MGL
22/12/2015 15:58
WAV/RULE
PRICE SENSITIVE
REL: 1558 HRS Mercer Group Limited
WAV/RULE: MGL: MGL - Waiver from NZX Main Board Listing Rule 9.2.1
NZX Regulation Decision
Mercer Group Limited (MGL)
Application for a waiver from NZX Main Board Listing Rule 9.2.1
18 December 2015
Waiver from Rule 9.2.1
Decision
1. Subject to the conditions set out in paragraph 2 below, and on
the basis that the information provided by MGL is complete and accurate in
all material respects, NZXR grants MGL a waiver from Rule 9.2.1, to the
extent that this Rule would require MGL to obtain shareholder approval to
enter into the Agreement to sell the Interiors Division to MIL.
2. The waiver in paragraph 1 above is provided on the conditions that:
(a) the Directors of MGL certify to NZXR that:
i. the terms and conditions of the Agreement have been negotiated on an arm's
length and commercial basis;
ii. entry into, and the terms and conditions of the Agreement, are in the
best interests of MGL, and are fair and reasonable to MGL's shareholders who
are not Associated Persons of Mr. Ramsey;
iii. Mr. Ramsey took no part in the decision for MGL to proceed with the sale
of the Interiors Division;
iv. MGL has not been influenced in its decision to enter into the Transaction
by the interests of Mr. Ramsey, or any Associated Person of Mr. Ramsey; and
(b) this waiver, its conditions, and the implications of this waiver are
disclosed in MGL's next annual report.
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 aspects.
4. The Rules to which this decision relates are set out in Appendix Two.
5. Capitalised terms that are not defined in this decision have the meanings
given to them in the Rules.
Reasons
6. 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 regulate transactions where a Related
Party to a Material Transaction may gain favourable consideration due to its
relationship with the Issuer. NZXR 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, or the decision to enter into, the transaction. The granting of
this waiver will not offend the policy behind Rule 9.2.1;
(b) NZXR considers that it is unlikely that the Related Parties could have
influenced MGL's decision to enter into the Transaction for the following
reasons:
i. the decision to sell the Interiors Division and to subsequently enter into
the Transaction was made by MGL's Board, and Mr. Ramsey took no part in the
Board's decision making. The Directors of MGL have provided a certification
to this effect;
ii. MGL has submitted, and NZXR has no reason not to accept, that once Mr.
Ramsey indicated his interest in the sale, MGL implemented an information
barrier to ensure that Mr. Ramsey could not access any confidential
information on the sales process or any of the other bidders; and
iii. all negotiations between MGL and the Consortium in relation to the
Agreement have been undertaken on an arm's length basis, and were not
affected by virtue of Mr. Ramsey's position as a general manager of the
Division. The Board has provided a certification to this effect;
(c) the condition in paragraph 2(a)(ii) above provides comfort that the
Board's decision to enter into the Transaction was reached on the basis that
this was the best offer available to MGL and is in the best interests of MGL
and its shareholders who are not Associated Persons of Mr. Ramsey. The Board
has provided a certification to this effect; and
(d) there is precedent for this decision.
Confidentiality
7. MGL has requested that NZX keep this waiver confidential until MGL
announces the sale of the Interiors Division. In accordance with Footnote 1
to Rule 1.11.2 NZXR grants MGL's request.
Appendix One
1. Mercer Group Limited ("MGL") is a Listed Issuer with ordinary shares
Quoted on the NZX Main Board. MGL's current Average Market Capitalisation is
approximately $19,108,884.
2. On 11 August 2015, MGL announced that it had completed a review of the MGL
businesses. MGL advised that it would explore its options for its interiors
business ("Interiors Division"), with a view to divesting the Interiors
Division at the appropriate time.
3. Once the Board determined that it would divest the Interiors Division, MGL
approached participants in the market that it considered likely to be
interested in purchasing the Interiors Division. As a result of this, MGL
received three indicative bids from interested parties, including from a
consortium ("Consortium") headed by one of MGL's executive officers, Ivan
Ramsey ("Mr. Ramsey").
4. The Consortium is comprised of two companies, Ramco Holdings Limited
("RHL") and Plughole Limited ("PL"). Mr. Ramsey is the sole director and
shareholder of RHL. RHL and PL hold 55% and 45% respectively in the company
nominated by the Consortium to purchase the Interiors Division, Mercer
Interiors Limited ("MIL").
5. Once Mr. Ramsey had indicated his interest in purchasing the Interiors
Division on behalf of the Consortium, Mr. Ramsey was excluded from any
involvement in the sales process on behalf of MGL. In particular, MGL has
advised that an information barrier was implemented to ensure that Mr. Ramsey
did not have any access to information on the sales process or other bidders
that was not available to all interested parties.
6. MGL has also confirmed that Mr. Ramsey did not have any influence over the
Board's decision to divest the Interiors Division. In particular, MGL has
advised that all decisions regarding MGL's restructure were made by the
Board. The Board delegated authority for the management of the sale of the
Interiors Division to the Chief Executive Officer, rather than Mr. Ramsey as
Head of that Division. The Board did not consult with Mr. Ramsey at any point
on the restructure or the sales process.
7. Of the three indicative bids received by MGL, one was withdrawn due to a
failure to reach an agreement on the assignment of a distribution agreement.
Another party was unwilling to include the Interior Division's manufacturing
operations as part of their bid. On this basis, the Board determined that the
Consortium's bid was the best remaining offer available, and that accepting
the Consortium's bid was in the best interests of MGL.
8. MGL's Board now wishes to enter into a conditional sale and purchase
agreement ("Agreement") under which MIL will purchase the Interiors Division
("Transaction").
9. Mr. Ramsey is a Related Party of MGL pursuant to Rule 9.2.3(a). As general
manager of the Division, Mr. Ramsey has no direct relationship with MGL's
Board. However, Mr. Ramsey does reports to MGL's Chief Operating Officer and
Chief Executive Officer. On this basis, Mr. Ramsey is an 'executive officer'
and therefore a Related Party of MGL, pursuant to Rule 9.2.3(a).
10. MIL is a Related Party of MGL pursuant to Rule 9.2.3(c), as it is an
Associated Person of Mr Ramsey. MIL is an Associated Person of Mr. Ramsey
pursuant to Rules 1.8.3a)(i) and 1.8.2, as Mr. Ramsey is the managing
director of MIL, and in this capacity could influence MIL in making a
decision that could influence MGL.
11. RHL is a Related Party of MGL pursuant to Rule 9.2.3(c), as it is an
Associated Person of Mr Ramsey. RHL is an Associated Person of Mr. Ramsey
pursuant to Rules 1.8.3(a)(i) as Mr. Ramsey is the sole director of RHL; and
1.8.3(c) as the sole shareholder of RHL.
12. PL is a Related Party pursuant to Rule 9.2.3(c), as it is an Associated
Person of Mr Ramsey. PL is a deemed Associated Person of Mr. Ramsey pursuant
to Rule 1.8.5, as Mr Ramsey is an Associated Person of PL. Mr. Ramsey is an
Associated Person of PL pursuant to Rule 1.8.2 as in his capacity as Managing
Director of MIL, he may be influenced by his relationship to PL, who hold a
45% share in MIL, in making a decision that could influence MGL.
13. The proposed purchase price of the Interiors Division is $2.15 million.
The value of the Transaction is therefore equivalent to 11.25% of MGL's
current Average Market Capitalisation, which crosses the 10% threshold in
Rule 9.2.2(a). Accordingly, the Transaction is a Material Transaction.
14. MGL has approached NZX Regulation ("NZXR") for a waiver from Rule 9.2.1
to the extent that this Rule would otherwise require MGL to obtain
shareholder approval to enter into the Transaction.
Appendix Two
Rule 1.8.1
In the Rules, a person is an Associated Person of another person if the first
person is associated with the other in terms of Rule 1.8.2 to Rule 1.8.7.
Rule 1.8.2
A person (the "first person") is associated with another person (the "second
person") if, in making a decision or exercising a power affecting an Issuer,
the first person could be influenced as a consequence of an Arrangement or
relationship existing between, or involving, the first person and the second
person.
Rule 1.8.3
Without limiting Rule 1.8.2, the first person is associated with the second
person if:
(a) the first person is a company, and the second person is:
(i) Director of that company; or
(ii) Related Company of that company; or
(iii) Director of a Related Company of that company; or
(b) the first person is a spouse, domestic companion, child or parent of the
second person, or a nominee or trustee for any of them or for the second
person; or
(c) the first person is a Director of a company, or holds a Relevant Interest
in Securities carrying more than 10% of the Votes of a company and the first
person and the second person are parties to an Arrangement relating to the
control of, or the control or ownership of Securities in, that company, which
Arrangement affects Securities of that company carrying more than 30% of the
total Votes attaching to Securities of that company; or
(d) the first person and the second person are acting jointly or in concert;
or
(e) the first person and/or the second person propose to do, or are likely to
do, anything which will cause them to become associated in terms of
paragraphs (a) to (d) above or Rule 1.8.2
Rule 1.8.5
If the first person is associated with the second person in terms of Rule
1.8.2 to Rule 1.8.4, then the second person shall be deemed to be associated
with the first person.
Rule 9.2.1
Transactions with Related Parties
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.
Rule 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
(e) provides or obtains any services (including without limitation obtaining
underwriting of Securities or services as an Employee) in respect of which
the actual gross cost to the Issuer in any financial year (ignoring any
returns or benefits in connection with such services) is likely to exceed an
amount equal to 1% of the Average Market Capitalisation of the Issuer; or
(f) amalgamates, except for amalgamations of a wholly owned Subsidiary with
another wholly owned Subsidiary or with the Issuer:
(g) For the purposes of Rule 9.2.2(a), "Aggregate Net Value" means the net
value of those assets calculated as the greater of the net tangible asset
backing value (from the most recently published financial statements) or
market value.
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
(d) a person in respect of whom there are arrangements other than the
Material Transaction itself, intended to result in that person becoming a
person described in (a), (b), or (c), or of whom the attainment of such a
status may reasonably be expected, other than as a consequence of the
Material Transaction itself;
but a person is not a Related Party of an Issuer if:
(e) the only reason why that person would otherwise be a Related Party of the
Issuer is that a Director or executive officer of the Issuer is also a
Director of that person, so long as:
(i) not more than one third of the Directors of the Issuer are also Directors
of that person; and
(ii) no Director or executive officer of the Issuer has a material direct or
indirect economic interest in that person, other than by reason of receipt of
reasonable Directors' fees or executive remuneration; or
(f) that person is a Subsidiary of, incorporated joint venture of, or
unincorporated joint venture participant with, the Issuer and:
(i) no Related Party of the Issuer has or intends to obtain a material direct
or indirect economic interest in that Subsidiary, incorporated joint venture,
or unincorporated joint venture participant, other than by reason of receipt
of reasonable Director's fees or executive remuneration; and
(ii) the Issuer is entitled to participate, directly or indirectly, in at
least one half of the income or profits, and the assets, of that Subsidiary,
incorporated joint venture, or unincorporated joint venture participant.
End CA:00275602 For:MGL Type:WAV/RULE Time:2015-12-22 15:58:07
