COVID-19 pandemic, a health and economic crisis, has brought the global economy on the knees, leaving millions of individuals jobless while impacting several businesses severely, as the governments across the world have rolled out measures to combat the deadly virus. However, there have been some positives too, with several economies planning to re-open their economies gradually, testing initiatives ramping up and robust research & developments efforts towards finding a vaccine/treatment.
In this article, we will acquaint you with how one New Zealand-based company is taking legal action against would-be suitor for pulling out of its takeover offer, with the latter claiming a "Material Adverse Change" (MAC) due to the COVID-19 outbreak.
New Zealand-based company, Metlifecare Limited (NZX: MET, ASX: MEQ) is a leading owner and operator of retirement villages. At its facilities, the Company provides rewarding lifestyles and outstanding care to over 5.6k people in New Zealand. Currently, it owns and operates a portfolio of nearly 25 villages situated primarily in the upper North Island of New Zealand.
On 21 May 2020, Metilifecare updated the market that a substantial number of shareholders have endorsed measures taken by the Board, targeted towards compelling Asia Pacific Village Group Limited (APVG) to meet its contractual obligations as part of the SIA (Scheme Implementation Agreement) entered between the two parties on 29 December 2019.
The shareholders that gave their support represent one-third of the Company’s shares on issue. The Accident Compensation Corporation, the Guardians of the NZ Superannuation Fund and overseas-based investors including Maso Capital, Westchester Capital and Omni Partners have a combined valuable or economic ownership of more than 33.4% in the Company’s shares.
All these shareholders have given written confirmations, highlighting their strong support to Metlifecare on the recent decision by the Board of the Company to file a statement of claim in the New Zealand High Court to challenge the validity of a notice sent by APVG in regards to the termination of the SIA. Each of the shareholders have also confirmed their intention to vote in support of the scheme plan, in case it is proposed to shareholders.
Consequently, on 15 May 2020, the Company filed the statement of claim with the initial hearing on the matter in the high court anticipated on 28 May 2020.
The Company highlighted that the high court hearing on 28 May 2020 would also consider its distinct proceeding applying for initial requests to schedule a meeting of its shareholders to vote on the scheme plan proposed by the scheme implementation agreement. Subject to the consent of the court, in late-June or early July 2020, the Company expects conducting the shareholder meeting for mulling the scheme plan.
Notably, Metlifecare stated that at this moment, its stockholders do not need to take any action and the Company remains strongly committed to the successful completion of the SIA in the interests of all shareholders.
Scheme Implementation Agreement (SIA)
On 30 December 2019, Asia Pacific Village Group Limited, an entity owned by EQT Infrastructure IV fund and managed by EQT Fund Management S.à.r.l., entered into a Scheme Implementation Agreement (SIA) with Metlifecare to acquire all (100%) of Metlifecare shares by way of a scheme of arrangement, subject to specific conditions.
In its announcement dated 30 December 2019, EQT Fund Management stated that shareholders of Metlifecare who are collectively representing nearly 22% of the register, have signalled about their current intention to vote in favour of the Scheme, in the unavailability of a superior proposal.
The SIA required Metlifecare to put a scheme of arrangement to its shareholders whereby, if approved, and all conditions satisfied, the shareholders would agree to sell their shares to APVG for $7.00 per share.
However, in early April 2020, the Company received a notice from APVG regarding its intention to terminate the agreement. It highlighted that owing to COVID-19, there has been the Material Adverse Change clause, given
- The event has lowered or is reasonably expected to reduce the consolidated net tangible assets of Metlifecare by a minimum of $100 million and/or
- It is reasonably anticipated to reduce the consolidated underlying net profit of Metlifecare by at least 10% in FY20, and/or FY21 and/or FY22 against what was expected before the event.
Additionally, APVG mentioned that some information wasn’t provided by the Company.
Metlifecare Takes Court Action to Compel SIA
On 18 May 2020, Metlifecare confirmed to have filed a statement of claim in the High Court of New Zealand, seeking orders that APVG meet its contractual obligations under the scheme entered late-December 2019.
Metlifecare filed the claim on 15 May 2020, challenging the validity of notice by APVG for terminating the SIA which was received on 28 April 2020, with the proceeding reiterating the factors why the Company deems that there has been no lawful basis in regard for the SIA termination. The Company highlighted that there has been no material adverse change and no prescribed incidences that allow APVG to terminate the SIA.
The statement of claim discloses that APVG has no reasonable points to decide that a prescribed incident has happened that would signify a violation of the SIA, as per the Company. Additionally, Metlifecare mentioned that it had given APVG reasonable access to information about and consulted with APVG regarding the measures that the Company had taken in response to the Level 4 lockdown restrictions in New Zealand.
Stock Information - On 22 May 2020, MET stock last traded at $4.310 on NZX, down by 0.69% with the Company boasting a market cap of approximately $919 million. The gross dividend yield of the stock stood at 1.671% and its P/E ratio was noted at 23.510x.
NOTE: Currency reported in New Zealand Dollars unless otherwise indicated.