The NZ Shareholders’ Association is going to vote in favour of Metlifecare’s litigation aimed at forcing Sweden’s EQT to proceed with its $1.5 billion takeover offer, even though it has “reservations” about the action.
EQT and its Asia Pacific Village Group unit announced they were pulling out of the deal in April, citing the impact of the covid-19 pandemic on Metlifecare’s prospects.
But Metlifecare’s directors have said this is an invalid termination of their agreement with EQT.
The company was established in 1984 and owns and operates 25 retirement villages predominantly in the upper North Island.
MET entered into a Scheme Implementation Agreement (SIA) with Asia Pacific Village Group Limited (APVG) on 29 December 2019, where APVG agreed to acquire all the shares in MET for $7.00 cash per share under a scheme of arrangement (Scheme).
Prior to the announcement the shares were trading around $6.38.
On 7 April 2020, MET received a notice from APVG that advised of an intention to terminate the SIA on the basis that the emergence and spread of COVID-19 had triggered a “Material Adverse Change”.
On 15 May 2020, MET commenced litigation in the High Court against APVG for a declaration that the SIA remains in force, and for court orders requiring specific performance of APVG’s obligations for the Scheme to proceed.
At the first case management conference on 28 May 2020 the Court set a timetable which pending other developments would lead to a three-week trial from 23 November 2020. There is potential for this timetable to be derailed.
On Sunday 5 July 2020 it received on a without prejudice basis a non-binding indicative offer from Asia Pacific Village Group Limited (APVG) to acquire all Metlifecare shares for NZ$6.00 per share under a Scheme of Arrangement (NBIO).
The company seeks shareholder approval by way of the following resolution to continue the proceedings against APVG.
Note: The Resolution requires 75% or more of the votes cast to be voted in favour of the resolution.
We definitely recommend shareholders read all the notes to the Notice of Meeting and form their own views.
They should then direct their votes accordingly.
The company believes it has a strong case to enforce the Scheme to proceed. We have read the Notice of Meeting and accompanying Explanatory Notes and the Independent Advisers Report provided by KordaMentha.
Regardless of the company’s view of the merits, the costs to pursue this matter through the courts will be large and the process will be drawn out.
Even if the company is successful in court and the verdict is in its favour there is still another hurdle, actually enforcing any judgment made against parties in another jurisdiction.
We note there is no indication of the potential costs of the litigation. It would have been helpful if even a broad range of costs had been included to give some context to the risk/reward equation.
It is important to note the wording of the resolution. It simply allows the directors to decide the process so that potentially includes terminating the court proceedings.
In effect the purpose of the meeting is just to gauge the appetite of shareholders to pursue the matter in court.
This, according to media reports, is not favoured by some institutional shareholders who bought in relatively recently solely in anticipation of a short- term gain and who are thus now suffering and wish to abandon ship.
It is said those shareholders are contemplating calling a shareholder meeting to remove directors.
Note 29 of the Explanatory Notes says:
For the resolution to be approved by the shareholders, 75% or more of the votes cast must be voted in favour of the resolution.
If the special resolution is not approved by shareholders, then Metlifecare would withdraw the Statement of Claim and Metlifecare would likely need to pay costs to APVG and EQT (those costs, at this early stage of the Litigation, will be low compared to the costs which will be required to pursue the Litigation to its conclusion).
Technically, if the resolution is not passed, the SIA would (in the company’s view) remain in place, but the directors would then consider Metlifecare terminating it.
NZ Shareholders Association has its reservations as to the wisdom of the course the directors have chosen but in the absence of evidence to the contrary reluctantly concludes the process should continue for now.
SOURCE: NZ Shareholders Association
In these circumstances, Metlifecare has decided to defer the special meeting of shareholders scheduled for this Friday, 10 July 2020. This meeting is currently scheduled to seek shareholder support to continue litigation against AVPG and EQT over their decision to terminate the original SIA, which Metlifecare alleges is invalid.
IMPORTANT: This article is of general nature only and readers should obtain advice specific to their circumstances from professional advisers.
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