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 be satisfied that:3

(a)There has been compliance with the statutory provisions as to meetings, resolutions, initial orders of the Court and similar procedural requirements.

(b)The arrangement has been fairly put to the equity holding classes concerned, and that if a circular or booklet has been sent out to those classes, it gives all the information reasonably necessary to enable the recipients to judge and vote upon the proposals.

(c)The classes were fairly represented by those who attended the meeting, and the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the classes whom they purport to represent.

(d)The arrangement is such that an intelligent and honest person of business, a member of the classes concerned, and acting in respect of her or his interest, might reasonably approve it.

(e)The arrangement is fair and reasonable to all of the classes concerned.

3      Re CM Banks Ltd [1944] NZLR 248 (SC) at 253; and Re Milne and Choyce Ltd [1953] NZLR 724 (CA) at 754.

Discussion

[7]    Affidavit evidence filed in support of the Application confirms that, the Scheme was notified to shareholders and other interested parties, and then made the subject of a properly constituted scheme meeting held on 12 April 2024, in accordance with initial orders made in this proceeding on 12 March 2024. The Scheme was put to the shareholders as a single interest class. The result of voting at, or in advance of, the Scheme Meeting was that the shareholders approved the Scheme by 67.97 per cent of the votes that were entitled to be voted, and by 96.92 per cent of the votes both entitled to be, and actually, voted. Only 2.16 per cent of the shares that were entitled to be voted, and 3.08 per cent of the votes both entitled to be, and actually, voted, were voted against approval of the Scheme.

[8]    The    result    of    voting    is    consistent     with     the     opinion     of Grant Samuel & Associates Ltd, an entity that provides corporate valuations, offered by affidavit through its managing director, that in November 2023:

(a)Volpara’s equity was valued in the range of AU$171.3 million to AU$211.3 million, or AU$0.67 to AU$0.82 per share;

(b)the premium for control offered by Lunit pursuant to the Scheme is significantly above the average premium of control generally observed in successful takeovers of other listed companies;

(c)in the absence of another takeover offer, or approval of the Scheme, it is highly unlikely that Volpara's share price would trade above the Scheme price in the near term.

[9]Lunit’s senior legal counsel has confirmed by affidavit that:

(a)Lunit supports the Scheme and consents to being bound by it;

(b)neither Lunit nor any associate held legal or beneficial ownership of, or effective control over, any shares in Volpara on the date of voting eligibility relating to the Scheme Meeting;

(c)the  Overseas  Investment  Office  has  consented  to  it  acquiring  100 per cent of Volpara’s shares; and

(d)Lunit has access to sufficient financial resources to meet its obligations to pay for Volpara’s shares.

[10]   Volpara’s Application envisaged that the holders of non-voting equity securities would not be disadvantaged by approval of the Scheme. Volpara has since entered either cancellation deeds or settlement and exercise deeds with the holders of all categories of non-voting equity securities other than “out of the money” (OTM) option holders. The cancellation and settlement and exercise deeds are conditional only upon the Court granting the Application, and provide that holders of these equities will be paid the consideration payable to shareholders under the Scheme (less any applicable taxes and other necessary deductions). The Scheme envisages that upon approval the OTM options will be cancelled for nil consideration. Volpara relies in this regard upon the Court’s jurisdiction under s 237 of the Companies Act to make additional orders for the purpose of giving effect to the arrangement, prescribing terms and conditions relating to the transfer or vesting of personal property, and such other matters that are necessary or desirable to give effect to the arrangement.

[11]   The Court’s initial orders of 12 March 2024 required any Volpara shareholder or OTM option holder, who wished to appear and be heard on the Application, to file and serve a notice of appearance, and in the event of opposition then a notice of opposition and any affidavit and memorandum in support of that opposition, no later than five working days prior to today’s hearing date. No such notice of appearance, or of opposition, has been filed. The initial orders further required any other person wishing to appear and be heard, other than Volpara, Lunit, and the Takeovers Panel, to file and serve an application for leave to be heard, within the same timeframe. Again, no such application has been filed.

[12]   Lunit filed a notice of appearance on 11 March 2024, and a memorandum through its counsel, confirming its support of and consent to the Application. The Takeovers Panel provided its no-objection statement on 24 April 2024.

[13]   In light of these matters, the affidavits filed in support of the Application, and the comprehensive submissions of counsel for Volpara with which I agree, I am satisfied of the matters set out at paragraphs [5] and [6] above.

Result

[14]    I accordingly make orders in terms of paragraph 1(a) to (d), inclusive, of the Application.

Johnstone J