MHM Automation Limited

[2023] NZHC 3610

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2023-409-664

[2023] NZHC 3610

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

BETWEEN

MHM AUTOMATION LIMITED

Applicant

AND

Hearing:	(On the papers)
Counsel:	E D Peers for Applicant
Judgment:	11 December 2023

JUDGMENT OF ASSOCIATE JUDGE LESTER

RE MHM AUTOMATION LIMITED [2023] NZHC 3610 [11 December 2023]

[1]    The applicant, MHM Automation  Limited  (MHM)  wishes  to  implement 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]    MHM has made an interlocutory application without notice for interim orders under pt 15 of the Companies Act 1993 (the Act). Mr Peers, counsel for MHM, has filed detailed submissions in support of the without notice application.

[3]    Mr Peers explains that although it is not a pre-condition to an order approving a scheme of arrangement under s 236(1) of the Act, in practice, the parties seeking approval of a scheme will also apply for interim orders relating to the procedural steps including the materials to be provided to shareholders. After the special meeting of shareholders (the Scheme Meeting) and assuming the proposal is approved by the requisite quorum of shareholders, there will be a second hearing where the Court is asked to give its final approval to the Scheme.

[4]    Accordingly, this judgment relates only to the application for interim procedural orders.

[5]    In summary, the orders sought relate to the process by which all relevant parties are to be served with the Scheme, the arrangements for the Scheme Meeting, along with the mechanics as to how shareholders will vote.

[6]    Mr Peers also seeks a hearing date for the Court to give its final approval to the Scheme, assuming it is approved at the Scheme Meeting.

[7]    The Court must be satisfied that the application for interim orders can be dealt with on a without notice basis. I accept Mr Peers’ submission that it is standard for such interim orders to be granted on a without notice basis as they are essentially procedural. Given MHM is a publicly listed company it would be impractical and involve a substantial and disproportionate time and cost for service on all shareholders. I accept Mr Peers’ submission that it is appropriate that such procedural orders be dealt with on the papers.

Part 15 of the Companies Act 1993 – eligibility

[8]    The proposed acquisition of MHM’s shares by a third party is an arrangement for the purposes of pt 15 of the Act.1

[9]    Section 236(2) of the Act sets out the Court’s jurisdiction to make initial orders in respect of proposed schemes. The purpose of these orders is to ensure there is a process by which all interested or affected parties are consulted before the Court makes its decision on the proposed scheme and that those parties are provided with sufficient information to enable them to properly consider and to decide whether or not to support the proposed scheme.

[10]   MHM is a code company for the purposes of the Takeovers Act 1993, being a New Zealand registered company with its ordinary shares quoted on the NZX. As the scheme affects the voting rights of the shareholders, MHM is required to notify the Takeovers Panel of its application pursuant to s 236A(2) of the Act. The directions sought by MHM require the application to be served on the Takeovers Panel.

[11]   The orders sought are procedural in nature. The orders describe the material to be sent to shareholders including a proxy form for voting, the means of communication which will be by way of email where shareholders have elected to receive materials by email or by ordinary post unless shareholders provide when those materials will be deemed to have been received. MHM will make copies of the Scheme Meeting available on its website. The orders sought provide that MHM may make amendments to the Scheme and how notice of those amendments will be given. Mr Peers, in a telephone conference, confirmed that of necessity any amendment to the Scheme would have to be minor and technical only and not affect substantive rights because a change would trigger a need for reconsideration by the Takeovers Panel.

[12]   Provisions are set out for the running of the Scheme Meeting which are reasonably straightforward. It is anticipated the meeting will be held in person but with people having the ability to attend on line or to vote by proxy. Mr Peers explained that the voting arrangements are consistent with MHM’s constitution.

1      Re Fliway Group Ltd [2017] NZHC 3216 at [5] citing Re Nuplex Industries [2016] NZHC 1677.

[13]   Finally, directions are sought in relation to how MHM will notify the outcome of the Scheme and the evidence it shall provide in relation to the Court dealing with its originating application for approval and how the parties will raise any opposition to the application.

[14]   Mr Peers has supplied a draft order setting out the detail of the directions sought. I note only one matter and that is there are some 51 shareholders, accounting for approximately 0.03 per cent of MHM’s shares for whom MHM does not have contact details and cannot serve. Mr Peers noted in the telephone conference that there has been some publicity in respect of the arrangement. If details for those shareholders are obtained or if they make themselves known then they will be provided with the materials.

[15]   I am satisfied that the draft orders sought by Mr Peers which accompany this judgment are appropriate in terms of giving effective parties reasonable notice of the Scheme as well as setting out  appropriate  processes  for  them  to  participate in the Scheme Meeting.

[16]Accordingly, there are orders in terms of the attached draft.

[17]   No order as to costs is sought and accordingly none is made on this aspect of the application.

[18]   The  originating  application  will  be   called   in   the   11:00am   List   on 29 February 2024 before me. If there is any opposition filed the applications will be heard on Monday 4 March 2024 at 10:00am.

Associate Judge Lester

Solicitors:
Buddle Findlay, Christchurch

DRAFT ORDER

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2023-

Under  Part 19 of the High Court Rules

In thematter of          A scheme of arrangement under Part 15 of the Companies Act 1993

Application by           MHM Automation Limited, a duly incorporated company having its registered office at 53 Lunns Road, Middleton, Christchurch, 8024, New Zealand

Applicant

INITIAL ORDERS UNDER PART 15 OF THE COMPANIES ACT 1993

Dated:     December 2023

To:                 The Registrar of the High Court at Christchurch

And to:          Any person the Court directs to be served

This document notifies you that –

1.The without notice interlocutory application for initial orders under Part 15 of the Companies Act 1993 (Companies Act) made by MHM Automation

Limited (MHM) on 8 December 2023 was determined by Associate Judge Lester on the 11th day of December 2023.

2.The determination was made without a hearing.

3.The following orders were made.

Service and hearing date

(a)      That service of this application is dispensed with, except as provided for in these orders.

(b)     MHM is to send Bettcher Industries, Inc (Bettcher) and the Takeovers Panel by electronic means, copies of all documents it files in this proceeding.

(c)      Personal service of the Originating Application (as defined below) on affected persons (other than Bettcher) is dispensed with, and instead the other affected parties will be served in accordance with the orders below.

(d)     The originating application for final orders will be called in the 11:00am List on 29 February 2024. If there is any opposition filed the

applications will be heard on Monday 4 March 2024 at 10:00am.

Notice of Scheme Meeting and Scheme Meeting Materials

(e)      MHM shall send the following information to each person who is, under paragraph 3(f) of these orders, to receive notice of the meeting of shareholders described in these orders (Scheme Meeting):

(i)The scheme booklet (Scheme Booklet) in respect of the scheme of arrangement under Part 15 of the Companies Act 1993

(Companies Act) that the shareholders will be asked to vote on at the Scheme Meeting (Scheme), which will contain the following:

(1)the Chair's letter;

(2)the formal notice of meeting, including the resolution proposing the Scheme;

(3)explanatory information about the Scheme;

(4)information equivalent to Schedule 1 of the Takeovers Code;

(5)information equivalent to Schedule 2 of the Takeovers Code;

(6)the Independent Adviser's report;

(7)the Scheme Plan (as defined in the Scheme Booklet);

(8)the Deed Poll executed by MHM, Bettcher and Merlin NZD Bidco Limited (Bettcher NZ),

(ii)a proxy form;

(iii)a copy of the Originating Application; and

(iv)          a copy of the Court's minute making these interim orders, (together, the Scheme Meeting Materials).

(f)      The Scheme Meeting Materials will be sent to the following persons:

(i)those shareholders of MHM whose names appear in the register of shareholders at 5.00pm on the fifth working day before the Scheme Meeting Materials are sent; and

(ii)the directors and auditors of MHM.

(g)     The Scheme Meeting Materials are to be sent (in accordance with sub- paragraph 3(i) below) by not later than 22 December 2023 (subject to the Court granting the orders sought in this application in time to enable this to occur).

(h)     The Scheme Meeting Materials are to be in substantially the same form as the drafts which are referred to in, and annexed to, the affidavit of Trevor John Burt dated 7 December 2023 filed in this proceeding, except as may be amended, revised or supplemented in accordance with paragraph 3(o) below.

(i)      The Scheme Meeting Materials will be sent to the directors and auditors of MHM by email, and to the shareholders specified in paragraph 3(f) above:

(i)by ordinary post in hardcopy format to the physical address recorded for each shareholder unless the shareholder has elected to receive the Scheme Meeting Materials from MHM electronically; and

(ii)by electronic means to the email address recorded for a shareholder, if the shareholder has elected to receive the Scheme Meeting Materials from MHM electronically.

(j)      The Scheme Meeting Materials shall be deemed to have been received by all those to whom they were ordered to be sent:

(i)on the working day after the Scheme Meeting Materials are sent, for the Scheme Meeting Materials sent by electronic means; or

(ii)the earlier of 5 working days after the Scheme Meeting Materials are sent or 3 January 2024, for the Scheme Meeting Materials sent by post.

(k)     In accordance with its continuous disclosure obligations, MHM shall cause the Scheme Meeting Materials to be lodged on the NZX market announcement platform no later than the time it is deemed to have been sent to shareholders.

(l)      MHM shall make:

(i)electronic copies of the Scheme Meeting Materials available at the MHM website on

the date on which the Scheme Meeting Materials are sent to shareholders (in accordance with paragraph 3(g) above); and

(ii)hard copies of the Scheme Meeting Materials available on written request to MHM to any person who becomes a registered shareholder of MHM before the Scheme Meeting but after the date that would have entitled that holder to receive the Scheme Meeting Materials in accordance with these orders.

(m)    The following will not constitute a breach of these orders nor invalidate any resolution passed at the Scheme Meeting (but if any such failure or omission is brought to the attention of MHM, then it shall use its best endeavours to rectify it by the method and in the time most reasonably practicable in the circumstances):

(i)the accidental failure or omission by MHM to send the Scheme Meeting Materials, or any specific document or document(s), to any persons; or

(ii)the non-receipt of the Scheme Meeting Materials, or any particular document or document(s) by any persons.

(n)     MHM is not required to send the Scheme Meeting Materials to those shareholders for whom MHM does not have a known address (being 51 shareholders as at 5 December 2023, accounting for approximately 0.03% of MHM’s shares on issue). In the event that (i) Link identifies any such shareholder or (ii) any such shareholder contacts Link or MHM to update its address details, in each case not less than 5 working days before the Scheme Meeting, MHM shall send a set of the Scheme

Meeting Materials to that shareholder.

Power of Amendment

(o)     MHM is permitted to make such amendments, revisions or supplements to the Scheme Booklet or the Scheme Meeting Materials as MHM may determine are in the best interests of MHM and its shareholders, and to which Bettcher has agreed in writing, as well as any inconsequential

amendments to the Scheme Booklet and the Scheme Meeting Materials, and the Scheme Booklet so amended will set out the Scheme to be submitted to the shareholders at the Scheme Meeting for approval.

(p)     Where possible, any amendments referred to in 3(o) above will be made before MHM sends the Scheme Meeting Materials and:

(i)if the Scheme Booklet or Scheme Meeting Materials are amended before the Scheme Meeting Materials are sent, MHM will send amended Scheme Meeting Materials in accordance with these orders; and

(ii)if MHM makes any material amendments to the Scheme Booklet or the Scheme Meeting Materials after they have been sent to shareholders, MHM will notify the shareholders of the

amendments as soon as reasonably practicable by lodging notices on NZX’s market announcement platform and on MHM’s website at Meeting

(q)     MHM shall hold the Scheme Meeting not earlier than 22 January 2024 (subject to the orders of the Court), as a hybrid meeting both:

(i)online at and

(ii)in person at a venue in Christchurch,

to seek approval of the Scheme (subject to any amendment or variation made in accordance with these orders) by special resolution before consideration by the Court.

(r)      If MHM considers it necessary or desirable to do so due to health and safety reasons or otherwise, the Scheme Meeting may be held as a virtual meeting only, or on a later date, in each case to be notified by MHM to

its shareholders through the NZX market announcement platform and on MHM's website persons registered on MHM's share register as the holders of shares in MHM at 5:00pm on the day which is 2 working days before the

Scheme Meeting are entitled to be represented and vote at the Scheme Meeting or any adjournment or postponement of the Scheme Meeting.

(t)      A shareholder is entitled to attend the meeting online or in person with shareholders to be provided with a virtual meeting link in the Notice of Scheme Meeting.

(u)     As to voting on the Scheme:

(i)all shareholders shall vote on the Scheme as a single interest class;

(ii)voting will be conducted by poll:

(1)personally during the Scheme Meeting (online or in person at the physical meeting, further details of which are provided in the Scheme Booklet); or

(2)by proxy, where the Proxy Form accompanying the Scheme Booklet is completed and submitted to Link, as MHM's share Registrar, in accordance with the instructions on the Proxy Form and in the Scheme Booklet; or

(3)by corporate representative (appointed by a corporate shareholder to represent it in the same manner as appointing a proxy);

(iii)the resolution shall be passed if it is approved (whether in person or by proxy) by:

(1)at least 75 percent of the votes of the shareholders in each interest entitled to vote and voting on the resolution; and

(2)a simple majority of the votes of those shareholders entitled to vote, whether or not actually voting on the resolution; and

(iv)Link shall act as scrutineer at the Scheme Meeting.

(v)            Except as otherwise provided for in these orders, MHM shall conduct the Scheme Meeting in accordance with the constitution of MHM, the provisions of the Companies Act and the NZX Listing Rules.

(w)               A shareholder who is entitled to vote at the Scheme Meeting but who is unable to attend may appoint a proxy to attend the Scheme Meeting to act generally and vote on their behalf.

(x)            As to validity of votes:

(i)to be valid, all votes need to be:

(1)cast in person at the Scheme Meeting; or

(2)if attending the virtual meeting, made online at the online meeting platform or

(3)if voting by proxy on a validly completed Proxy Form

received by Link at least 2 working days prior to the Scheme Meeting in accordance with the instructions on the Proxy Form and in the Scheme Booklet;

(ii)MHM is entitled to disregard any votes received after the relevant voting deadline; and

(iii)MHM may waive, in its discretion, the relevant voting deadline if it deems such waiver to be in its best interests and in the best

interests of MHM shareholders as a whole.

Reporting the results of the Scheme Meeting

(y)            MHM shall notify the outcome of the Scheme Meeting by lodging the results on NZX's market announcement platform as soon as practicable after voting at the Scheme Meeting is complete and the results are advised by Link to the Chairperson of the Scheme Meeting.

(z)            MHM shall, prior to the Court's hearing of the Originating Application, file with this Court an affidavit or affidavits:

(i)verifying compliance with these initial orders granted by the Court;

(ii)annexing copies of the Scheme Booklet and/or the Scheme

Meeting Materials if amendments have been made as referred to in paragraph 3(o) above;

(iii)confirming the actions taken at, and the outcomes of, the Scheme Meeting; and

(iv)confirming whether the Takeovers Panel has issued a no-objection letter (and, if so, annexing that letter).

Rights of appearance and shareholder opposition

(aa) if Bettcher, Bettcher NZ, the Takeovers Panel or a MHM shareholder wishes to appear and be heard on the Originating Application, leave is not required, but the party must file a notice of appearance or a notice of opposition (as applicable, and in either case containing an address for service), any affidavits and a memorandum of submissions on which

they intend to rely, no later than 10 working days before the hearing date set for the Originating Application, and on the same day serve a copy on MHM;

(bb) if any other person who claims to have an interest in the Scheme wishes to appear and be heard on the Originating Application, they must file an application for leave to be heard on the Originating Application (containing an address for service), a notice of opposition, any affidavits and a memorandum of submissions upon which that person intends to rely no later than 10 working days before the hearing date set for the Originating Application, and on the same day serve a copy on MHM;

(cc) MHM shall serve on any shareholder wishing to appear and be heard on

the Originating Application, and any other person who is granted leave to be heard (pursuant to paragraph 3(bb) above), copies of all documents filed in support of the Originating Application no later than 5 working days before the hearing date set for the Originating Application.

Court file not to be searched

(dd) That the Court file in this proceeding may not be searched, inspected or copied without leave of the Court on notice to MHM.

Leave to apply for variation at short notice

(ee) MHM is granted leave to apply at short notice to vary these orders and to apply for such further orders as may be appropriate.

(ff)    If the shareholders do not vote to approve the Scheme, MHM will likely discontinue or seek leave to amend the Originating Application.

(Registrar/Deputy Registrar)

Sealed this         day of                  2023