20 Oct 2020

Metlifecare takeover: High Court approves $1.3bn offer despite opposition

8:51 pm on 20 October 2020

Retirement village company Metlifecare is set to de-list from the local stock exchange, after the High Court gave its $1.3 billion takeover offer the green light.

Depressed elderly widow sitting alone at home

Photo: 123RF

Asia Pacific Village Group (APVG) - backed by the Swedish equity firm EQT - will take over the firm for $6 a share, with trading on the NZX ceasing when the market closes on Friday, and the company de-listing from both the NZX and ASX on 3 November.

Until late yesterday afternoon, the application was opposed by one of Metlifecare's shareholders - ResIL which holds 1000 shares and 7000 retail bonds - whose sole shareholder claimed the information provided about the scheme was misleading and incorrect.

Despite the objection, and with respect to the points raised, the Takeovers Panel did issue its no-objection letter, which the High Court considered today.

In the High Court judgement issued this afternoon, Justice Lang took "considerable comfort" from the fact the panel had already considered ResIL's concerns and had found no reason to object to the offer.

"Shareholders in Metlifecare were obviously entitled to feel disappointed that they were not going to realise the premium available under Asia Pacific's earlier offer... Taking all relevant factors into account, however, I consider the scheme was one that an intelligent business person could reasonably support.

"Those factors also mean it is fair and equitable that the scheme be permitted to proceed."

The board chair, Kim Ellis, the Shareholders Association and Salt Funds Management also opposed the deal by voting against it in early October.

APVG's bid to buy Metlifecare has been fraught since it pulled out of its initial $7 a share offer in April, following the Covid-19 lockdown.

APVG claimed the virus outbreak was a Material Adverse Change (MAC), which would lower the value of Metlifecare's assets, earnings, and profits.

Metlifecare pushed back at the time saying the MAC metrics had not been triggered, but regardless it 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.

Ellis said the board would be prepared to force the deal via legal action, if that was what shareholders wanted.

APVG then came back with a lower offer of $6 a share, which was in line with a recent valuation that put the share price in the range of $5.80 to $6.90.

Ellis opposed the new offer, saying it did not reflect the underlying value of Metlifecare shares.

"He believes the scheme consideration... does not represent fair value and should be at least at the mid-point of the range determined by independent adviser KordaMentha at NZ$6.35," a July market update said.

The Shareholders Association also came out against the offer, saying it would vote its proxies against it.

In a letter to shareholders last month, the association said Metlifecare was not in trouble, so did not need to be bailed out.

"Why would directors recommend this offer for a profitable company which, despite having been the retirement sector laggard, has now actually outperformed its own expectations? Many investors will have bought in to Metlifecare because they saw it as better value than its listed comparators," the letter stated.

"If the company is sold, current investors will lose the opportunity to see this value gap close."

However, 90.7 percent of shareholders - including the NZ Superannuation Fund - did not feel the same way, and voted in early October to approve the bid.

In a statement, Guardians of NZ Superannuation said it welcomed the court's decision supporting the takeover, which it believed was a good opportunity for the future.

"We believe there is a better use for our capital and agreed with the majority of directors on the board who stated the sale price of $6 is reasonable when weighed against the uncertainty, disruption and potential risks associated with the previous litigation and inherent risk in continuing to operate Metlifecare's business in a Covid-19 environment over a significant period of time."

It had acquired 17 percent of Metlifecare in November 2013 at $3.53 per share, taking its total holdings to 19.9 percent.

It said it had concluded that the offer was as good as the expected future returns on the asset, "and that capital can be better invested elsewhere".

The takeover has already been approved by the Overseas Investment Office.

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