Z Energy Limited

[2022] NZHC 841

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2022-485-55

[2022] NZHC 841

IN THE MATTER

Commercial Panel

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

IN THE MATTER

of an application by Z ENERGY LIMITED Applicant

Hearing:

26 April 2022

Counsel:

L L Fraser and L A Murton for Applicant

J Q Wilson and T M J Shiels for Ampol Limited and Ampol Holdings NZ Limited (Interested Party)

Judgment:

27 April 2022

REASONS JUDGMENT OF ELLIS J

[1]    Following a hearing on 26 April 2022, I made orders under Part 15 of the Companies Act 1993 approving a scheme of arrangement (the Scheme) that will effect the acquisition by Ampol Holdings NZ Limited (Ampol NZ)  of all the shares in     Z Energy Limited (Z Energy).

[2]My reasons for making those orders are set out below.

Background

[3]    Z Energy filed an originating application seeking approval of the Scheme on 17 February 2022. On 21 February the Court made procedural orders relating to

RE Z ENERGY LIMITED [2022] NZHC 841 [27 April 2022]

service, representation and obtaining shareholder approval for the Scheme (the procedural orders). As well, time was needed to obtain regulatory approval under the Overseas Investment Act 2005 and the Commerce Act 1986, as well as from the Takeovers Panel and, possibly, the NZX and ASX.

[4]    At the time of the hearing before me, Z Energy’s position was that the procedural orders have now been complied with and the relevant consents have been obtained. It therefore sought the Court’s final approval of the Scheme.

Relevant parties

Z Energy Limited

[5]    Z Energy is a registered, New Zealand limited company, listed on the NZX Main Board and the ASX.

[6]    Z Energy was incorporated in 1959 as “Shell Oil New Zealand Limited”. Through its subsidiaries, Z Energy is an owner and operator of service stations, truck shops, pipelines, terminals and bulk storage terminal infrastructure around New Zealand. Z Energy supplies fuel to retail customers and large commercial customers such as airlines, trucking companies, shipping companies and vehicle fleet operators. Z Energy currently owns and operates a portfolio of approximately 197 service stations and 135 truck shops, located around New Zealand. As well, Caltex—a brand which is operated by Z Energy under licence from Chevron International—operates 133 service stations and 66 truck stops across New Zealand.

[7]    As of 15 February 2022, Z Energy had 15,638 shareholders and a total of 520,476,853 shares on issue. There is only one class of shares, and all are fully paid up, ordinary shares, with identical voting rights.

Ampol Limited and Ampol Holdings NZ Limited

[8]    The proposed acquirer of Z Energy’s shares under the Scheme is Ampol NZ, a wholly owned subsidiary of Ampol Ltd (Ampol), which is an Australian company listed on the ASX. Ampol’s principal activities include the purchase, supply, refining, distribution and sale of petroleum products and the operation of convenience retail

stores throughout Australia and New Zealand (under the Gull New Zealand brand, which will be divested if the Scheme is implemented). Ampol also supplies fuel to international customers including Seaoil Philippines Inc. in the Philippines (a business in which Ampol holds a 20 per cent equity interest).

[9]    According to Abigail Foote, chair of Z Energy, neither Z Energy, nor any Director, Senior Manager or any of their associates (as those terms are defined in the Takeovers Code), holds or controls any equity or securities in Ampol, Ampol NZ or any of their related companies.

The impetus for the Scheme

[10]   On 23 August 2021, Z Energy announced that it had received a proposal from Ampol to acquire all the Z Energy shares on issue on the Scheme Record Date (Scheme Shares) at an offer price of NZ$3.78.1

[11]   This proposal was sufficiently attractive to cause the Board of Z Energy to decide it would be in the best interests of the company and its shareholders to pursue it. The Board therefore allowed Ampol a four-week period of exclusivity to undertake due diligence and further develop its proposal, and for the parties to negotiate transaction documentation.2 On 10 October 2021, Z Energy and Ampol concluded those negotiations and entered into a scheme implementation agreement (SIA), discussed shortly below.3 The Board unanimously agreed to recommend the Scheme to its shareholders.

Part 15 of the Companies Act 1993

[12]   Part 15 permits the Court to approve arrangements, amalgamations and compromises that are binding on a company, its shareholders and any creditors or other

1      Subject to decreases to the cash consideration for any dividends paid before the Implementation Date and a mechanism to increase the cash consideration progressively up to a maximum of NZ$0.10 per Scheme Share if the Implementation Date occurred after 31 March 2022.   The     23 August proposal followed earlier unsolicited, confidential and non-binding indicative proposals from Ampol to acquire Z Energy shares for NZ$3.35, NZ$3.50 and NZ$3.60 each.

2      On 27 September 2021, Z Energy announced that the exclusivity period had been extended to  11 October 2021 to allow both parties to agree on transaction documentation.

3      Scheme implementation agreements are orthodox in takeovers that are proposed by way of schemes of arrangement.

persons whose rights are affected.4 The company itself may apply for such an order, as it did in this case.

[13]   The Act sets out no specific criteria by which schemes are to be approved. Rather, the Court has a broad discretion, limited only by the policy and purposes of the Companies Act.

[14]   Under s 159 of the Companies Act 1933 and s 205 of the Companies Act 1955, the Courts consistently applied the “intelligent person of business” test articulated in Re CM Banks Limited, which followed a number of similar decisions from the United Kingdom.5 Smith J held that the Court would grant a final order provided that:

(a)there had been compliance with the statutory provisions as to meetings, resolutions, the application to the Court, and the like;

(b)the scheme had been fairly put to the class or classes concerned; and that if the circular or circulars had been sent out, as is usual, whether before or after the making of the application to the Court, those circulars gave all the information reasonably necessary to enable the recipients to judge and vote upon the arrangement;

(c)the class was fairly represented by those who attended the meeting and that the statutory majority were acting bona fide and were not coercing the minority in order to promote interests adverse to those of the class whom they purported to represent; and

(d)the scheme was such that an intelligent and honest businessperson, being a member of the class concerned and acting in respect of his or her interest, might reasonably approve.

[15]   While the test was affirmed by the Court of Appeal in Re Milne & Choyce Limited,6 it was later doubted in Suspended Ceilings (Wellington) Ltd, a case involving

4      Weatherston v Waltus Property Investments Ltd [2001] 2 NZLR 103 at 112 (CA)

5      Re CM Banks Ltd [1944] NZLR 248.

6      Re Milne & Choyce Ltd [1953] NZLR 724 at 727.

the imposition of a compromise on a sole and unwilling creditor, the Commissioner of Inland Revenue.7 The majority of the Court of Appeal in that case preferred a more stringent criterion requiring an applicant to establish that it would be unreasonable not to make the order sought. However, the Court of Appeal in the subsequent case of Weatherston indicated that the decision in Suspended Ceilings (Wellington) Ltd “may not be pertinent beyond its particular context”.8

[16]   In Weatherston the Court of Appeal supplemented the four tests outlined in Re CM Banks by reference to the Canadian test of whether the proposal is “fair and equitable”.9 The Court said the combination of the two was “clearly apt” where the Court is called upon to balance competing interests in its decision to approve a proposal.10

[17]   Section 236A provides that an arrangement which “affects the voting rights” of a code company is one that involves a change in the relative percentage of voting rights held or controlled by one or more shareholders. A scheme that effects a transfer of shares will plainly “affect the voting rights of a code company”.

[18]Where s 236A is engaged (as it is in this case), it requires that:

(a)the applicant, at the same time as filing an application under s 236 of the Companies Act, notify the Takeovers Panel of the application;

(b)the court may not make an order under s 236(1) unless the company’s shareholders approve the arrangement, and either:

(i)the court is satisfied that the shareholders of the code company will not be adversely affected by the use of s 236(1) rather than the Takeovers Code to effect the change involving the code company; or

7      Suspended Ceilings (Wellington) Ltd v Commissioner of Inland Revenue (1997) NZCLC 261, 318 CA at 261 and 328.

8      Weatherston v Waltus Property Investments Ltd [2001] 2 NZLR 103 at [34].

9 At [35].

10 At [35].

(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 s 236(1);

(c)a code company’s shareholders may only approve the arrangement by both:

(i)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

(ii)a resolution approved by a simple majority of the votes of those shareholders entitled to vote (not merely those in fact voting).

[19]   The 90 per cent threshold (for compulsory acquisition) in the Takeovers Code does not apply.

The Scheme Implementation Agreement

[20]   The SIA governs the terms of, and process for implementing, the Scheme. It offered total value to shareholders of NZ$3.83 per share, comprising an offer price of

$3.78 plus the payment by Z Energy of a NZ$0.05 per share interim dividend.

[21]   The SIA provided that if the Scheme is not implemented by 31 March 2022, shareholders will receive NZ$0.00055 in cash per share, per calendar day that the Implementation Date is after 31 March 2022, up to a limit of NZ$0.10 per share.

[22]   If Z Energy pays any dividends in respect of the financial year to 31 March 2022 other than the permitted interim dividend of NZ$0.05 per share, the amount of such dividend(s) will reduce the offer price.11

[23]As well, the SIA (among other things):

11 On 8 December 2021, Z Energy paid a NZ$0.07 per share interim dividend, reducing the headline price for the purposes of the Scheme to NZ$3.76 for each Scheme Share to reflect the additional NZ$0.02 per share interim dividend paid to Shareholders.

(a)prescribed the terms of the proposed Scheme;

(b)required Z Energy to announce the Scheme and its Board to recommend it to shareholders (provided there was no superior proposal);

(c)required, as conditions, Ampol to gain regulatory approvals under the Overseas Investment Act 2005, Commerce Act 1986, and requires Ampol and Z Energy to gain approvals from the Takeovers Panel, NZX and ASX (if required) to complete the Scheme;

(d)required Z Energy to seek approval of the Scheme through this proceeding, the meeting of shareholders and related steps;

(e)required Ampol to pay the purchase price for the shares, provided that, inter alia, Commerce Act, Overseas Investment Office (OIO) and Takeovers Panel, shareholder and Court approval is obtained;

(f)required Ampol and Ampol NZ to execute a deed poll (the Deed Poll) which, along with the SIA, would bind Ampol and Ampol NZ to the Scheme; and

(g)prevented Z Energy from soliciting or encouraging competing offers to the Scheme, or prompting any inquiries which might lead to a competing offer.

[24]   The SIA contained “no-talk” and “no-shop” clauses (the Exclusivity Clauses), of a kind that the Australian courts have required to be drawn to the Court’s attention so the Court can assess whether those clauses are in the interests of shareholders. I record that I am satisfied that, as explained by Ms Foote in her affidavit, the Exclusivity Clauses in the SIA are the result of normal arm’s length commercial negotiation. Ampol likely would not have entered into the SIA without such clauses.

The Scheme itself

[25]   The core object of the Scheme is to give effect to Ampol’s  acquisition of     Z Energy’s shares.

[26]   The Scheme becomes “effective” on the date the Court’s order comes into effect if all the conditions to the implementation of the Scheme have either been satisfied or waived (if waiver is possible).

[27]   Z Energy will apply to suspend trading in its shares on both the NZX and ASX with effect from two business days after the later of either the making of the final Court orders and the day on which the last of the regulatory conditions are satisfied, or such other date as is agreed by Z Energy and Ampol in writing.

[28]   The shareholders who will sell their shares to Ampol NZ pursuant to the Scheme are those who are registered on the share register on the Scheme “Record Date”;12 any transfers of any share after the Record Date will not be recognised.

[29]   Ampol will  pay  the  Scheme  Consideration  (NZ$3.76  in  cash)  for  each  Z Energy share registered as at the Record Date, subject to any prescribed adjustments, into a trust account operated by Z Energy’s share registrar, LINK Market Services Limited (LINK). That payment is to occur no later than 5 pm on the Business Day prior to the “Implementation Date”.

[30]   Provided that the Scheme Consideration has been paid by Ampol and the Conditions that can only be satisfied or waived as at 8 am on the Implementation Date are satisfied or waived, on the Implementation Date all the Scheme Shares will then be transferred to Ampol NZ without any further act or formality. Z Energy will enter Ampol NZ into the share register.

[31]   Z Energy will arrange for payment from the trust account to each Scheme Shareholder and the transfers are to be free of any encumbrance.

12 The “Record Date” will be 7 pm on the fifth business day after the later of the day of the final  Court orders and the day on which the last of the regulatory conditions are satisfied (unless the parties agree otherwise).

[32]   Notably, there is no credit risk for the shareholders. The Scheme Consideration will be held by LINK in a trust account. Ampol will direct Z Energy to instruct LINK to transfer the Scheme Consideration to Scheme Shareholders on transfer of the Scheme Shares without requiring any further action to be taken.

Conditions

[33]   The Scheme is subject to various conditions, incorporated by cross-reference to the SIA. Other than the approval of the Scheme by Z Energy shareholders and the Court, the Scheme is conditional on:

(a)Ampol obtaining all consents required under the Overseas Investment Act 2005 to its implementation, on terms or conditions acceptable to Ampol acting reasonably;13

(b)clearance having been given, or an authorisation granted, to Ampol under the Commerce Act 1986 for implementation of the Scheme on terms or conditions acceptable to Ampol acting reasonably;14

(c)obtaining any regulatory clearances required by the Takeovers Panel or NZX and ASX;

(d)no event occurring before 8 am on the Implementation Date which results in, or is reasonably likely to result in, delay in commencement of provision of Core ITS Services (as defined in the SIA) at the New Zealand Refining Company Limited’s Marsden Point facility past 30 June 2023 (or prevents it, or is reasonably likely to prevent it, occurring at all);

13 Ampol may not withhold its approval to terms or conditions of any consent if the terms and conditions imposed are the standard conditions imposed in respect of such consent, or are consistent with the positive undertakings, plans or intentions specified in writing in Ampol’s  application for such consents.

14 Ampol may not withhold its approval to terms or conditions of any consent if the terms and conditions imposed are consistent with undertakings given to the New Zealand Commerce Commission specified in, or specified in writing by Ampol in connection with, Ampol’s application for clearance or authorisation.

(e)the absence of any judgment, order, restraint or prohibition preventing the Scheme that is enforced or issued by any Government Agency;

(f)the absence of any “Prescribed Occurrence” (as defined in the SIA) before 8 am on the Implementation Date, which includes Z Energy (without Ampol’s agreement in writing):

(i)making, or declaring that it will make, any dividend or distribution (except for a Permitted Dividend), or reducing its share capital, in various ways;

(ii)passing a resolution for the amalgamation of any of Z Energy and its related companies;

(iii)making certain payments to employees and directors;

(iv)changing its constitution; or

(v)undergoing certain insolvency events; and

(g)no Material Adverse Change (as defined in the SIA) occurring before 8 am on the Implementation Date.

Deed Poll

[34]   Ampol is legally bound to pay the Scheme Consideration through its execution of a Deed Poll. Under the Deed Poll, Ampol has undertaken in favour of each Scheme Shareholder that it will pay on behalf of Ampol NZ the Scheme Consideration to which each Scheme Shareholder is entitled under the Scheme and Ampol NZ has undertaken to acquire all of the Scheme Shares, subject to the Scheme becoming unconditional. Under the Deed Poll, Ampol will deposit the aggregate of the Scheme Consideration payable to the shareholders in clear funds into the trust account operated by LINK, as trustee for the Scheme Shareholders.

[35]   The Deed Poll therefore gives Z Energy shareholders a direct contractual right against Ampol in the event that Ampol fails to pay the Consideration upon implementation  of  the  Scheme.  Under  the  Scheme,  each  shareholder  appoints  Z Energy as its attorney and agent to enforce the Deed Poll on their behalf.

The procedural orders

[36]   On 17 February 2022 Z Energy filed an originating application seeking approval for the scheme, together with a without notice application seeking directions as to service and orders prescribing the process for the Scheme to be put to, and voted on, by its shareholders.

[37]The without notice application came before Gwyn J, who was satisfied that:

… the initial directions put forward by Z Energy will appropriately structure the process so as to allow Z Energy to comply with statutory requirements as to meetings, resolutions and the final application. The proposal, in so far as it can be assessed at this interim stage, appears to have proper regard to the interests of the shareholders. I am also satisfied that the proposed process will fairly inform shareholders.

[38]   Because the detail and requirements of the procedural orders assume some importance in terms of some of the matters the Court must consider when deciding whether to approve the scheme, I set them out more or less in full:

AService and representation

3.1service of the interlocutory application upon all persons affected is dispensed with;

3.2Z Energy is to send Ampol Holdings NZ Limited (Ampol NZ) and Ampol Limited (Ampol) and the Takeovers Panel by electronic means copies of all documents it files in this proceeding;

3.3personal service of the originating application dated 17 February 2022 on affected persons (other than Ampol NZ and Ampol) is dispensed with, and instead, the other affected parties will be served in accordance with the orders below;

3.4leave is granted for Z Energy to effect service on those affected persons outside the jurisdiction in the manner referred to below;

BNotice of Scheme Meeting and Shareholder Materials

3.5Z Energy is to send the following information (the Shareholder Materials) to each of its shareholders who is entitled under its

constitution to receive notice of the meeting of shareholders described in these orders (the  Scheme  Meeting),  Z  Energy’s  directors  and Z Energy’s auditors. Such Shareholder Materials are to be sent at least ten working days before the Scheme Meeting and in accordance with the requirements of the Companies Act 1993 (Companies Act):

(a)the proxy form; and

(b)the scheme booklet (the Scheme Booklet) in respect of the scheme of arrangement under Part 15 of the Companies Act (the Scheme), which will contain the following materials:

(i)the Chair’s letter;

(ii)the formal notice of meeting;

(iii)information about the Scheme, including:

(A)a summary of the Scheme;

(B)a summary of both the reasons to vote in favour of the Scheme and the reasons to vote against the Scheme;

(iv)information equivalent to Schedule 1 of the Takeovers Code;

(v)information equivalent to Schedule 2 of the Takeovers Code;

(vi)the Scheme Plan (as defined in the Scheme Booklet);

(vii)the deed poll executed by Ampol and Ampol NZ;

(viii)the independent adviser’s report prepared by Calibre Partners New Zealand; and

(ix)the disclosure document relating to the buy-back of forfeited LTI plan shares;

…

3.6the Shareholder Materials are to be sent to those persons specified in order 3.5 in:

(a)electronic format to all shareholders who have elected to receive documents from Z Energy in electronic form only; and

(b)by ordinary mail in hardcopy format to all other shareholders for which Z Energy has address details recorded;

3.7the approved Scheme Booklet is to be promptly lodged on the NZX market announcement platform and ASX market announcement platform;

3.8the Shareholder Materials will be deemed to have been received by all those to whom they were ordered to be sent 48 hours after the Shareholder Materials are sent in accordance with order 3.6 above;

3.9Z Energy is to make:

(a)electronic copies of the Shareholder Materials available at the Z Energy website ( align="left">(b)hard copies of the Shareholder Materials available on written request to Z Energy;

3.10Z Energy is permitted to make such amendments to the  Scheme as  Z Energy may determine are in the best interests of Z Energy and its

Shareholders, and to which Ampol NZ and Ampol have agreed in writing, as well as any inconsequential amendments to the Scheme Plan, and the Scheme so amended will be the Scheme to be submitted to Shareholders at the Scheme Meeting for approval;

3.11Z Energy is permitted to make amendments, revisions and/or supplements to the Shareholder Materials. Should Z Energy make any material amendments after the Shareholder Materials have been sent to shareholders, those changes will be notified to shareholders as soon as reasonably practicable. Such notification may be made by way of market announcement on the NZX market announcement platform, ASX market announcement platform and on Z Energy’s website Energy is to provide links to complete copies of the following documents on the website: align="left">(a)the Scheme Booklet (referred to in order 3.5);

(b)the initial orders made by the Court, and the application for final Court orders, in respect of the Scheme;

(c)the scheme implementation agreement dated 10 October 2021 between Z Energy and Ampol;

(d)relevant Z Energy NZX and ASX announcements; and

(e)any other relevant updates to shareholders as required;

3.13Z Energy is to provide a copy of the relevant Shareholder Materials on written request to any other person who becomes a registered shareholder of Z Energy after the date that would have entitled that holder to receive the Shareholder Materials in accordance with these orders;

3.14the accidental failure or omission by Z Energy to send the Shareholder Materials to any persons or the non-receipt of such documents by any persons will not constitute a breach of the orders nor invalidate any resolution passed or proceedings taken at the Scheme Meeting, but if any such failure or omission is brought to the attention of Z Energy, then it shall endeavour to rectify it by the method and in the time most reasonably practicable in the circumstances;

3.15Z Energy is not required to send the Shareholder Materials to those shareholders for whom Z Energy does not have known addresses (as at 16 February 2022,  82  shareholders  holding  0.034  per  cent  of Z Energy’s shares). In the event that any of those shareholders contacts Z  Energy  to  update  their  address  details  not  less  than  5 working days before the Scheme Meeting, Z Energy is required to send a set of the Shareholder Materials to that shareholder;

CScheme Meeting

3.16Z Energy is to hold the Scheme Meeting, on Tuesday, 22 March 2022 or such later date to be notified by Z Energy (if it considers it

necessary, or desirable to do so to comply with any applicable legal restrictions, or for health and safety reasons associated with the COVID-19 pandemic or other relevant regulatory considerations), online at and concurrently via telephone, to seek approval of the Scheme between Z Energy, Ampol NZ, Ampol and Z Energy’s shareholders (subject to any amendment or variation made in accordance with these orders);

3.17only holders of Z Energy shares whose names appear in the register of shareholders as at 5:00pm NZDT on the day which is two working days before the Scheme Meeting are entitled to be represented and vote at the Scheme Meeting or any adjournment or postponement thereof;

3.18all shareholders shall vote on the Scheme as a single class;

3.19the vote be conducted by poll;

3.20the resolution shall be passed if it is approved by:

(a)a majority of 75 per cent of the votes of the shareholders entitled to vote and voting on the resolution; and

(b)a simple majority of the votes of those shareholders entitled to vote;

3.21the Chairperson of the Scheme Meeting shall not have a casting vote;

3.22the resolution sought by Z Energy may be put to the shareholders at the same time as, or incorporated  into,  such  other  resolutions  as  Z Energy may determine;

3.23subject to these orders, the Scheme Meeting is to be conducted in accordance with the provisions of the Companies Act and Z Energy’s constitution;

3.24to be valid, all proxy votes need to be:

(a)received by the Registrar, Link Market Services Limited PO Box 91976 Victoria Street West, Auckland 1142, New Zealand; or

(b)received by the Registrar, Link Market Services Limited Locked Bag A14, Sydney, NSW 1235; or

(c)lodged online at vote.linkmarketservices.com/ZEL; or

(d)scanned and emailed to [email protected]; or

(e)delivered in person to Link Market Services Limited, Level 30, PwC Tower, 15 Customs Street West, Auckland, 1010, no later than the time and date that is 48 hours before the Scheme Meeting (Proxy Deadline);

3.25Z Energy is entitled to disregard any proxy votes received after the Proxy Deadline; but

3.26notwithstanding Z Energy’s constitution, Z Energy may waive, in its discretion, the Proxy Deadline if it deems such waiver to be in its best interests and in the best interests of Z Energy’s shareholders as a whole;

DReporting the results of the Scheme Meeting

3.27Z Energy is to notify the outcome of the Scheme Meeting by:

(a)lodging the results on the NZX Main Boards’ and the ASX’s market announcement platforms as soon as practicable after voting at the Scheme Meeting is complete; and

(b)serving written notice on persons entitled under order 3.33 below to appear and be heard at the hearing of the application for final Court orders. Such notice is to be served as soon as is practicable after voting at the Scheme Meeting is complete;

3.28prior to the Court’s consideration of the application for final Court orders, Z Energy is to file and serve on any party who has filed a notice or an application for leave under order 3.30 to 30.31 (as applicable), an affidavit or affidavits:

(a)verifying compliance with these orders;

(b)confirming the outcome of the Scheme Meeting; and

(c)confirming the issue of a Takeovers Panel no-objection letter;

…

F        Rights of appearance and opposition

3.30if Ampol, Ampol NZ, the Takeovers Panel or a Z Energy shareholder wishes to appear and be heard on the Application for Final Court Orders, leave is not required, but any such party must file a notice of appearance or a notice of opposition (as applicable, and in either case containing an address for service), any affidavits and a memorandum of submissions on which they intend to rely no later than five working days before the hearing date set for the Application for Final Court Orders, and on the same day serve a copy on Z Energy;

3.31if any other person who claims to have an interest in the Scheme wishes to appear and be heard on the Application for Final Court Orders, they must file an application for leave to be heard on the Application for Final Court Orders (containing an address for service), a notice of opposition, any affidavits and a memorandum of submissions upon which that person intends to rely no later than five working days before the hearing date set for the Application for Final Court Orders and on the same day serve a copy on Z Energy;

3.32Z Energy is to serve on:

(a)any shareholder wishing to be heard on the Application for Final Court Orders, copies of all documents filed in support of the Application for Final Court Orders by 5.00pm on the date that is five Business Days prior to the Final Court Hearing; and

(b)any other person claiming to have a proper interest in the Scheme, who has been granted leave to appear and be heard at the hearing of the Application for Final Court Orders, a copy of the affidavits in support of the Application for Final Court Orders;

3.33the only persons entitled to appear and be heard at the hearing of the Application for Final Court Orders will be:

(a)Z Energy;

(b)Ampol and/or Ampol NZ, if a notice of appearance has been filed in accordance with order 3.30 above;

(c)the Takeovers Panel, if a notice of appearance or a notice of opposition has been filed in accordance with order 3.30 above;

(d)a Z Energy shareholder, if a notice of appearance or a notice of opposition has been filed in accordance with order 3.30 above;

(e)those other persons who claim to have an interest in the Scheme who file an application for leave to be heard and a notice of opposition to the Application for Final Court Orders in accordance with order 3.31 above, and who are subsequently granted leave to appear and be heard at the hearing of the Application for Final Court Orders;

3.34if the hearing of the Application for Final Court Orders approving the Scheme is adjourned, only those persons who have filed and served a notice of appearance or a notice of opposition in accordance with orders 3.30 and 3.31 above need to be served with notice of the adjourned date;

…

Compliance with the procedural orders

Service and representation

[39]   Z Energy sent to Ampol, Ampol NZ and the Takeovers Panel electronic copies of the documents it filed in this proceeding in accordance with Procedural Order 3.2.

Shareholder Materials and Notice of Special Meeting

[40]On 24 February 2022, Z Energy:

(a)lodged the Scheme Booklet on the NZX market announcement platform and ASX market announcement platform; and

(b)made electronic copies of the Shareholder Material available on the   Z Energy website.

[41]   On 25 February 2022, Z Energy sent the Shareholder Materials by email to all its shareholders who had elected to receive documents electronically.15

[42]   Z Energy posted hardcopy Shareholder Materials by ordinary mail to those other shareholders who  had  not  elected  to  receive  documents  electronically  on  2 March 2022 (to shareholders with a New Zealand address) and 3 March 2022 (to shareholders with an Australian address).16

[43]   Z Energy sent the Shareholder Materials by email to Z Energy’s directors and auditors on 3 March 2022.

[44]   Z Energy provided links to complete copies of the Shareholder Materials and the required additional documents on the Z Energy website.

[45]   No person who became a shareholder of Z Energy after the date that Z Energy sent the Shareholder Materials (in accordance with Procedural Order 3.13) requested a copy of the Shareholder Materials.

15 With no material changes from the versions originally supplied to the Court, other than to complete times and dates which were square bracketed items in the draft approved by the Court, insert    Z Energy’s closing share price as at the last practicable date before the date of release of the Scheme Booklet, update the number and percentages of Z Energy shares held and traded by substantial product holders as at the last practicable date, and correct some minor typographical errors. Z Energy also applied branding and graphically designed the text of the Shareholder Materials.

16 The Shareholder Materials were deemed to have been received by all those to whom they were ordered to be sent 48 hours after they were sent in accordance with Procedural Order 6.

[46]   No accidental failure or omission to send the Shareholder Materials to any persons, or the  non-receipt  of  those  documents  by  any  person,  was  brought  to Z Energy’s attention.

[47]   One shareholder for whom Z Energy did not hold a valid address requested copies of the Shareholder Materials, which were then sent to that shareholder in accordance with Procedural Order 3.15.

The Scheme Meeting

[48]   On 7 March 2022, Z Energy notified the Court that the shareholder meeting would be held on 25 March 2022 (in order to comply with a recommendation in the NZX Corporate Governance Code).17 The Scheme Meeting was held concurrently as a virtual (online) meeting and a telephone meeting on that day.

[49]   As noted earlier, the shareholders who were entitled to be represented and vote at the Scheme Meeting were those shareholders whose names appeared in Z Energy’s share register as at 5 pm (New Zealand time) on 23 March 2022.

[50]   All shareholders voted on the Scheme as a single class and voting was conducted by poll, in accordance with Procedural Orders 3.18 and 3.19 (and, subject only to those orders, in accordance with the provisions of the Companies Act and Z Energy’s constitution).

[51]   The shareholders approved the Scheme by a margin which exceeded the requisite statutory thresholds for approval, with 98.73 per cent of votes cast (324,321,189 votes) exercised in favour of the Scheme and 1.27 per cent exercised against (4,158,826 votes). There were 3,857,831 abstentions. In total, 62.57 per cent of overall voting rights were exercised in favour of the Scheme.

17     And being more than 10 working days after the Shareholder Materials were distributed to shareholders in compliance with Procedural Order 3.5.

[52]   LINK ascertained the extent of valid proxy appointments received by 10.30 am on 23 March 2022. Valid proxy appointments in respect of 327,603,979 shares were made by that date.18

[53]   The voting result was announced to the NZX Main Board and ASX by announcement shortly after the conclusion of the Scheme Meeting.

[54]   Z Energy provided a copy of the NZX results announcement to counsel for Ampol, Ampol NZ and the Takeovers Panel.

No opposition

[55]   Any notices of appearance or opposition were due by 5 pm, Wednesday 6 April 2022. Z Energy has not been served with any notices of appearance or notices of opposition to the Scheme, other than the notice of appearance (in support) by Ampol and Ampol NZ.

Compliance with conditions

[56]   The condition that the Independent Adviser conclude prior to the Scheme Meeting that the Scheme Consideration is above or within the Independent Adviser’s range was satisfied. The advice received was that the Scheme Consideration sits within the assessed valuation range of $3.54 to $4.07 per share, and is near the midpoint of $3.80 per share.

[57]   Following the Scheme Meeting, Z Energy requested that the Takeovers Panel provide a “no objection” statement in relation to the Scheme. A no objection statement from the Takeovers Panel has subsequently been provided and was in evidence before the Court.

[58]   Clearance has been received from the Commerce Commission under the Commerce Act 1986.

18 Proxy appointments in respect of 134,186 shares were made after that deadline. Z Energy did not waive the Proxy Deadline and those proxy appointments were not treated as being effective, in accordance with clause 35 of the Second Schedule to Z Energy’s constitution.

[59]   Consent has also now been received from the OIO, in terms of the Overseas Investment Act 2005 (OIA).19

[60]   Although Z Energy lodged the Scheme Booklet with the NZX at the same time it sent the Scheme Booklet to shareholders, the NZX does not have a role in reviewing scheme booklets under the NZX Listing Rules. Similarly, no approvals were required from the ASX in relation to the Scheme.20

Should the scheme be approved?

[61]   The authorities referred to earlier establish that four factors are relevant to the exercise of the discretion:

(a)whether the relevant statutory provisions have been met;

(b)whether the proposed arrangement has been fairly put to shareholders;

(c)whether shareholders were fairly represented by those in attendance, and the requisite majorities were acting in good faith and not coercing the minorities to promote interests adverse to shareholders; and

(d)whether the arrangement might reasonably be approved by reasonable and intelligent businesspeople, acting in their own interests.

Compliance with statutory procedures

[62]   Here, Z Energy has complied with all applicable statutory provisions under Part 15 of the Companies Act, in that:

(a)the procedural orders have been complied with;

19 Under order 3.32, Z Energy was required to serve specific documents—including the OIO consent—on any shareholder wishing to be heard, and any other person granted leave to appear, on the substantive application. The OIO consent was not received by the date for serving those documents (6 April 2022). But because no shareholders, or other persons, had filed a notice of appearance or opposition to the substantive orders no prejudice was caused by Z Energy’s inability to comply with this timeframe.

20  Z Energy nonetheless lodged the Scheme Booklet and other relevant material with the ASX as   part of its obligation to keep the market informed.

(b)the Takeovers Panel has been notified of the application in accordance with s 236A(1) of the Companies Act and has provided a no objection statement; and

(c)the resolution to approve the Scheme was approved by the requisite percentage of shareholders in terms of s 236A(4) of the Companies Act.

Fairly put to shareholders?

[63]   The Scheme has been fairly put to shareholders. Materials were made available to them in accordance with the procedural orders approved by the Court. Those materials fairly represented the Scheme to shareholders. The Shareholder Materials were also provided to, and commented on by, the Takeovers Panel. The Scheme Meeting was fairly conducted, and the affidavit evidence satisfies me that all questions by shareholders were adequately answered.

Fair representation?

[64]   There is no suggestion that the shareholders did not fairly represent the relevant class or that the substantial majority supporting the scheme did not act in good faith. It is well-established that overwhelming shareholder support in such a vote, and the absence of opposition to Final Orders, indicate fair representation and good faith at the meeting.

Class intelligence?

[65]   I am satisfied that the Scheme is such that an intelligent and honest businessperson acting in his or her own interest might reasonably approve, and is generally fair and equitable.

[66]   First, the Scheme itself is relatively simple, in that it involves shareholders exchanging their shares for cash. The Scheme will be legally enforceable against Ampol and Ampol NZ. There are no unusual features of the sale and purchase. It is fair in the sense that all shareholders are treated equally. In those circumstances, whether or not it is fair and equitable is really a matter of price.

[67]And as to price:

(a)The Scheme provides for shareholders to obtain a premium for their shares. The Scheme Consideration (as described in the Scheme Booklet) of NZ$3.76 (which does not include the first half of financial year 2022 dividend of NZ$0.07 per share, which has already been paid, or any Implementation Date Adjustment payment up to NZ$0.10 per Scheme Share) for each Scheme Share represents a:

(i)35 per cent premium to Z Energy’s closing share price on the NZX Main Board on 26 July 2021, the last trading day prior to first press speculation in relation to corporate activity involving Z Energy;

(ii)23 per cent premium to Z Energy’s closing price on the NZX Main Board on 20 August 2021, the last trading day prior to the announcement that Z Energy had received an acquisition proposal from Ampol;

(iii)35 per cent premium to Z Energy’s one-month volume weighted average price (VWAP) ended 26 July 2021;

(iv)39 per cent premium to Z Energy’s three-month VWAP ended 26 July 2021;

(v)37 per cent premium to Z Energy’s six-month VWAP ended  26 July 2021; and

(vi)32 per cent premium to Z Energy’s twelve-month VWAP ended 26 July 2021.

(b)The Independent Adviser’s opinion is that the Scheme Consideration sits within the assessed valuation range of $3.54 to $4.07 per share, and is near the midpoint of $3.80 per share.

[68]   Third, Z Energy’s Board unanimously recommended the Scheme. In doing so it noted (amongst other things) that:

(a)Although there is a positive outlook for Z Energy and the Board was confident that the business can deliver growth in the long-term, there is risk associated with pursuing strategies to achieve long-term growth (reflected in the market price of Z Energy Shares before media speculation in relation to corporate activity involving Z Energy) and potentially considerable capital expenditure would be required to achieve those growth goals.

(b)The industry in which Z Energy operates faces long-term headwinds and therefore shareholder risks, including technology disruption due to the arrival of electric vehicles sooner than anticipated, decreasing social acceptance of fossil fuel consumption and the risk of a disadvantageous change in government policy.

(c)The Scheme Consideration of 100 per cent cash mitigates those risks and provides shareholders with certainty of value for their Z Energy Shares now.

[69]Fourthly, the Scheme has overwhelming shareholder support.

[70]Lastly, and for completeness, I record that the Scheme:

(a)does not affect the legal rights of Z Energy’s creditors, because it is merely a transfer of shares in Z Energy and, going forward, Z Energy will remain indebted to its creditors;

(b)triggers  certain  provisions  in  contractual  arrangements  between    Z Energy and some of its creditors, such that those creditors have the right to determine  whether  to  continue  providing  debt  funding  to Z Energy; and

(c)does not purport to bind bondholders in any way: bonds will continue on their existing terms as set out in the applicable bond Trust Deeds, unaffected by the Scheme.

Conclusion

[71]   For the reasons given above I was satisfied that the Court should exercise its discretion to approve the scheme and I therefore made orders that:

(a)the proposed scheme of arrangement between the applicant, Z Energy, and its shareholders, as described in the Scheme Plan (annexed to the orders), is approved and binding upon Z Energy, all of its shareholders, Ampol, Ampol NZ, and all such other persons as are necessary to give effect to the Scheme; and

(b)Z Energy is granted leave to apply to the Court for approval of any amendment, modification or supplement to the Scheme.

Rebecca Ellis J

Solicitors:

Chapman Tripp, Auckland for Applicant Bell Gully, Auckland for Interested Party