Metlifecare shareholders are being urged to vote on foreign takeover
Tuesday, 29 September 2020
Shareholders in one of New Zealand’s largest retirement village businesses, Metlifecare, are being urged to vote on a crucial $1.3 billion takeover bid that will determine if it passes entirely into foreign ownership.
The New Zealand Shareholders’ Association chief executive Michael Midgley is exhorting all shareholders to vote. A special meeting of shareholders is being held on Friday to determine the issue.
The New Zealand Super Fund has given the overseas bidder a head start by deciding in early July to accept the $6 a share takeover offer for its almost 20 per cent stake. The overseas bidder is Asia Pacific Village Group, owned by a huge Swedish investment organisation, EQT Infrastructure.
“It might be closer than one might have thought,” Midgley said of the vote. “Shareholders should vote. They should always vote. They own the company.”
READ MORE:
*Metlifecare launches legal action to force completion of a $1.4 billion takeover
*Metlifecare gets new offer from Swedish suitor
*Metlifecare comes to an agreement with EQT to buy its shares for $6 a share
To be successful the foreign bidder must win 75 per cent of the votes cast and 50 per cent of all shares have to vote to accept the $6 takeover offer.
It is the second and a lower offer from Asia Pacific for Metlifecare and NZSA thinks it’s too cheap. The first was $7 late in December last year.
An independent valuation of Metlifecare put its value at $5.80 to $6.90 a share with the midpoint being $6.35. Metlifecare owns and operates 25 villages in the North Island, home to 5500 residents.
While the company had been considered “the laggard” of the big retirement village operators it had posted a better than expected and solid annual result, Midgley said.
Its net assets were worth $7.18 a share. A takeover offer would be expected to come close to that, Midgley said,
NZSA questions why NZ Super Fund is “dumping” an existing business when the Government was keen to see it invest more “at home”.
Asia Pacific had engaged a company, Georgeson Shareholder Communications Australia, to ring shareholders, even small shareholders, to lobby for their vote, Midgley said.
“They clearly don’t think it’s a done deal.”
New Zealand had had a history of selling valuable assets.
“Shareholders should do their own research. Don’t take advice from the person who is trying to buy the assets from you. Do you take the car dealers word for what the car is?”
Many shareholders get NZSA to vote their shares in what is called “a standing proxy service”, where NZSA chooses whether to vote for or against a proposal for them.
NZSA has said it will vote any “undirected’ proxies against the takeover bid. NZSA regularly was one of the 10 biggest shareholders at company meetings when shareholders asked NZSA to vote their shares, he said.
It will not know until it goes to the meeting on Friday how many proxies it will have.
“This meeting, I suspect we will have a very significant number of proxies. I’ve even had phone calls from the other side of the world about attending the meeting and that’s from institutional shareholders,” Midgley said.
“Not all investors are in the same category as the superannuation fund and some big investors are clearly looking closely to see whether they are going to take the money.”
Probably likely to vote for the $6 offer would be hedge funds and arbitrage traders who had been hoping to make a profit from buying Metlifecare shares in the past few months but wanted now to cut their losses at $6 and exit Metlifecare.
Until the second offer, the board of Metlifecare had been heading to court to challenge the legality of Asia Pacific terminating its earlier $7 a share offer. The bidder was arguing the impact of Covid-19 had reduced the value of Metlifecare.
Metlifecare’s board had the backing of some large shareholders including the NZ Super Fund for the court challenge. But the new offer has split the board with chairman Kim Ellis opposing the acceptance of $6 though most other board directors support it.
If the Swedish bidder is successful Metlifecare will cost it $1.28b, less than its original bid late last year of $7 a share costing $1.49b.
NZ Super said in written responses to Stuff questions that the $6 offer was 14.9 per cent higher than the share price before announcement of Asia Pacific’s second offer in early July. It was also 18.1 per cent higher than the share price on November 19, 2019 before Asia Pacific’s first expression of interest in buying Metlifecare.
Metlifecare had consistently traded below its net assets value and the average broker target price.
If NZ Super was to sell its big stake on the open market is would likely have to sell at a discount because of the size of the holding. If the deal did not go ahead it would have to wait for the share price to trade at $6.60 to get the equivalent of what was on the table now.
The options were costly and uncertain litigation in New Zealand courts, and the possibility of having to pursue that in Europe, or take the current offer.
Even if Metlifecare was successful in court forcing EQT to pay $7 a share, the time taken to potentially receive that compensation would impact the present value of that option, NZ Super said.
It agreed with the majority of directors at Metlifecare who said it was a finely balanced decision and that the $6 offer when weighed against the uncertainty, disruption and risks of pursuing legal action and continuing to run the business in a Covid environment was reasonable.
In regard to the NZSA claim it was dumping a New Zealand business, NZ Super said it always assessed whether future returns of an investment were better than what it could achieve investing the capital elsewhere.
NZ Super had decided the $6 value was as good as the expected future returns which came with plenty of uncertainty around demand, house prices, regulatory impost and costs.
The NZ Super Fund had grown to be one of New Zealand's largest institutional investors with more than $7b invested locally. But that did not mean it would never sell local assets when it thought the capital could earn better returns for taxpayers elsewhere.