Tenon Limited - [2016] NZHC 2947

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-2590 [2016] NZHC 2947

UNDER Part 19 of the High Court Rules

IN THE MATTER

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

AND

IN THE MATTER OF

TENON LIMITED Applicant

Hearing: On the papers

Appearances:

T B Fitzgerald and S V A East for Applicant

Judgment:

7 December 2016

JUDGMENT OF LANG J

[on originating application for orders approving a scheme of arrangement under Part 15 of the Companies Act 1993]

This judgment was delivered by me on 7 December 2016 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

In the matter of TENON LIMITED [2016] NZHC 2947 [7 December 2016]

[1] The applicant, Tenon Limited (Tenon), is incorporated in New Zealand and is listed on the main board of the New Zealand Stock Exchange. Tenon and its subsidiaries are involved in the processing, marketing and distribution of wood products.

[2] Tenon wishes to return approximately US$72 million of capital to its shareholders. It seeks the approval of the Court under s 236(1) of the Companies Act 1993 (the Act) to an arrangement under which one of every two Tenon shares is cancelled in exchange for a payment to shareholders of US$2.20 per cancelled share.

Background

[3] Tenon is a holding company. It owns 100 per cent of the shares in Tenon Holdings Limited (THL), which in turn is the sole shareholder of two companies. The first of these is Tenon Manufacturing Limited (TML), which operates a business known as Clearwood. Clearwood is based in New Zealand, and operates a large clearwood (pinus radiate) sawmill and re-manufacturing facility in Taupo. It also has associated sales and marketing activities. Clearwood runs a substantial business that employs approximately 275 full-time staff.

[4] THL also owns the shares in an American company called NACS USA, Inc (NASC). NASC owns several companies that operate businesses in the United States of America. The NACS companies acquire product from Clearwood and other suppliers for distribution throughout North America. NASC employs approximately 970 employees, and has substantial warehouse facilities. NACS acquires approximately ten per cent of its product requirements from the Clearwood business in New Zealand.

[5] THL has entered into a contract to sell its American-based business to an American entity for approximately US$110 million. A resolution approving the proposed sale of the business was passed with a majority of more than 99.5 per cent at the annual meeting of Tenon’s shareholders held on 18 November 2016.

[6] The proposed scheme of arrangement relates to part of the funds that will be realised as a result of the sale of the North American business. THL will distribute

the sale proceeds to Tenon by way of dividend. Tenon will use those funds to repay its entire net debt. It will then use the balance of the dividend to undertake the return of capital to shareholders. The return of capital is being made in US dollars…

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 Tenon Limited

Details

AGLC: Tenon Limited [2016] NZHC 2947
Case: [2016] NZHC 2947
Decision Date: 7 December 2016

CaseChat Overview and Summary

Tenon Limited sought approval from the High Court of New Zealand for a scheme of arrangement under Part 15 of the Companies Act 1993 to return approximately US$72 million of capital to its shareholders. The scheme involved cancelling one of every two Tenon shares in exchange for a payment to shareholders of US$2.20 per cancelled share. The court had to decide whether the scheme complied with the procedural requirements of the Act and whether it was fair and equitable.

The court found that Tenon had complied with the procedural requirements and that the scheme was fairly put to the shareholders. The directors considered that the proposed return of capital was the most appropriate way to deal with the surplus sale proceeds, and the shareholders agreed. Tenon was a solvent and profitable company, and the directors considered that this would remain the case after the sale of the American-based business and the proposed return of capital. The arrangement would not affect the employees of Clearwood or the solvency of Tenon. The court concluded that the proposed arrangement was one that an intelligent and honest person of business might reasonably approve and was fair and equitable.

The court made an order under s 236(1) of the Act that the proposed arrangement as set out in the Arrangement Plan attached to the draft Final Orders filed on 7 December 2016 was binding on Tenon and its shareholders with immediate effect but subject to the conditions contained in the arrangement. The draft orders may now be sealed by the Registrar.

Orders