MHM Automation Limited - [2024] NZHC 532

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2023-409-664

[2024] NZHC 532

UNDER Part 19 of the High Court Rules 2016

IN THE MATTER

of a scheme of arrangement under Part 15 of the Companies Act 1993

APPLICATION BY

MHM AUTOMATION LIMITED

Applicant

Hearing: 21 February 2024

Appearances:

O D Peers and L C Elliot for Applicant

B G Walker for Interested Party (Bettcher Industries Inc)

Judgment:

13 March 2024

REASONS JUDGMENT OF ASSOCIATE JUDGE LESTER

RE MHM AUTOMATION LIMITED [2024] NZHC 532 [13 March 2024]

[1] MHM Automation Limited (MHM) has implemented a scheme of arrangement (the Scheme) between it and its shareholders, concerning the acquisition of 100 per cent of the shares in MHM by Merlin NZD Bidco Limited (Merlin).

[2] Interim orders were made on 11 December 2023 concerning the procedural steps MHM was to undertake in advancing the Scheme and in respect of the materials to be provided by its two shareholders.1

[3] As will be addressed, those procedural requirements were satisfied by MHM and it subsequently sought final orders approving the Scheme under pt 15 of the Companies Act 1993 (the Act).

[4] That application came before me on 21 February 2024 and an oral results judgment was issued making the final orders as sought by MHM. I now give reasons for that judgment.

[5] I acknowledge the comprehensive and thorough submissions prepared by Mr Peers, counsel for MHM, in support of the application and this judgment is based largely, if not entirely, on his submissions.

[6] MHM’s application was not opposed. Mr Walker appeared for Bettcher Industries Inc (Bettcher), the parent company of Merlin.

Background

[7] MHM designs and supplies innovative, engineered solutions for the food and primary industries, with a particular focus on bespoke food processing and packaging technologies. The MHM Group comprises MHM and 17 wholly owned subsidiaries. MHM is a listed issuer that has its ordinary shares quoted on the NZX Main Board and is, therefore, a "code company" (as defined in s 2A(1) of the Takeovers Act 1993) for the purposes of pt 15 of the Act.

1 Re MHM Automation Ltd [2023] NZHC 3610.

[8] Bettcher is a United States incorporated company and is a developer and manufacturer of equipment in the food processing industry. It has business operations in North America, South America, Asia and Europe. It identified MHM's business as being particularly suited to Bettcher's expansion objectives. It accordingly approached MHM in August 2023 indicating an interest in acquiring MHM's shares. This initial approach was formalised in a confidential and non-binding letter of intention from Bettcher dated 22 September 2023.

[9] The letter of intention triggered MHM board's protocol for potential takeover offers, resulting in MHM’s board appointing a sub-committee of independent directors (referred to in the court papers filed as the Takeovers Committee). The Takeovers Committee delegated the board's functions and powers to: approve the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

AGLC: MHM Automation Limited [2024] NZHC 532
Case: [2024] NZHC 532
Decision Date: 13 March 2024

CaseChat Overview and Summary

MHM Automation Limited, a New Zealand company, sought approval from the High Court of New Zealand for a scheme of arrangement to facilitate the acquisition of 100% of its shares by Merlin NZD Bidco Limited. The case involved the procedural steps and disclosure requirements mandated by the Companies Act 1993 and the Takeovers Act 1993. The application was heard on 21 February 2024, with an oral results judgment issued approving the scheme on 13 March 2024. The court's decision was based on compliance with statutory provisions, adequate disclosure to shareholders, fair representation of shareholders, and the fairness of the scheme.

The primary legal issues addressed by the court included whether MHM had complied with statutory provisions and interim orders, whether the scheme had been fairly put to shareholders, whether shareholders were fairly represented by those who attended the meeting, and whether the scheme was fair and equitable. The court found that MHM had met all the statutory requirements, including timely distribution of scheme materials and adherence to interim orders. The scheme was deemed fairly put to shareholders due to comprehensive disclosure and the opportunity for shareholders to raise questions. The interest class was considered fairly represented given the high turnout and support for the scheme. Lastly, the court determined the scheme to be fair and equitable, supported by the independent advisor's report and the unanimous recommendation of MHM’s independent directors.

Associate Judge Lester concluded that the scheme met all the criteria set forth by the court, consistent with past jurisprudence. The final orders approving the scheme were made on 13 March 2024, allowing Merlin NZD Bidco Limited to acquire 100% of MHM Automation Limited.

Orders