In the Matter of A scheme of arrangement under part 15 of the Companies Act 1993 Arvida Group Limited Applicant

[2024] NZHC 3053

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2024-404-2124

[2024] NZHC 3053

IN THE MATTER OF

A scheme of arrangement under part 15 of the Companies Act 1993

ARVIDA GROUP LIMITED

Applicant

Hearing:

17 October 2024

Appearances:

L L Fraser and L C Bercovitch for the applicant

J Wilson and T Sharpe for Stonepeak Alps Bidco Ltd

Judgment:

18 October 2024

JUDGMENT OF CAMPBELL J

This judgment was delivered by me on 18 October 2024 at 11.00 am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

ARVIDA GROUP LTD [2024] NZHC 3053 [18 October 2024]

Introduction

[1]                 The applicant, Arvida Group Ltd (Arvida), seeks final orders under s 236 of the Companies Act 1993 (the Act) approving a scheme of arrangement. Initial orders were made on 29 August 2024.

[2]                 Counsel for Arvida filed memoranda in support dated 11 and 16 October 2024. The first memorandum addresses compliance with the initial orders and supplements the earlier submissions, dated 26 August 2024.

[3]                 Arvida is one of New Zealand’s largest aged care providers. It owns and operates 35 retirement villages throughout New Zealand. Arvida is registered under the Act and is listed on the NZX Main Board.

[4]                 The essential purpose of the proposed scheme is to give effect to the acquisition of all shares in Arvida by Stonepeak Alps Bidco Ltd (Stonepeak).

[5]                 In accordance with the initial orders, a meeting of Arvida’s shareholders was held on 25 September 2024. At that meeting, a resolution to approve the proposed scheme was put to the shareholders, in two classes. The first class consisted of one shareholder, William McDonald, who is an associate of Stonepeak. Mr McDonald voted all his shares in favour of the proposed scheme. The other class consisted of all other Arvida shareholders. Of those in that class who voted, 99.04 per cent (by voting rights) voted in favour of the scheme. A total of 69.84 per cent of total voting rights were exercised in favour of the scheme.

[6]In short, the scheme has received overwhelming approval from shareholders.

[7]                 The initial orders required that any person who wished to oppose or be heard on the application file and serve a notice of opposition, or notice of appearance, by 1 October 2024. No such notices were filed, and no one appeared at the hearing to oppose the application.

Law

[8]                 Section 236(1) of the Act provides this Court with jurisdiction to approve     a scheme of arrangement, subject to such terms and conditions as the Court thinks fit. Section 237(1) provides the Court with power to make additional orders giving effect to any arrangement approved under s 236(1).

[9]                 Section 235 defines “arrangement” in a non-exhaustive fashion.  A transfer  of shares from existing shareholders to a new acquirer comes within the definition  of “arrangement”.1

[10]              To approve a scheme of arrangement under s 236 the Court must be satisfied that:2

(a)There has been compliance with the statutory provisions as to meetings, resolutions, the initial Court orders and similar procedural requirements.

(b)The arrangement has been fairly put to the classes concerned, and that if a circular or booklet has been sent out to those classes, it gives all the information reasonably necessary to enable the recipients to judge and vote upon the proposals.

(c)The classes were fairly represented by those who attended the meeting, and the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the classes whom they purport to represent.

(d)The arrangement is such that an intelligent and honest person of business, a member of the classes concerned, and acting in respect of her or his interest, might reasonably approve it.

1      Recent examples include Re Westland Co-operative Dairy Co Ltd [2019] NZHC 1683 and Re Trade Me Group Ltd [2019] NZHC 840.

2      Re CM Banks Ltd [1944] NZLR 248 (SC) at 253; and Re Milne and Choyce Ltd [1953] NZLR 724 (CA) at 754.

(e)The arrangement is fair and reasonable to all of the classes concerned.

[11]              Because Arvida is listed on the NZX, it is a “code company” in terms of the Act.3 The proposed arrangement will affect the voting rights of Arvida. In these circumstances, s 236A provides that the Court may not approve the scheme of arrangement under s 236 unless:

(a)Arvida’s shareholders approve the arrangement by a resolution approved by a majority of 75 per cent of the votes of shareholders (in each interest class) entitled to vote and voting on the question, and by a simple majority of those shareholders entitled to vote; and

(b)The Court is satisfied that the shareholders of the company will not be adversely affected by the use of s 236 rather than the takeovers code to effect the change of voting rights, or the applicant has filed a statement from the Takeovers Panel indicating the Panel has no objection to the order being made under s 236.4

Decision

[12]              I am satisfied that Arvida has complied with the Act’s provisions and with the initial orders.

[13]              I am also  satisfied that  the resolution  was fairly  put  to  the shareholders.  A scheme  booklet  was  distributed  to  shareholders  in  advance  of  the  meeting, in accordance with the initial orders. A draft of that booklet was approved by this Court when making the initial orders. The booklet, as distributed, provided ample information to enable shareholders to consider and vote on the proposal. That information was comprehensively yet succinctly set out.

[14]              There were two classes of shareholders.   Each class was fairly represented   at the meeting. There was a high turnout. Only a tiny minority voted against the

3      Companies Act 1993, s 2(1), incorporating the definition of “code company” in s 2(1) of the Takeovers Act 1993.

4      Section 236A(3) makes clear that, even if the Panel provides such a statement, the Court need not approve the arrangement.

resolution. There is no suggestion of coercion. None of the minority has taken steps to oppose the scheme. The overwhelming support and lack of opposition indicate fair representation and good faith by the majority.5

[15]              The arrangement is one that an intelligent and honest person of business, acting in respect of her or his interest, might reasonably approve. Mr Beverley, the chair of Arvida’s board of directors, explained in his affidavits dated 23 August and 10 October 2024 the reasons for the arrangement. In short, the price offered by Stonepeak is at a very significant premium to the price at which Arvida’s shares had been trading for some time and the offer price is within the valuation range assessed by an independent adviser. The reasons for the arrangement clearly made sense to the shareholders who overwhelmingly approved the arrangement.

[16]              As to the additional requirements in s 236A that arise from Arvida being a code company, these have been satisfied. The resolution received support well above the requisite thresholds. Arvida has received a statement from the Takeovers Panel indicating the Panel has no objection to the Court approving the scheme under s 236.

[17]              The scheme is subject to several conditions. One condition, being consent from the Overseas Investment Office (OIO), remains outstanding. Arvida and Stonepeak have agreed to a variation to their underlying scheme implementation agreement, the essential effect of which is that the “Record Date” in that agreement is now six business days after the later of the date on which the OIO condition is satisfied and the date this Court makes final orders.

[18]              I am satisfied that the Court can grant final orders when a scheme is still subject to a condition such as the OIO condition. The approval does not require any amendment to the scheme that was approved by the shareholders, as that was always subject to the OIO condition and the definition of “Record Date” in the scheme is four business days after the Court makes final orders “or such other date Stonepeak and Arvida agree in writing”.

5      Re Methven Ltd [2019] NZHC 608 at [9(c)].

[19]              For those reasons, I am satisfied that it is appropriate to exercise my discretion to approve the scheme of arrangement.

Result

[20]              I approve the scheme of arrangement described in the Scheme Plan that was part of the materials distributed to Arvida shareholders for the meeting that was held on 25 September 2024 (and as attached to the draft final orders filed with the Court on 16 October 2024).

[21]              I order that the scheme is binding on Arvida, all of its shareholders, Stonepeak, and all such other persons as are necessary to give effect to the scheme.

[22]              Arvida is granted leave to apply to the Court for approval of any amendment, modification or supplement to the scheme.

Campbell J