Re Nuplex Industries
[2016] NZHC 1677
•22 July 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-1191 [2016] NZHC 1677
UNDER Part 19 of the High Court Rules IN THE MATTER OF
a scheme of arrangement under Part 15 of the Companies Act 19(3
IN THE MATTER OF
NUPLEX INDUSTRIES Applicant
Hearing: On the papers Appearances:
S J P Ladd and T B Fitzgerald for applicant
Judgment:
22 July 2016
JUDGMENT OF KATZ J
This judgment was delivered by me on 22 July 2016 at 10:00am
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors: Bell Gully, Auckland
NUPLEX INDUSTRIES LIMITED [2016] NZHC 1677 [22 July 2016]
Introduction
[1] Nuplex Industries Limited (“Nuplex”) seeks final orders approving a scheme of arrangement under Part 15 of the Companies Act 1993. Initial orders, addressing various procedural matters, were made on 10 June 2016 (“Initial Orders”). No notices of opposition or appearances have been filed.
[2] Nuplex has filed a number of affidavits in support of its application, including two affidavits from Peter Springford, the chairperson of Nuplex’s board of directors. Additional supporting affidavits have been provided by James Cooney and Jennifer Coote (both of Bell Gully), Marie Joseph Flore van In (Allnex), Lisa Gaye Crooke (PwC), Duncan Taylor (Allnex) and Michael Lorimer (Grant Samuel).
[3] Nuplex’s proposed scheme of arrangement (“Scheme”) is intended to implement an acquisition by Allnex New Zealand Limited (“Allnex NZ”) of all of the shares in Nuplex, by providing for all of the shares in Nuplex to be transferred from their owners to Allnex NZ and for Allnex NZ to pay those shareholders $5.43 per share.
[4] Nuplex is a global manufacturer and distributor of industrial resins. It operates in Europe, Asia, the Americas, Australia and New Zealand. Nuplex and its related entities (“Nuplex Group”) employ approximately 1,800 people. The company is incorporated in New Zealand. Its corporate headquarters are in Sydney. It is listed on both the New Zealand Stock Exchange (“NZX”) and the Australian Securities Exchange (“ASX”). All of its shares are fully paid ordinary shares. It has only one class of shares. As at 30 May 2016 there were 188,592,999 shares on issue, held by 7,262 shareholders with registered addresses in 27 countries. Nuplex’s shares are therefore widely held. There is no majority or controlling shareholder. The vast majority of Nuplex’s shareholders have registered addresses in New Zealand.
[5] Allnex NZ is a New Zealand incorporated entity, which was formed for the initial purpose of acquiring the shares in Nuplex pursuant to the Scheme. It is wholly owned by Allnex Belgium SA/NV (“Allnex”), an entity based in Belgium. Allnex is a leading global producer and supplier of coating resins and additives for
architectural, industrial, protective, automotive and special purpose coatings and inks. Allnex has annual turnover of approximately USD1.5 billion. It has approximately 2,200 employees and operates globally, with 17 manufacturing and 12 research and technology support facilities throughout the world. Neither Allnex nor Allnex NZ are existing shareholders of Nuplex.
The law – schemes of arrangement
[6] Section 236 of the Companies Act 1993 (“Act”) provides this Court with jurisdiction to approve a scheme of arrangement subject to such terms and conditions as the Court thinks fit:
236 Approval of arrangements, amalgamations, and compromises
(1) Notwithstanding the provisions of this Act or the constitution of a company, the Court may, on the application of a company or any shareholder or creditor of a company, order that an arrangement or amalgamation or compromise shall be binding on the company and on such other persons or classes of persons as the Court may specify and any such order may be made on such terms and conditions as the Court thinks fit.
…
[7] Section 237(1) provides the power to make additional orders giving effect to any arrangement approved under s 236(1) of the Act:
(1) Without limiting section 236, the Court may, for the purpose of giving effect to any arrangement or amalgamation or compromise approved under that section, either by the order approving the arrangement or amalgamation or compromise, or by any subsequent order, provide for, and prescribe terms and conditions relating to, –
(a) The transfer or vesting of real or personal property, assets, rights, powers, interests, liabilities, contracts, and engagements:
(b) The issue of shares, securities, or policies of any kind: (c) The continuation of legal proceedings:
(d) The liquidation of any company:
(e) The provisions to be made for persons who voted against the arrangement or amalgamation or compromise at any meeting called in accordance with any order made under subsection (2)(b) of that section or who appeared before the Court in opposition to the application to approve the arrangement or amalgamation or compromise:
(f) Such other matters that are necessary or desirable to give effect to the arrangement or amalgamation or compromise.
[8] Section 236A of the Act, which came into effect on 3 July 2014, applies in this case. It provides that, if the proposed arrangement affects the voting rights of a code company (being a company that the Takeovers Code applies to), the applicant must notify the Takeovers Panel of the application at the same time as filing the application in Court. An arrangement affects the voting rights of a code company if it involves a change in the relative percentage of voting rights held or controlled by
one or more shareholders.1 The Nuplex scheme, obviously, falls within this
definition as it will change the percentage of voting rights held by Allnex NZ from zero to 100 per cent, and will change the percentage of voting rights held by every existing shareholder to zero.
[9] The Court may not make an order that affects the voting rights of a code company unless:2
(a) The code company’s shareholders approve the arrangement by a
resolution approved by a majority of:
(i)75 per cent of the votes of the shareholders in each interest class entitled to vote and voting; and
(ii)A simple majority of the votes of those shareholders entitled to vote; and
(b) Either:
(i)the Court is satisfied that the shareholders of the code company will not be adversely affected by the use of section
236(1) rather than the Takeovers Code to effect the change
involving the Code company; or
1 Section 236A(5).
2 Section 236A(2) and 236A(4).
(ii)the applicant has filed a statement from the Takeovers Panel indicating that the Takeovers Panel has no objection to an order being made under section 236(1).
[10] The four-part test to be applied by the Court when deciding whether or not to exercise its discretion to approve a scheme under s 236 of the Act is well-established and was articulated in Re CM Banks Ltd as follows:3
(a) there has been compliance with the statutory provisions as to meetings, resolutions, the application to the Court, and the like;
(b)the scheme has been fairly put to the class or classes concerned, and that if a circular or circulars have been sent out, as is usual, whether before or after the making of the application to the Court, they give all the information reasonably necessary to enable the recipients to judge and vote upon the proposals;
(c) the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and
(d)the arrangement was such that an intelligent and honest person of business, a member of the class concerned, and acting in respect of his or her interest, might reasonably approve it.
[11] As most recently observed in Re Auckland International Airport4 and Re ACS (NZ) Ltd,5 the Court also needs to consider, with respect to the fourth limb of the Re CM Banks test, whether the proposed arrangement is generally fair and equitable.6
This is because, particularly where there are competing interests, it is implicit in the
3 Re CM Banks Ltd [1944] NZLR 248 (SC) at 253.
4 Re Auckland International Airport [2014] NZHC 405 at [9].
5 Re ACS (NZ) Ltd [2012] NZHC 1396 at [6].
6 Applying Weatherston v Waltus Property Investment Ltd [2001] 2 NZLR 103 (CA) at [35].
test of the intelligent and honest business person that a proposed scheme is also fair and equitable.
[12] I will consider each of the four limbs of the Re CM Banks test in turn.
Has there been compliance with the relevant statutory provisions?
[13] I am satisfied, based on the comprehensive affidavit evidence that has been filed, that Nuplex has complied with all applicable statutory provisions and the Initial Orders.
[14] In particular, the Scheme Meeting, which took place on 7 July 2016, was conducted in accordance with the Initial Orders and the required resolution was put to shareholders at that meeting. Neither Allnex nor Allnex NZ were shareholders of Nuplex on the Shareholder Voting Record Date, so there was only one interest class of shareholders for the purposes of voting at the Scheme Meeting.
[15] The Initial Orders provided for Nuplex to take several measures to ensure that interested parties (and in particular shareholders) were informed of the Scheme, and had the opportunity to oppose it. Nuplex complied with those orders, and took additional steps to ensure that shareholders were fully informed.
[16] As required by s 236A of the Act, paragraph 13 of the Initial Orders provided that the Resolution approving the Scheme would be approved if passed by:
(a) a majority of 75 per cent of the votes of the shareholders in each interest class entitled to vote and voting; and
(b) a simple majority of the votes of those shareholders entitled to vote. [17] The Resolution was approved overwhelmingly at the Scheme Meeting:
(a) the Resolution was passed by a majority of 98.07 per cent of the votes of shareholders entitled to vote and voting; and
(b)the Resolution was passed by a majority of 76.92 per cent of the total number of votes of those shareholders entitled to vote.
[18] On 7 July 2016 (the same day as the Scheme Meeting), Nuplex:
(a) lodged the results of the Scheme Meeting on NZX’s and ASX’s market announcement platforms, in compliance with paragraph 23(a) of the Initial Orders.
(b)served written notice of the results of the Scheme Meeting on the Takeovers Panel, Allnex NZ, and Allnex, in compliance with paragraph 23(b) of the Initial Orders.
[19] On 15 July 2016, the Takeovers Panel provided Nuplex with a letter confirming that the Takeovers Panel did not object to final orders being granted in respect of the Scheme, as required by s 236A of the Act.
Has the Scheme been fairly put to shareholders?
[20] I am satisfied that the Scheme was fairly put to shareholders. The information provided to shareholders (including in particular the Scheme Booklet and at the Scheme Meeting) fairly and fully explained what was proposed, its intended effect, the reason why Nuplex proposed the Scheme, and the reasons why Nuplex’s independent directors unanimously recommended that shareholders vote in favour of the Scheme.
[21] The shareholders have been provided with detailed information about the
Scheme and have been given the chance to oppose final orders being made.
Were the shareholders fairly represented by those who attended the meeting?
[22] I am satisfied that the relevant interest class (i.e. Nuplex’s shareholders) was fairly represented by those who attended the meeting. Indicators that the interest class was fairly represented, and that those who voted were acting bona fide, include:
(a) the high proportion of shareholders who voted (76.92 per cent of the total number of all shares);
(b)the overwhelming support for the Resolution by the shareholders who attended the meeting (98.07 per cent of all shares voted at the meeting);
(c) the fact that no shareholders have filed a notice of opposition; and
(d) there has been no suggestion that the votes cast at the Scheme
Meeting were anything other than bona fide.
Is the Scheme one that an intelligent and honest person of business might reasonably approve?
[23] I am also satisfied that the Scheme is one that an intelligent and honest person of business, a member of the class concerned, and acting in respect of his or her interest, might reasonably approve. It is also generally fair and equitable.
[24] The overwhelming majority of shareholders who voted supported the Scheme and clearly saw it as being in their best interests. That level of shareholder support must clearly be given due weight, as shareholders are the persons best-placed to determine what is in their own best interests.7
[25] Nuplex’s independent directors, who are thoroughly familiar with Nuplex’s affairs and who have extensive business experience both in New Zealand and globally, are of the view that it is in the best interests of Nuplex and its shareholders for the Scheme to proceed. The Board’s judgement obviously must be given significant weight.
[26] The Scheme will not prejudice Nuplex’s creditors. Following implementation of the Scheme, Nuplex expects to be able to satisfy the statutory solvency test
prescribed by s 4 of the Act.
7 See generally Greymouth Petroleum Mining Co Ltd v Fletcher Challenge Ltd [2001] 2 NZLR 786 (HC) at [47]; Re Osiris Insurance Ltd [1999] 1 BCLC 182 (Ch) at 189.
[27] I also place considerable weight on the Independent Adviser’s Report
prepared by Grant Samuel, which concluded (among other things) that:
(a) the Scheme Consideration of $5.43 per share is within its assessed value range for Nuplex shares of $5.36 to $5.86 per share;
(b) the Scheme Consideration of $5.43 per share represents a 45 per cent premium relative to the closing price of Nuplex shares on the last trading day prior to Nuplex’s announcement of the Scheme, i.e. $3.74 per share (excluding dividend) on 12 February 2016. Nuplex’s shares have not traded at a higher price in the last five years;
(c) While Nuplex’s recent performance has been strong, it is not certain whether or not this trend will continue. Moreover, due to a lack of acquisition opportunities and intense competition in the markets in which Nuplex operates, material improvements in earnings may take time to occur;
(d) If the Scheme is not approved, there is no certainty that Allnex or
another bidder will make another offer for Nuplex’s shares; and
(e) If the Scheme is not approved, a likely result will be a reversal of some or all of the share price appreciation that followed the announcement of the Scheme.
[28] There is no evidence that any prejudice will be suffered by any shareholder (or other properly interested or affected person) if the Scheme is approved and implemented.
Summary
[29] Having regard to all the evidence and circumstances of this case, I am satisfied that it is appropriate to exercise my discretion to approve the Scheme because:
(a) Nuplex has complied with the relevant statutory provisions and the
Initial Orders;
(b)The Scheme has been fairly put to shareholders, who voted overwhelmingly in support of it;
(c) The relevant interest class (i.e. Nuplex’s shareholders) was fairly represented by those who attended the meeting, and those who voted were acting bona fide.
(d)The Scheme is such that an intelligent and honest person of business, as a member of the class concerned, and acting in respect of his or her interest, might reasonably approve and is generally fair and equitable.
Result
[30] The scheme of arrangement described in the Scheme Plan annexed to the draft final orders filed on 20 July 2016 is approved and binding upon:
(a) Nuplex Industries Limited; (b) Allnex Belgium SA/NZ;
(c) Allnex New Zealand Limited; and
(d) Every person who is a Scheme Shareholder in terms of the Scheme
Plan.
[31] Nuplex is granted leave to apply to the Court for approval of any amendment,
modification or supplement to the Scheme.
Katz J
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