Radius Properties Limited - [2017] NZHC 473

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2017-404-000096 [2017] NZHC 473

UNDER Part 15 of the Companies Act 1993

IN THE MATTER OF

an application for orders approving a scheme of arrangement

RADIUS PROPERTIES LIMITED Applicant

Hearing: 16 March 2017

Appearances:

A J Nelder and D J Raudkivi for Applicant

Judgment:

16 March 2017

ORAL JUDGMENT OF GILBERT J

Solicitors:
Russell McVeagh, Auckland

RADIUS PROPERTIES LIMITED [2017] NZHC 473 [16 March 2017]

[1] This is an application by Radius Properties Ltd (Radius) pursuant to s 236 of the Companies Act 1993 for approval of a scheme of arrangement under which Radius’ majority shareholder, Montagu Investment Holdings Ltd (Montagu), will acquire 100 per cent ownership of Radius. This will be achieved by:

(a) all shareholders (including Montagu) receiving a fully imputed special dividend payment of $0.0515 per share; and

(b) the cancellation of all Radius’ shares, other than those held by

Montagu, in return for a payment to these minority shareholders of

$0.5085 per share.

[2] Radius is an unlisted property investment company established in 2004. It has seven properties in its portfolio, five aged care facilities and two industrial properties. Montagu currently holds 12,969,717 ordinary shares representing
54.98 per cent of the total ordinary shares on issue. The remaining 45.02 per cent of

Radius’ shares are held by approximately 750 minority shareholders.

[3] Radius has not paid a dividend since 2013 because it is pursuing a growth strategy and reinvesting profits into the business. There is very little liquidity in Radius’ shares as they are not quoted on any stock exchange or securities trading facility. Almost all of the share transactions conducted in the past three years have involved Montagu acquiring further shares. In July and August 2015, non-voting shares were offered to all holders of ordinary shares in Radius of $0.42 per share. The rights issue was fully underwritten by Montagu. Very few minority shareholders participated. As a result, Montagu acquired 99.49 per cent of the non-voting shares on offer. In the last 12 months, Montagu has acquired approximately 1.17 million ordinary shares from minority shareholders at a price of $0.30 per share.

[4] One of the principal objectives of the scheme of arrangement is to enable minority shareholders to realise proper value for their shares in circumstances where a great many of them wish to exit their investment but there is otherwise little or no market for their shares.

[5] Because Radius is a code company and the proposed arrangement affects voting rights, s 236A of the Act applies and the application must be notified to the Takeovers Panel. Although the arrangement is not a transaction under the takeovers code, the Takeovers Panel has taken the view that a scheme of arrangement should generally provide shareholders with the same information as a transaction under the code and a report evaluating the merits of the transaction for each class of affected shareholders and for each interest class of those shareholders should be prepared. Consistent with this stance,…

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.

Continue reading Radius Properties Limited

Details

AGLC: Radius Properties Limited [2017] NZHC 473
Case: [2017] NZHC 473
Decision Date: 16 March 2017

CaseChat Overview and Summary

In the High Court of New Zealand, Auckland Registry, Radius Properties Limited, an unlisted property investment company, applied for approval of a scheme of arrangement. The scheme aimed for Montagu Investment Holdings Ltd, Radius' majority shareholder, to acquire 100% ownership of Radius. The legal issues involved ensuring compliance with statutory provisions, fair presentation of the scheme, proper representation of shareholder interests, and whether the arrangement was fair and reasonable for all shareholders.

The court found that the statutory provisions were met, including shareholder approval and engagement of an independent advisor. The scheme was fairly presented with necessary information provided to shareholders. The interests of the shareholder classes were properly represented, and the majority of minority shareholders supported the arrangement. The court applied the four-stage test, supplemented by the fair and equitable test due to the dissenting minority. The consideration offered to minority shareholders was deemed fair, representing the mid-point of the independent advisor's valuation.

The court concluded that the arrangement was fair and equitable for all shareholders and approved the scheme. An order was made pursuant to section 236(1) of the Companies Act 1993, approving the arrangement in the terms of the draft order filed.

Orders