Volpara Health Technologies Limited - [2024] NZHC 1078

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-459

[2024] NZHC 1078

IN THE MATTER OF a scheme of arrangement under pt 15 of the Companies Act

AND IN THE MATTER OF

VOLPARA HEALTH TECHNOLOGIES LIMITED

Applicant

Hearing: 3 May 2024

Appearances:

A J Horne and I J Stewart for applicant

S J P Ladd, M R Wentze and A Steel for interested party Lunit, Inc.

Judgment:

3 May 2024

ORAL JUDGMENT OF JOHNSTONE J

Solicitors:
MinterEllisonRuddWatts, Auckland Harmos Horton Lusk, Auckland

VOLPARA HEALTH TECHNOLOGIES LTD [2024] NZHC 1078 [3 May 2024]

[1] By application dated 8 March 2024 (Application), Volpara Health Technologies Ltd applies for orders under pt 15 of the Companies Act 1993, approving a scheme of arrangement (Scheme), and declaring the Scheme binding.

[2] Volpara was founded in 2009, seeking to commercialise research on breast density as a measure of assessing breast cancer risk. Its software is now used in over 2000 facilities, primarily in the United States of America. Volpara is a New Zealand company, with its registered office and head office in Wellington. It has been listed on the Australian Securities Exchange (ASX) since April 2016.

[3] In summary, the Scheme provides for an entity named Lunit, Inc. (Lunit) to pay the holders of fully paid ordinary shares in Volpara the sum of AU$1.15 in consideration for each of their shares. Lunit is a company incorporated under South Korean law and listed on the KOSDAQ board of the Korea Exchange. Lunit having then purchased all of Volpara’s ordinary shares, Volpara will be delisted from the ASX.

Legal principles

[4] Section 236(1) of the Companies Act provides that the Court may, on the application of a company, order that an arrangement be binding on the company and others persons, on such terms and conditions as the Court thinks fit. A transfer of shares from existing shareholders to a new acquirer comes within the definition of “arrangement”.1

[5] Volpara is a code company, in terms of s 2A of the Takeovers Act 1993. For that reason, the Court may not order that the Scheme is binding, unless: 2

(a)Volpara’s shareholders approve the arrangement by a resolution approved by a majority of 75 per cent of the votes of the shareholders in each interest class entitled to vote and voting on the question, and by

1 Companies Act, s 235. See for example Re Westland Co-operative Daily Co Ltd [2019] NZHC 1683, Re Trade Me Group Ltd [2019] NZHC 840 and Re Embark Education Group Limited [2023] NZHC 1541.
2 Companies Act s 236A.

a simple majority of the votes of those shareholders entitled to vote; and

(b)either:

(i)the Court is satisfied that Volpara’s shareholders will not be affected by the use of s 236(1) rather than the takeovers code to effect the Scheme; or

(ii)the Takeovers Panel has issued a no-objection statement.

[6] To approve a scheme of arrangement under s 236 the Court must…

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

Case: [2024] NZHC 1078
Decision Date: 3 May 2024

CaseChat Overview and Summary

Volpara Health Technologies Limited applied to the High Court of New Zealand to approve a scheme of arrangement whereby Lunit, Inc., a South Korean company, would acquire all shares in Volpara. Volpara, founded in 2009, is a New Zealand-registered company with its head office in Wellington and is listed on the Australian Securities Exchange. The scheme involves Lunit purchasing all ordinary shares in Volpara for AU$1.15 each, leading to Volpara's delisting from the ASX. The court had to decide whether to approve the scheme under section 236(1) of the Companies Act 1993, considering statutory requirements and fairness to all affected classes.

The legal issues centred on whether Volpara met the statutory requirements for approving the scheme, including proper notification and voting processes, and whether the scheme was fair and reasonable to all shareholders. Given that Volpara is a code company under the Takeovers Act 1993, the court also had to consider additional criteria, such as shareholder approval by a majority of 75% and a simple majority of votes, or a no-objection statement from the Takeovers Panel. The court examined whether the scheme met these conditions and was fair to all equity holders.

The court found that Volpara had complied with all statutory requirements, including proper notification to shareholders and a scheme meeting held on 12 April 2024. Shareholders approved the scheme by 67.97% of entitled votes and 96.92% of actual votes cast. The court also noted that the scheme offered a premium significantly above typical control premiums in similar takeovers and that it was unlikely Volpara’s share price would exceed the scheme price without the deal. Lunit confirmed its support for the scheme and its ability to finance the acquisition. Furthermore, non-voting equity holders would not be disadvantaged, and the Takeovers Panel issued a no-objection statement. The court concluded that all criteria under section 236 were met and that the scheme was fair.

The court ordered the scheme to be binding, approving the acquisition of Volpara by Lunit. The orders include the delisting of Volpara from the ASX and the distribution of AU$1.15 per share to Volpara’s shareholders.

Orders