19 May 2014

Schemes of arrangement popular again

6:57 am on 19 May 2014

Schemes of arrangement are back in fashion.

First, Archer Capital and the disaffected former Abano director, Peter Hutson, tried to take over Abano Healthcare through such a scheme, failing when Abano's board failed to support the bid.

And now Wilmar International, a Singapore-listed agribusiness, and First Pacific, the Hong-Kong listed investment business, are trying it on with Goodman Fielder.

Schemes of arrangement got a bad name in New Zealand when the Australia-based Transpacific used the process to acquire Waste Management in 2006.

Such schemes, which in New Zealand require the approval of only 75 percent of shareholders of the target company who bother to vote, are seen as a much easier way to take over a company than a conventional takeover bid.

A normal bid needs at least 90 percent of all shareholders to accept the offer in order for the bidder to gain complete control.

With a few tweaks to the current law, the Takeovers Panel supports schemes of arrangement.

Those tweaks include an additional requirement that at least 50 percent of shareholders by value need to vote in favour.

That's still a lesser hurdle than the Australian rules which require at least 50 percent of shareholders by number to vote in favour of a scheme.

The Takeover Panel's general counsel, Andrew Hudson said the panel believed that the 50 percent by number requirement would be too difficult to achieve.

He said the panel had always had the view that schemes of arrangement were legitimate means of undertaking corporate transactions in New Zealand.

"Schemes offer flexibility that sometimes can't be incorporated into a code transaction, with the modifications, the consistent and equivalent shareholder disclosure and independent advisor report and different voting thresholds the panel's view is that, yeah they are neutral in the form of the transaction."