granting the waiver will in no way diminish the right of
EBO's shareholders to consider and approve the Transaction.
(f) There is precedent for this decision. Similar waivers have been granted
to Hellaby Holdings Limited (NZSX: HBY) (23 August 2010), AMP NZ Office Trust
(7 May 2009), Pike River Coal Limited (16 March 2009) and Skellerup Holdings
Limited (NZSX: SKL) (11 February 2008).
Rule - 9.2.1
20. 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;
(b) ...
unless that Material Transaction is approved by an Ordinary Resolution of the
Issuer.
21. Footnote 1 to Rule 9.2.1 provides:
NZX may waive the requirement to obtain the approval of a resolution for the
purposes of Rule 9.2.1 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.
22. 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 Capitilisation of the Issuer; or
(b) ...
23. 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
(b) ...
Decision Two - Rule 9.2.1
24. On the basis that the information provided to NZXR is full and accurate
in all material respects, and subject to the conditions contained below, NZXR
grants EBO a waiver from Rule 9.2.1 so that EBO is not required to seek
shareholder approval for the Related Companies to participate in the
Placement and to act as sub-underwriters of the Entitlement Offer.
25. NZXR grants this waiver on this conditions that:
(a) The terms and conditions on which the Related Companies participate in
the Placement and act as sub-underwriters of the Entitlement Offer are
identical to those offered to the other parties who are participating in the
Placement and acting as sub-underwriters;
(b) The directors of EBO, other than Mr Kraus and Mr Wallace, certify to NZXR
that Mr Kraus and Mr Wallace had no part in the negotiation of the terms of
participation in the Placement or as sub-underwriters;
(c) Mr Kraus and Mr Wallace abstain from, and do not participate in any
discussions or approval of the Placement allocations;
(d) The Notice of Meeting in respect of the approval of the acquisition of
Symbion clearly discloses the participation of the Related Companies in the
Placement and as sub-underwriters of the Entitlement Offer; and
(e) The Notice of Meeting in respect of the approval of the acquisition of
Symbion clearly discloses why the Related Companies are considered Related
Parties to the Symbion Transaction in respect of Rule 9.2.1.
Reasons - Rule 9.2.1
26. In coming to the decision to grant EBO a waiver from Rule 9.2.1 NZXR has
considered the following matters:
(a) The purpose of the prohibition in Rule 9.2.1 is to ensure that undue
influence is not exercised by a Related Party to cause entry into
transactions on terms that are unfairly favourable to those Related Parties
without scrutiny by, and approval of, minorities and other shareholders. The
granting of the waiver in paragraph 24 will not offend the policy behind Rule
9.2.1;
(b) The terms and conditions the Related Companies will participate in the
Placement and as sub-underwriters are identical to those offered to other
institutional investors participating and have been set at arms' length;
(c) The invitation and agreement to participate in the Placement and to act
as a sub-underwriter in the Entitlement Offer was formulated between the
Underwriters and directors of EBO, other than Mr Kraus and Mr Wallace. NZXR
is satisfied the Related Companies have not participated in the negotiation
of the underwriting or sub-underwriting agreements so have had no influence
in the terms of the agreements;
(d) Other substantial security holders will be offered the chance to
participate in the Placement and to act as sub-underwriters on the same terms
as the Related Parties;
(e) EBO has submitted, and NZXR has no reason not to accept, that the
Underwriters are hesitant to underwrite the Entitlement Offer without the
support of the Related Companies;
(f) EBO has submitted, and NZXR has no reason not to accept, that the support
of sub-underwriters including the Related Companies is critical prior to the
announcement of the Transaction. Therefore it is not commercially feasible
for EBO to obtain shareholder approval at the upcoming special meeting;
(g) As other major shareholders will be offered the opportunity to
participate in the Placement and sub-underwrite it would be unfair to the
Related Companies if they could not participate because they are Related
Parties due to having common directors with EBO, especially as those
directors had no part in formulation of the Placement, negotiation of
sub-underwrite agreement and are participating on the same arms' length basis
as all other parties;
(h) The conditions in paragraph 25 give NZXR comfort that the Related Parties
will participate in the Placement and act as sub-underwriters on the same
terms as other participants and that Mr Kraus and Mr Wallace had no part in
negotiating the Placement and sub-underwriting agreements; and
(i) There is precedent for waivers of this type.
Application Three - Rule 7.12.2
27. EBO has approached NZXR seeking a waiver in respect of the requirements
in Rule 7.12.2 to permit the Bonus Issuer Record Date to be six Business Days
after the announcement of the Bonus Issue.
28. In support of its application for a waiver from Rule 7.12.2, EBO submits:
(a) EBO wishes to ensure existing shareholders who have been loyal to EBO
prior to the Transaction get the benefit of accumulated imputation credits.
(b) As such, the Record Date for the Bonus Issue must be prior to the
allotment of shares under the Placement. The announcement of the Bonus Issue
is scheduled for 29 May 2013, while the allotment under the Placement is
scheduled for 7 June 2013. In the absence of a waiver from Rule 7.12.2 the
earliest Record Date for the Bonus Issue, based on an announcement date of 29
May 2013, would be after the scheduled allotment date for the Placement.
(c) The Bonus Issue cannot be announced prior to the announcement of the
Transaction on 29 May 2013 (in an attempt to meet the 10 Business Day period
imposed by Rule 7.12.2, by keeping the Bonus Issue Record Date at 6 June 2013
but moving the announcement date), as to do so would make it clear to the
market that a major transaction is imminent.
(d) Allotment of the shares under the Placement cannot be delayed until 10
Business Days after the announcement of the Transaction on 29 May 2013 as EBO
wishes to settle the Placement as close to the Placement bookbuild occurring
on 29 May 2013 as possible. While settlement of the Placement bookbuild will
be on a T + 5 basis, to extend this settlement any further will cause
institutions participating in the Placement to demand a discount on the
Placement price which will adversely affect EBO's shareholders.
(e) The proposed timetable for the Transaction, including the trading halt
for the Placement bookbuild, allows for at least one full day of trading
after the Bonus Issue announcement within which those who wish can trade in
order to be on or off EBO's share register before the Bonus Issue record
date.
(f) There is precedent for this decision. NZX has granted waivers in
circumstances where an Issuer wished to confer a benefit on its shareholders
but would not have been able to do so had it been required to comply with the
10 Business Day notice period under Rule 7.12.2; for example, SKYCITY
Entertainment Group (NZSX: SKC) (23 January 2009), Mr Chips Holdings Limited
(12 September 2008) and Dairy Equities Limited (4 August 2008).
Rule - 7.12.2
29. Rule 7.12.2 provides:
Where any benefit is to be paid or distributed on Quoted Securities
(including dividends, interest or bonus issues) or any Conversion of
Securities or call on Securities is to take place, the Issuer shall give to
NZX, forthwith after any Director's recommendation and at least 10 Business
Days before the Record Date to determine entitlements or obligations, full
details of the benefit, Conversion or call, including the information in the
table below [not replicated here]. That information shall be supplied in the
form set out in Appendix 7.
Decision Three - Rule 7.12.2
30. On the basis that the information provided to NZXR is full and accurate
in all material respects, NZXR grants EBO a waiver from the 10 Business Day
notice requirement in Rule 7.12.2 on the conditions that:
(a) EBO releases information on the Bonus Issue in the form required by Rule
7.12.2 when the transaction is announced on Wednesday, 29 May 2013; and
(b) The Record Date for the Bonus Issue is 6 June 2013.
31. The conditions of the waiver from Rule 7.12.2 require EBO to provide the
market six Business Days notice of the Bonus Issue. Within these six Business
Days the market will have at least one day, 31 May 2013, where trading can
occur in order for those who wish to move on or off the EBO share register
before the Bonus Issue.
Reasons - Rule 7.12.2
32. In coming to the decision to grant EBO a waiver from Rule 7.12.2 NZXR has
considered the following matters:
(a) The purpose of Rule 7.12.2 is to ensure the market and those persons who
are to receive any benefit are given sufficient notice ahead of any benefit.
In shortening the notification timeframe from 10 Business Days to six
Business Days, NZXR remains satisfied the market will have sufficient
notification of the Bonus Issue;
(b) The market will have at least one full day (being 31 May 2013) to trade
EBO shares after notice of the Bonus Issue but before the ex date of the
Record Date;
(c) NZXR accepts there is a commercial rational for the timetable of the
Transaction that means EBO is unable to provide the required 10 Business Days
notice to market;
(d) Being a Bonus Issue one Business Day where trading can occur for those
who wish to move on or off the EBO share register is sufficient as
shareholders do not need to take any active step to benefit from the
transaction;
(e) EBO is undertaking the Bonus Issue to give EBO shareholders the benefit
of imputation credits that would otherwise be lost due to the Transaction
causing a breach in shareholder continuity rules;
(f) EBO has submitted, and NZXR has no reason not to accept, that prior
notice of the Bonus Issue would signal to market a major transaction was
imminent. NZXR considers this a compelling commercial reason as to why in
this case a shorter notice period is sufficient; and
(e) EBO has confirmed with its share registry that the timing of the notice
of the Bonus Issue will not create any practical problems.
Confidentiality
33. EBO has requested that NZXR keep its application and any decision
confidential until the date on which the Transaction is announced to market.
34. NZXR grants EBO's request, as it accords with Rules 1.11.2 and 1.11.4 and
the footnotes to those Rules.
ENDS.
End CA:00236761 For:EBO Type:WAV/RULE Time:2013-05-29 08:32:20
