Metlifecare shareholder challenges $1.3 billion Swedish takeover 'on principle'

Monday, 12 October 2020

Orion Point Retirement Village in Hobsonville, Auckland, is being planned by retirement village operator Metlifecare.

The small shareholder fighting the Swedish takeover of retirement village operator Metlifecare for $1.3 billion is big on sharemarket markets experience.

Craig Priscott is the owner of Resil Investments which owns 1000 shares in Metlifecare (MET) and has lodged a notice of objection in the High Court to the “Scheme of Arrangement” which will give effect to the takeover of Metlifecare by Asia Pacific Village Group, owned by Swedish investment organisation EQT Infrastructure.

Priscott has been involved in the capital markets and investing for many years and said Resil was making a principled opposition to the scheme on behalf of Metlifecare shareholders. Almost 15 million shares were voted against the scheme at a virtual special meeting of shareholders, 9.14 per cent of those voting, mostly local shareholders.

He provided Stuff with a written summary of Resil’s reasons for objecting.

*Metlifecare shareholders are being urged to vote on foreign takeover

*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

Resil claims that shareholders did not receive all the information necessary and material to make a fully informed decision, that the $6 offer price was not reasonable and that bondholders in Metlifecare were prejudiced by the scheme.

The $6 a share offer, made in July, is lower than the first offer of $7 made in late December last year, then withdrawn in April by the Swedish investor, arguing the value of Metlifecare had reduced because of the impact of Covid-19.

Res claimed breaches of the High Court’s initial orders and of the Takeovers Code in the information to shareholders set out in the scheme booklet.

There were also deficiencies in the independent adviser’s report on the $6 share offer, Resil claimed.

The independent advisers, Calibre Partners, carried out the valuation and report for both the $7 and $6 a share offers but came back with the same valuation range despite key factors driving the value of Metlifecare changing between the offers, the statement claimed.

David Glenn and Craig Priscott were partners in Ascot Asset Management about 10 years ago.

Both reports put the value of Metlifecare in the $5.80 to $6.90 a share range.

Key changes that would have impacted on Metlifecare’s value were the increase in house prices in June and July rather than the decrease forecast, a significant decrease in interest rates, and the increase in the share prices of four comparator retirement village operators by an average 14 per cent, the statement claimed.

Resil commissioned independent advice from Campbell MacPherson, a corporate advisory business with specialist expertise in these matters.

Its advice included that there were subtle but impactful changes to the independent adviser’s valuation methodologies between the two reports. Outdated information on house prices was included in the report. The house price forecasts in the report were in most cases from many months earlier and by August 25 had been superseded by more recent forecasts that were significantly more optimistic, the statement claimed.

There were also methodological errors in the valuations, the statement claimed.

CBRE’s valuations dated June 30 should have been updated, the statement claimed. Since June 30, house price forecasts had significantly improved, the sales prices of Metlifecare’s units were higher than the CBRE valuations, interest rates had dropped dramatically and the share prices of other retirement village operators had risen significantly.

So the CBRE valuations were stale by the time of the scheme booklet, “to such an extent they were misleading,” the statement claimed.

There was poor or no disclosure to shareholders around the bigger context in which the $6 share offer was forced on Metlifecare by EQT, the statement claimed. These included uncertainty around Covid-19 and house prices, border closures preventing alternative bidders and the significant presence of hedge funds on the shareholders register who were desperate to sell after the termination of the $7 offer.

Media reports indicated that hedge funds were so desperate to sell “that they sought to place inordinate pressure on the MET directors to conclude a transaction with APVG, at almost any price,” the statement claimed.

“Even if $6 was an acceptable price back in early July when the deal was agreed (which Resil disputes) there have been such dramatic changes in MET’s key value drivers that this can no longer be the case,” the statement claimed.

The Takeovers Panel is considering the objection that Resil has lodged and whether the disclosure to shareholders has met its guidelines. If it does, the panel issues a letter of no objection.

The High Court is entitled to rely on the no-objection statement to approve a scheme. However, the court does not have to approve a scheme because it has been presented with a panel no-objection statement.

The High Court hearing for the scheme is scheduled for Thursday.