Re TRADE ME GROUP LIMITED [2019] NZHC 840

Re TRADE ME GROUP LIMITED [2019] NZHC 840 [16 April 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-000279[2019] NZHC 840UNDER Part 19 of the High Court RulesANDIN THE MATTER OF an application for orders approving a schemeof arrangement under Part 15 of theCompanies Act 1993BETWEEN TRADE ME GROUP LIMITEDApplicantHearing: 16 April 2019Appearances: S A Armstrong, A J Nelder and D J Raudkivi for ApplicantS J P Ladd and A E Buchly for TitanJudgment: 16 April 2019ORAL JUDGMENT OF VENNING JSolicitors: Russell McVeagh, AucklandBell Gully, AucklandIntroduction[1] Trade Me Group Limited (Trade Me) seeks final orders:(a) approving the scheme of arrangement described in the Scheme Plan(attached as a schedule to the amended application) (Scheme);(b) directing that the Scheme is binding with immediate effect upon:(i) Trade Me;(ii) Titan AcquisitionCo New Zealand Limited (Titan);(iii) every person who is a shareholder (as defined in theImplementation Plan) (as at the record date as defined in theScheme); and(iv) such other persons as necessary to give effect to the Scheme;(c) granting leave to Trade Me to apply to the Court for approval of anyamendment, modification, or supplementation to the Scheme as may berequired.1[2] On 6 March 2019 this Court approved initial orders, including orders requiringthe holding of a shareholders' meeting on 3 April 2019 to enable shareholders toconsider and, if they supported it, to approve the Scheme. The initial orders also setout the information to be provided to shareholders in advance of that meeting, and thesteps a party was to take if they wished to oppose the application.2[3] Trade Me has filed a number of affidavits in support of its applications.Affidavits have been filed by David Kirk, a director and chairman of Trade Me; StevenKooyers, a director of Titan; Michael Lorimer, a director of Grant Samuel and1 The orders sought are in an amended application. The amendments are minor and not substantive.2 Re Trade Me Group Ltd [2019] NZHC 340.Associates Ltd (Grant Samuels); Stuart Mutch, a partner in Ernst & Young; CarolineRawlinson, the chief financial officer of Trade Me; and Yuan Wen, a solicitor.Trade Me and the Scheme[4] Trade Me through its subsidiaries operates a range of classified listing sites andis the largest internet auction site in New Zealand. It is currently listed on the NZXand dual listed on the ASX, has nearly 10,000 shareholders (almost all of whom arebased in New Zealand and Australia) and net assets of approximately $750 million. Ifthe Scheme is approved by the Court Titan, a New Zealand incorporated companyowned by a series of private equity investment funds that are advised by Apax PartnersLLP, (a leading global private equity advisory firm) will be permitted to acquire 100per cent of Trade Me's shares. In exchange for their shares each Trade Me shareholderwill receive consideration of NZ$6.45 per share, a price assessed by the independentadviser (Grant Samuel) as above the assessed value range for Trade Me shares.[5] The effect of the Scheme is to confirm the 100 per cent takeover of Trade Meby Titan in accordance with the details and mechanics of implementation set out in theScheme.[6] The Scheme represents by some magnitude the largest takeover by way ofscheme of arrangement in New Zealand's history but is substantially similar in conceptto three recent schemes of arrangement where this Court has approved a 100 per centtakeover pursuant to a transfer of all the shares in the applicant by way of a scheme ofarrangement.3Progress since initial orders[7] Since the initial orders were made on 6 March 2019 the following steps haveoccurred:3 Re Nuplex Industries Ltd [2016] NZHC 1677; Re Fliway Group Ltd [2017] NZHC 3216; and ReTrilogy International Ltd [2018] NZHC 580.(a) The shareholders' meeting has been held. The shareholders voted insupport of the takeover. The Scheme received approval from 99.29 percent of the votes of shareholders entitled to vote and voting.(b) No opposition has been filed by the timetable date of 8 April 2019 andthere has been no appearance in opposition this morning.(c) The Takeovers Panel has provided a statement confirming that it has noobjection to the Scheme; and(d) Trade Me has not received any competing or superior proposals for theacquisition of its shares.Statutory framework[8] The application is made under ss 236 and 237 of the Companies Act 1993 (theAct). As relevant the sections provide:236 Approval of arrangements, amalgamations, and compromises(1) Notwithstanding the provisions of this Act or the constitution of acompany, the court may, on the application of a company or anyshareholder or creditor of a company, order that an arrangement oramalgamation or compromise shall be binding on the company andon such other persons or classes of persons as the court may specifyand any such order may be made on such terms and conditions as thecourt thinks fit.(2) Before making an order under subsection (1), the court may, on theapplication of the company or any shareholder or creditor or otherperson who appears to the court to be interested, or of its own motion,make any 1 or more of the following orders:(a) an order that notice of the application, together with suchinformation relating to it as the court thinks fit, be given insuch form and in such manner and to such persons or classesof persons as the court may specify:(b) an order directing the holding of a meeting or meetings ofshareholders or any class of shareholders or creditors or anyclass of creditors of a company to consider and, if thought fit,to approve, in such manner as the court may specify, theproposed arrangement or amalgamation or compromise and,for that purpose, may determine the shareholders or creditorsthat constitute a class of shareholders or creditors of acompany:(c) an order requiring that a report on the proposed arrangementor amalgamation or compromise be prepared for the court bya person specified by the court and, if the court thinks fit, besupplied to the shareholders or any class of shareholders orcreditors or any class of creditors of a company or to any otherperson who appears to the court to be interested:(d) an order as to the payment of the costs incurred in thepreparation of any such report:(e) an order specifying the persons who shall be entitled to appearand be heard on the application to approve the arrangement oramalgamation or compromise.(3) An order made under this section has effect on and from the datespecified in the order.237 Court may make additional orders(1) Without limiting section 236, the court may, for the purpose of givingeffect to any arrangement or amalgamation or compromise approvedunder that section, either by the order approving the arrangement oramalgamation or compromise, or by any subsequent order, providefor, and prescribe terms and conditions relating to,—(a) the transfer or vesting of real or personal property, assets,rights, powers, interests, liabilities, contracts, andengagements:(b) the issue of shares, financial products, or policies of any kind:(c) the continuation of legal proceedings:(d) the liquidation of any company:(e) the provisions to be made for persons who voted against thearrangement or amalgamation or compromise at any meetingcalled in accordance with any order made under subsection(2)(b) of that section or who appeared before the court inopposition to the application to approve the arrangement oramalgamation or compromise:(f) such other matters that are necessary or desirable to giveeffect to the arrangement or amalgamation or compromise.[9] As Trade Me is a code company for the purposes of the Takeovers Act 1993 anorder approving the arrangement cannot be made unless Trade Me shareholderssupport the arrangement by resolution approved by the requisite majority and eitherthe Court is satisfied the shareholders will not be adversely affected by the use of thePart 15 proceeding instead of the Takeover Code or the Takeovers Panel confirms ithas no objection to the order.4[10] The Court has a discretion whether or not to approve a scheme of arrangementunder s 236(1) of the Act.[11] The considerations as to an application for approval of a scheme ofarrangement under Part 15 of the Act were stated in Re CM Banks Ltd5 and haverecently been restated in Re Methven Ltd.6 The Court must be satisfied:(a) the relevant statutory provisions have been complied with;(b) the proposed arrangement has been fairly put to the relevantshareholders who had all information reasonably necessary so that theycould make an informed decision;(c) the shareholders were fairly represented by those attending the meetingand the statutory majority acted in good faith and without coercing anyminority in order to promote interests adverse to shareholders; and(d) the arrangement might reasonably be approved by a reasonable andintelligent business person acting in their own interests.[12] In Weatherston v Waltus Property Investments Ltd the Court of Appeal alsoheld it was appropriate to consider whether overall the agreement was fair andequitable.74 Companies Act 1993, s 236A.5 Re CM Banks Ltd [1944] NZLR 248 (SC).6 Re Methven Ltd [2019] NZHC 608.7 Weatherston v Waltus Property Investments Ltd [2001] 2 NZLR 103 (CA).Evidence of compliance[13] Dr Kirk has confirmed that the special meeting of shareholders was held at2.00 pm on 3 April 2019 at the Museum of New Zealand, Te Papa Tongarewa, 55Cable Street, Wellington. Shareholders were also able to attend the meeting online.[14] Dr Kirk also confirmed that prior to the meeting copies of the shareholdermaterials were delivered to all shareholders listed on the share register as at 7.00 pmon Tuesday, 19 March 2019. Persons who became shareholders after that date butbefore 7.00 pm on 1 April 2019 were also provided with a copy of the materials.Further, the shareholder materials were also lodged on NZX and ASX as marketannouncement platforms and were made available at Trade Me's offices in Aucklandand Christchurch and at its registered office in Wellington, in addition to beingavailable at the Auckland and Wellington offices of Russell McVeagh; and wereavailable for download on Trade Me's website itself.[15] Copies of the sealed initial orders and the application for final orders have beenavailable online and available for inspection at Trade Me's Auckland, Wellington andChristchurch offices and at the Auckland and Wellington offices of Russell McVeagh.[16] Dr Kirk also confirms that the Scheme received shareholders' support. Votingat the Scheme meeting was conducted by poll and all shareholders voted on theScheme as a single interest class. It was approved by 99.29 per cent of the votes ofthe shareholders voting (and 65.61 per cent of the votes of those shareholders entitledto vote).[17] The Scheme was also conditional on Titan receiving the consent of theOverseas Investment Office. Mr Kooyers has confirmed that consent was grantedunder the Overseas Investment Act 2005 on 8 March 2019.[18] The Takeovers Panel was also required to be notified of the application. TheTakeovers Panel was notified of the application and provided with a copy of allrelevant documentation. Ms Wen, solicitor employed by the applicant's solicitors, hasconfirmed that a representative of the Panel attended the meeting. On 8 April 2019the Panel provided Trade Me with a no objection statement indicating it had noobjection to the Court making the orders sought.[19] The only outstanding condition requiring third party approval is the formalapproval of this Court. I confirm that in a recent affidavit Mr Kooyers has confirmedthat Titan is committed to paying the Scheme Consideration if the Scheme becomeseffective.[20] As Dr Kirk has confirmed the Scheme is also however conditional upon:(a) no judgment, order, restraint or prohibition enforced or issued by anygovernment agency being in effect as at 8.00 am on the ImplementationDate8 that prohibits, prevents, materially delays or makes illegal theimplementation of the Scheme; and(b) no prescribed occurrence as set out at schedule 1 of the SchemeImplementation Agreement (SIA) between Trade Me and Titanoccurring before 8.00 am on the Implementation Date.[21] In Re Methven Ltd Jagose J held that outstanding conditions of this nature didnot establish any supervening detriment to shareholders, as the failure of such acondition would simply be to restore the status quo.9 The conditions were disclosedin the shareholder materials provided to shareholders who gave their approval withknowledge of them. I agree that that aspect conditionality of the Scheme should notprevent the Court's approval if otherwise satisfied the Scheme should be approved.[22] Having reviewed the amended application and the further informationdisclosed in the affidavits of Dr Kirk, Mr Kooyers, Mr Mutch who acted as scrutineerat the shareholders' meeting, Ms Rawlinson, and Mr Lorimer, in particular, I amsatisfied that:8 The Implementation Date is the date two business days after the Record Date which is in turn7.00 pm on the date two business days after the Trading Halt Date which is the later of 2 May2019 and the date two business days after the unconditional date (or such other date Titan andTrade Me agree in writing).9 Re Methven Ltd [2019] NZHC 608 at [10].(a) Trade Me has complied with the orders of the Court to ensure thatinterested parties were informed of the Scheme and had the opportunityto oppose it or to lodge an objection;(b) Trade Me has complied with the remainder of the initial orders grantedunder s 236(2) of the Act.[23] The Court was previously satisfied that the information proposed to beprovided to shareholders fully and fairly explained what was proposed, its intendedeffect, the reason why it was proposed and the reason the Board supported it.[24] Mr Mutch has confirmed the process at the meeting. All classes were fairlyrepresented by those attending the meeting to the extent they voted as a single class.The resolution was put to shareholders and was approved in accordance with thestatutory majorities as required under s 236A(4). I am satisfied that the Scheme wasfairly put and confirmed. There is no suggestion of coercion of any minority interests.[25] In the initial orders judgment the Court noted that 578,602 shares representing0.15 per cent of the total shareholding were held on trust by a related company TMGTrustee Ltd (TMG) for Trade Me employees entitled to participate in the Trade Me'sExecutive Long-Term Incentive Plan (LTI plan). All LTI participants will receiveconsideration for their shares under the terms of the Scheme. Each participant in theLTI Scheme is a current senior employee of Trade Me and is well aware of the Schemeand its progress. As Ms Rawlinson deposes all LTI participants who exercised theirvoting rights via proxy (representing 80.09 per cent of votes able to be exercised byLTI participants overall) voted in favour of the Scheme.[26] Next, I am satisfied that the Scheme is such that an intelligent and honestbusiness person acting in respect of their own interests might reasonably approve theScheme. The takeover purchase price of $6.45 per share is above the valuation rangefor Trade Me shares as set out in the Independent Advisor Report. It represents apremium of in excess of 20 per cent relative to the closing price of $5.10 per share on20 November 2018, the last trading day prior to the initial announcement of the receiptof the initial non-binding indicative proposal from Titan.[27] Finally I accept that overall the Scheme is generally fair and equitable. In hissecond affidavit Dr Kirk has provided a summary of the questions received at theScheme meeting and the responses to those questions. He has confirmed the Schemehas the unanimous support of the Board. The Board's judgment ought to be givenweight as well.10[28] In summary, although the sum involved in the Scheme is significant, thefeatures of the proposed Scheme are otherwise relatively straightforward. Theproposed Scheme is consistent with the authorities and the way the s 236 procedurehas been applied in the past.Result/orders[29] The Court is satisfied that it is appropriate to make the orders sought in theamended application. There will be orders as sought in that amended application dated10 April 2019.__________________________Venning J10 Re Nuplex Industries Ltd [2016] NZHC 1677.