A court case is looming for the retirement village operator Metlifecare as it fights to keep its takeover deal alive.
The government-ordered lockdown has skittled Asia Pacific Village Group's plans to buy retirement village operator Metlifecare. Photo: 123RF
Earlier this month the bidders, Asia Pacific Village Group (APVG) said the Covid-19 outbreak was a "Material Adverse Change" (MAC), which would lower the value of Metlifecare's assets, earnings and profits.
It also said it had not been consulted about decisions relating to the government-ordered lockdown, and would therefore terminate the agreement.
APVG, which is owned by the Swedish-based private equity firm EQT Infrastructure IV (EQT), had made a $1.5 billion takeover offer for Metlifecare, of which 20 percent is held by the New Zealand Superannuation Fund.
Metlifecare chair Kim Ellis said the board had sought legal advice and believed neither of the allegations would allow EQT out of the deal.
"I think they're panicking… they don't even understand the business even though they've had untold data. They don't understand that this is a one-month pause in activity - [the] core business is in great shape.
"They've obviously decided that they just don't want to be part of this uncertain future and think that by resting on the on the fact that this pandemic has killed our business and that we're going to be mortally wounded, or whatever it is, that they don't want to part of it so they're obviously completely wrong."
Ellis said regardless of whether the Material Adverse Change metrics were triggered, the MAC would not apply because the impact was clearly due to changes in general economic conditions, and had not disproportionately impacted Metlifecare, compared with other retirement operators.
"So what they've done then is focus on a breach, so a breach in the agreement we've got. A breach is around not supplying them with information when they ask for it, taking action, that is material to the company and its subsidiaries without getting their approval or consulting and so on.
"They're just really burrowing into this and it's driving everyone mad, but that's their approach, trying to trip us up or prove a MAC in respect of a breach… there's a lot going on in this little space."
He said litigation was likely.
"I can't see it not going to court, and it'll be over a long period. It'll cost millions but we've received untold correspondence from our shareholders - there's been a big change in the shareholder balance since the bid - and they're angry.
"They want us to take the strongest of action... either to make it happen or to enable a big claim."
Ellis said it was now up to EQT, to decide next steps.
"They've given us the notice, they've got to prove the MAC, they can't just make unsubstantiated allegations… they have to put a substantial case.
"In the event that they don't, and they just rest on whatever information they've got, they can move to terminate… and then we can either accept that termination, we can fight it to try and force the scheme to proceed, or we can look at other options... filing for damages and so on.
"A lot of that will be shareholder-led, because they'll be the beneficiaries of a claim, which could be pretty substantial… there's one hell of a court case coming up."
EQT has been contacted for comment.
An NZ Super Fund spokesperson said: "Under the voting deed, NZ Super Fund has agreed to vote its shares in favour of the scheme of arrangement, and we stand by that agreement."
NZ Super Fund holds 19.86 percent of Metlifecare's shares. "As NZ Super is not a party to the Scheme Implementation Agreement between APVG and Metlifecare, we are unable to make any further comments on the discussions between the parties."
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