Comments on Exemptions

Published 1 December 2001

Time required to process exemption applications

If an exemption is required this should be taken into account early in the process of the transaction. Applicants should notify the Panel as soon as they can of the need for an exemption. It can take up to a month to process an exemption application. Follow the Guide to Applying for Exemptions from the Takeovers Code in CodeWord 3 and ensure all the necessary information is included.

Canadian National Railway Company - effect of the exemption - upstream parties

The Panel exempted Canadian National Railway Company from compliance with rule 6(1). The exemption was granted in respect of any increase in voting rights in Tranz Rail Holdings Limited controlled by Canadian National that might occur as a result of a merger between a wholly owned subsidiary of Canadian National and Wisconsin Central Transportation Corporation.

This exemption was concerned with the “upstream” merger affecting Wisconsin Central which holds a parcel of shares in Tranz Rail. Through the merger in North America the control of that parcel of shares will change. The exemption was granted because the merger was directed to operational rail network issues in North America and the change in control of the Tranz Rail parcel was incidental to the overall transaction.

Fisher & Paykel Industries Limited - effect of the exemption - reconstruction

The Panel exempted Fisher & Paykel Industries Limited (FPI) and Fisher & Paykel Appliances Holdings Limited (FPA) from compliance with rule 6(1) of the Code. The exemption was in respect of FPI shares to be acquired by FPA under the proposed arrangement to separate FPI into two listed companies. The need for the exemption arose because, as part of the separation, FPA would temporarily hold more than 20% of the shares of FPI. The exemption was given on condition that FPA’s holding in FPI would reduce to below 20% within one month and FPA’s shares could not be voted until the shareholding fell below 20%.

Data Advantage Limited - effect of the exemption - schemes of arrangement

An exemption from rule 6(1) of the Code was granted to Data Advantage Limited and its wholly owned subsidiary Aqua Advantage (New Zealand) Limited in respect of their acquisition of all the shares in Baycorp Holdings Limited through a scheme of arrangement under part XV of the Companies Act l993. The exemption was granted on conditions, including that Baycorp shareholders were given information broadly comparable to that which would have been provided under a Code offer. In addition, the shareholder vote required to approve the scheme of arrangement had to be passed by 75% of the votes cast, being at least 50% of the total votes of the company, and also by 50% by number of the shareholders voting at the meeting.

Applicants seeking an exemption to allow a takeover via a scheme of arrangement under Part XV of the Companies Act l993 are required to state to the Panel why the transaction is to be made under a scheme of arrangement rather than by a takeover offer.

Air New Zealand limited - effect of the exemption – urgency

The Panel exempted the Crown from compliance with rule 6(1) in respect of the Crown’s increased control of voting rights in Air New Zealand resulting from entry into the shareholder support agreement with Air New Zealand’s two largest shareholders.

The Panel also exempted the Crown from rule 7(d) to the extent that it requires rule 17(2) (imposing voting restrictions) to apply to the ordinary resolution of Air New Zealand needed to approve any increase in the Crown’s control of voting rights in Air New Zealand that will arise from the anticipated allotment of voting shares to the Crown.

Rule 7(2) provides that the allottee and its associates must not vote on a resolution for the approval of the allotment under rule 7(d). The exemption effectively permits the principal shareholders to vote in favour of the allotment of shares in Air New Zealand to the Crown despite the fact that, because of the shareholder support agreement, they are associates of the Crown.

The reasons for granting the exemptions were:

  • the financial position of Air New Zealand;
  • the importance of early certainty about the Crown’s financial support to the viability of Air New Zealand;
  • the need for that financial support to be provided ahead of the shareholders’ meeting; and
  • if time and circumstances had allowed the arrangements could have been made conditional on a shareholder meeting conforming with the Code at which the principal shareholders would be able to vote.

Normandy NFM Limited - effect of the Exemption - Non-Australasian shareholders and unmarketable parcels

Normandy is making a Code offer for all the shares and options in Otter Gold Mines Limited, a New Zealand listed company. Rule 20 of the Code states that all shareholders of the target company must be offered the same consideration on the same terms and conditions.

Normandy is exempted from rule 20 in respect of shareholders of Otter resident outside Australia and New Zealand. Those shareholders who accept the offer will have their Normandy share entitlement transferred to a nominee appointed by Normandy. The nominee is then obliged to sell those shares and distribute the proceeds to the shareholders. A similar arrangement is permitted for holders of small parcels of Otter shares. They can elect to transfer their share entitlement to the nominee.

These exemptions were granted because of:

  • the cost of complying with securities law in multiple jurisdictions where share scrip is being offered as consideration in a takeover;
  • the opportunity provided to consolidate small holdings; and
  • the principle of equal consideration still being observed.