Ann: WAV/RULE: TTK: TTK - Waiver from NZSX Listin

• Release Date: 26/11/12 18:08
• Summary: WAV/RULE: TTK: TTK - Waiver from NZSX Listing Rule 7.3.2(b)
• Price Sensitive: No
• Download Document  8.27KB

					

TTK
26/11/2012 16:08
WAV/RULE

REL: 1608 HRS TeamTalk Limited

WAV/RULE: TTK: TTK - Waiver from NZSX Listing Rule 7.3.2(b)

23 November 2012

NZX Regulation Decision
TeamTalk Limited
 Application for Waiver from NZSX Listing Rule 7.3.2(b)

Background

1. TeamTalk Limited ("TTK") is a Listed Issuer with ordinary shares Quoted on
the NZX Main Board.

2. On 2 November 2012, TTK and the shareholders (the "Vendors") of BayCity
Communications Limited ("BayCity") entered into a Share Sale Agreement
pursuant to which TTK will, subject to the fulfillment of certain conditions,
acquire all of the shares in the capital of BayCity for a consideration
consisting partly of cash and partly of ordinary shares in the capital of TTK
(the "Proposed Transaction"). BayCity and its subsidiaries together trade
under the name "Farmside" (the "Farmside Group").

3. The basic structure of the Proposed Transaction is that on settlement, in
exchange for all of the ordinary shares in BayCity, TTK will:

(a) Pay to the Vendors in cash the sum of $19 million less an amount equal to
the borrowed money indebtedness of, and transaction costs incurred by, the
Farmside Group at the settlement date; and

(b) Issue to the Vendors ordinary shares in the capital of TTK having a value
of $12 million, calculated with reference to the volume-weighted average
price of shares in TTK over the 20 Business Days prior to the announcement by
the TTK of the Proposed Transaction.

4. There is also an earn-out component of the purchase price based on the
results of the Farmside Group for the years ending 31 March 2013 and 31 March
2014. Under the earn-out, if:

(a) The Farmside Group's EBITDA for the year ending 31 March 2013 is greater
than $6,600,000, then TTK will pay the Vendors earn-out consideration of
$8.75 for each dollar of EBITDA in excess of $6,600,000 up to a maximum
earn-out consideration of $7 Million, payable in cash (the "2013 Earn-out
Consideration"); and

(b) The Farmside Group's EBITDA for the year ending 31 March 2014 is greater
than $13,000,000, then TTK will pay the Vendors additional earn-out
consideration (the "2014 Earn-out Consideration") based on the Farmside
Group's EBITDA, to a maximum of $11.05 million, less any 2013 Earn-out
Consideration already paid.

5. The first $7 million of earn-out consideration that is payable will be
payable in cash. The balance, if any, will be paid by the issue to the
Vendors of ordinary shares in the capital of TTK having a value of up to
$4.05 million, calculated with reference to the volume-weighted average price
of shares in TTK over the 20 Business Days prior to 31 March 2014 (the
"Earn-out Shares").

6. Under the terms of the Share Sale Agreement there is a cap on the total
number of Earn-out Shares that can be issued to any of the Vendors and their
"Associated Persons" in terms of the Takeovers Code if, as a result of the
issue, those persons would own 20% or more of TTK's shares. Any balance of
the 2014 Earn-out Consideration will be paid in cash.

7. TTK will seek shareholder approval for the Proposed Transaction and
related financing, as each is a major transaction. In addition, both the
initial issue of shares and the issue of the Earn-out Shares (if any) will
require the approval of shareholders by ordinary resolution pursuant to NZSX
Listing Rule ("Rule") 7.3.1(a) (the "Shareholders' Resolution").

8. Rule 7.3.2(b) requires shares to be allotted within 12 months from the
date of the Shareholders' Resolution approving the issue of shares under Rule
7.3.1(a).

Application

9. TTK has applied to NZX Regulation ("NZXR") for a waiver from Rule 7.3.2(b)
to enable it to issue the Earn-out Shares to the Vendor after the expiry of
12 months from the date of the Shareholders' Resolution.

10. In support of its application TTK makes the following submissions:

(a) Applications for waivers of Rule 7.3.2(b) have been considered on
numerous occasions by NZXR in the past. The most recent example TTK has
sighted is the decision in respect of Claridge Capital Limited ("CLA") dated
20 September 2012 relating to the issue by CLA of earn-out shares (the "CLA
Earn-out Shares"), in connection with the acquisition of SeaDragon Marine
Oils Limited;

(b) As with the present application, the issue of the CLA Earn-out Shares was
dependent upon the target company achieving certain financial targets, which
would not be known within the 12-month period following shareholder approval
of the issue. At paragraph 13(a) of its decision, NZXR stated that:

i. "The purpose of Rule 7.3.2(b) is to ensure that Issuers do not unduly
delay the issue of securities for which they have received approval. This
mischief is not present where the shares to be issued in the future are
determined by an objective formula which requires the Earn Out Shares ... to
be issued within approximately 2 years of the Shareholder Resolution."

(c) TTK submits that the circumstances in this instance are identical in all
material respects.

(d) As with CLA's application:

i. NZXR will have the opportunity to review and approve TTK's Notice of
Meeting to ensure that the period within which the Earn-out Shares may be
issued is clearly and prominently stated;

ii. TTK's shareholders will have the opportunity to consider whether to
approve the issue of the Earn-out Shares on those terms;

iii. The issue of the Earn-out Shares will be based on an objective formula
which will be disclosed to shareholders at the time shareholder approval is
sought; and

iv. The waiver and TTK's reliance on the waiver will be apparent to future
TTK shareholders as it will be disclosed in TTK's annual reports for the
period within which TTK is reliant on the waiver;

(e) We note that NZXR has granted similar waivers in the past, including to
Infratil Limited (13 July 2011) (redemption of bonds by the issue of shares),
NZ Farming Systems Uruguay Limited (18 February 2008) (payment of management
fees by the issue of shares) and The Warehouse Group Limited (5 February
2007) (issue of "Conditional Rights" to certain senior executives).

Rule 7.3.2(b)

11. Rule 7.3.2(b) provides that:

"An issue authorised by resolutions passed pursuant to Rule 7.3.1(a) shall be
completed...

(b) in all other circumstances, within twelve months after the passing of
those resolutions."

Decision

12. On the basis that the information provided to NZXR is full and accurate
in all material respects, NZXR grants TTK a waiver from Rule 7.3.2(b), so
that it may issue the Earn-out Shares after the expiry of 12 months from the
date of the Shareholders' Resolution.

13. The waiver in paragraph 12 is granted on the following conditions:

(a) the precise terms and conditions of the issue of the Earn-out Shares,
including in particular the period within which they are to be issued, are
clearly and prominently disclosed in the Notice of Meeting relating to the
Proposed Transaction;

(b) the Notice of Meeting clearly states that this waiver has been granted
and the effect of this waiver; and

(c) this waiver and the timeframe within which the Earn-out Shares will be
issued are disclosed in the annual report for the period within which the
waiver is relied upon.

Reasons

14. In coming to this decision, NZXR has considered the following matters: ?

(a) The purpose of Rule 7.3.2(b) is to ensure that Issuers do not unduly
delay the issue of securities for which they have received approval. This
mischief is not present where the number of shares to be issued in the future
is determined by an objective formula, and the terms of the agreement require
the Earn-out Shares to be issued within approximately 1.5 years of the
Shareholders' Resolution;

(b) NZXR will have the opportunity to review and approve TTK's Notice of
Meeting to ensure that the period within which the Earn-out Shares may be
issued is clearly and prominently stated and TTK shareholders will have the
opportunity to consider whether to approve the issue of Earn-out Shares on
those terms;

(c) The number of Earn-out Shares to be issued will be based on an objective
formula which will be disclosed to shareholders at the time shareholder
approval is sought for the issue of the Earn-out Shares; and

(d) The waiver and TTK's reliance on the waiver will be apparent to future
TTK shareholders as it will be disclosed in TTK's annual report for the
period in which TTK relies on the waiver.

ENDS.
End CA:00230238 For:TTK    Type:WAV/RULE   Time:2012-11-26 16:08:05