IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2019-404-000279
[2019] NZHC 840	

UNDER	Part 19 of the High Court Rules	
AND

IN THE MATTER OF	

an application for orders approving a scheme of arrangement under Part 15 of the
Companies Act 1993	
BETWEEN	TRADE ME GROUP LIMITED
Applicant	

Hearing:	16 April 2019	
Appearances:	S A Armstrong, A J Nelder and D J Raudkivi for Applicant S J P Ladd and A E Buchly for Titan	
Judgment:	16 April 2019	

ORAL JUDGMENT OF VENNING J

Solicitors:	Russell McVeagh, Auckland
Bell Gully, Auckland

Re TRADE ME GROUP LIMITED [2019] NZHC 840 [16 April 2019]

Introduction

[1]	Trade Me Group Limited (Trade Me) seeks final orders:

(a)	approving the scheme of arrangement described in the Scheme Plan (attached as a schedule to the amended application) (Scheme);

(b)	directing that the Scheme is binding with immediate effect upon:

(i)	Trade Me;

(ii)	Titan AcquisitionCo New Zealand Limited (Titan);

(iii)	every person who is a shareholder (as defined in the Implementation Plan) (as at the record date as defined in the Scheme); and

(iv)	such other persons as necessary to give effect to the Scheme;

(c)	granting leave to Trade Me to apply to the Court for approval of any amendment, modification, or supplementation to the Scheme as may be required.1

[2]	On 6 March 2019 this Court approved initial orders, including orders requiring the holding of a shareholders’ meeting on 3 April 2019 to enable shareholders to consider and, if they supported it, to approve the Scheme. The initial orders also set out the information to be provided to shareholders in advance of that meeting, and the steps a party was to take if they wished to oppose the application.2

[3]	Trade Me has filed a number of affidavits in support of its applications. Affidavits have been filed by David Kirk, a director and chairman of Trade Me; Steven Kooyers,  a  director  of Titan;   Michael  Lorimer,  a  director  of  Grant  Samuel and

1	The orders sought are in an amended application. The amendments are minor and not substantive.
2	Re Trade Me Group Ltd [2019] NZHC 340.

Associates Ltd (Grant Samuels); Stuart Mutch, a partner in Ernst & Young; Caroline Rawlinson, the chief financial officer of Trade Me; and Yuan Wen, a solicitor.

Trade Me and the Scheme

[4]	Trade Me through its subsidiaries operates a range of classified listing sites and is the largest internet auction site in New Zealand. It is currently listed on the NZX and dual listed on the ASX, has nearly 10,000 shareholders (almost all of whom are based in New Zealand and Australia) and net assets of approximately $750 million. If the Scheme is approved by the Court Titan, a New Zealand incorporated company owned by a series of private equity investment funds that are advised by Apax Partners LLP, (a leading global private equity advisory firm) will be permitted to acquire 100 per cent of Trade Me’s shares. In exchange for their shares each Trade Me shareholder will receive consideration of NZ$6.45 per share, a price assessed by the independent adviser (Grant Samuel) as above the assessed value range for Trade Me shares.

[5]	The effect of the Scheme is to confirm the 100 per cent takeover of Trade Me by Titan in accordance with the details and mechanics of implementation set out in the Scheme.

[6]	The Scheme represents by some magnitude the largest takeover by way of scheme of arrangement in New Zealand’s history but is substantially similar in concept to three recent schemes of arrangement where this Court has approved a 100 per cent takeover pursuant to a transfer of all the shares in the applicant by way of a scheme of arrangement.3

Progress since initial orders

[7]	Since the initial orders were made on 6 March 2019 the following steps have occurred:

3	Re Nuplex Industries Ltd [2016] NZHC 1677; Re Fliway Group Ltd [2017] NZHC 3216; and Re Trilogy International Ltd [2018] NZHC 580.

(a)	The shareholders’ meeting has been held. The shareholders voted in support of the takeover. The Scheme received approval from 99.29 per cent of the votes of shareholders entitled to vote and voting.

(b)	No opposition has been filed by the timetable date of 8 April 2019 and there has been no appearance in opposition this morning.

(c)	The Takeovers Panel has provided a statement confirming that it has no objection to the Scheme; and

(d)	Trade Me has not received any competing or superior proposals for the acquisition of its shares.

Statutory framework

[8]	The application is made under ss 236 and 237 of the Companies Act 1993 (the Act). As relevant the sections provide:

236	Approval of arrangements, amalgamations, and compromises

(1)	Notwithstanding the provisions of this Act or the constitution of a company, the court may, on the application of a company or any shareholder or creditor of a company, order that an arrangement or amalgamation or compromise shall be binding on the company and on such other persons or classes of persons as the court may specify and any such order may be made on such terms and conditions as the court thinks fit.

(2)	Before making an order under subsection (1), the court may, on the application of the company or any shareholder or creditor or other person who appears to the court to be interested, or of its own motion, make any 1 or more of the following orders:

(a)	an order that notice of the application, together with such information relating to it as the court thinks fit, be given in such form and in such manner and to such persons or classes of persons as the court may specify:

(b)	an order directing the holding of a meeting or meetings of shareholders or any class of shareholders or creditors or any class of creditors of a company to consider and, if thought fit, to approve, in such manner as the court may specify, the proposed arrangement or amalgamation or compromise and, for that purpose, may determine the shareholders or creditors that constitute a class of shareholders or creditors of a company:

(c)	an order requiring that a report on the proposed arrangement or amalgamation or compromise be prepared for the court by a person specified by the court and, if the court thinks fit, be supplied to the shareholders or any class of shareholders or creditors or any class of creditors of a company or to any other person who appears to the court to be interested:

(d)	an order as to the payment of the costs incurred in the preparation of any such report:

(e)	an order specifying the persons who shall be entitled to appear and be heard on the application to approve the arrangement or amalgamation or compromise.

…

(3)	An order made under this section has effect on and from the date specified in the order.

…

237	Court may make additional orders

(1)	Without limiting section 236, the court may, for the purpose of giving effect to any arrangement or amalgamation or compromise approved under that section, either by the order approving the arrangement or amalgamation or compromise, or by any subsequent order, provide for, and prescribe terms and conditions relating to,—

(a)	the transfer or vesting of real or personal property, assets, rights, powers, interests, liabilities, contracts, and engagements:

(b)	the issue of shares, financial products, or policies of any kind:

(c)	the continuation of legal proceedings:

(d)	the liquidation of any company:

(e)	the provisions to be made for persons who voted against the arrangement or amalgamation or compromise at any meeting called in accordance with any order made under subsection (2)(b) of that section or who appeared before the court in opposition to the application to approve the arrangement or amalgamation or compromise:

(f)	such other matters that are necessary or desirable to give effect to the arrangement or amalgamation or compromise.

…

[9]	As Trade Me is a code company for the purposes of the Takeovers Act 1993 an order approving the arrangement cannot be made unless Trade Me shareholders support the arrangement by resolution approved by the requisite majority and either

the Court is satisfied the shareholders will not be adversely affected by the use of the Part 15 proceeding instead of the Takeover Code or the Takeovers Panel confirms it has no objection to the order.4

[10]	The Court has a discretion whether or not to approve a scheme of arrangement under s 236(1) of the Act.

[11]	The considerations as to an application for approval of a scheme of arrangement under Part 15 of the Act were stated in Re CM Banks Ltd5 and have recently been restated in Re Methven Ltd.6 The Court must be satisfied:

(a)	the relevant statutory provisions have been complied with;

(b)	the proposed arrangement has been fairly put to the relevant shareholders who had all information reasonably necessary so that they could make an informed decision;

(c)	the shareholders were fairly represented by those attending the meeting and the statutory majority acted in good faith and without coercing any minority in order to promote interests adverse to shareholders; and

(d)	the arrangement might reasonably be approved by a reasonable and intelligent business person acting in their own interests.

[12]	In Weatherston v Waltus Property Investments Ltd the Court of Appeal also held it was appropriate to consider whether overall the agreement was fair and equitable.7

4	Companies Act 1993, s 236A.
5	Re CM Banks Ltd [1944] NZLR 248 (SC).
6	Re Methven Ltd [2019] NZHC 608.
7	Weatherston v Waltus Property Investments Ltd [2001] 2 NZLR 103 (CA).

Evidence of compliance

[13]	Dr Kirk has confirmed that the special meeting of shareholders was held at
2.00 pm on 3 April 2019 at the Museum of New Zealand, Te Papa Tongarewa, 55 Cable Street, Wellington. Shareholders were also able to attend the meeting online.

[14]	Dr Kirk also confirmed that prior to the meeting copies of the shareholder materials were delivered to all shareholders listed on the share register as at 7.00 pm on Tuesday, 19 March 2019. Persons who became shareholders after that date but before 7.00 pm on 1 April 2019 were also provided with a copy of the materials. Further, the shareholder materials were also lodged on NZX and ASX as market announcement platforms and were made available at Trade Me’s offices in Auckland and Christchurch and at its registered office in Wellington, in addition to being available at the Auckland and Wellington offices of Russell McVeagh; and were available for download on Trade Me’s website itself.

[15]	Copies of the sealed initial orders and the application for final orders have been available online and available for inspection at Trade Me’s Auckland, Wellington and Christchurch offices and at the Auckland and Wellington offices of Russell McVeagh.

[16]	Dr Kirk also confirms that the Scheme received shareholders’ support. Voting at the Scheme meeting was conducted by poll and all shareholders voted on the Scheme as a single interest class. It was approved by 99.29 per cent of the votes of the shareholders voting (and 65.61 per cent of the votes of those shareholders entitled to vote).

[17]	The Scheme was also conditional on Titan receiving the consent of the Overseas Investment Office. Mr Kooyers has confirmed that consent was granted under the Overseas Investment Act 2005 on 8 March 2019.

[18]	The Takeovers Panel was also required to be notified of the application. The Takeovers Panel was notified of the application and provided with a copy of all relevant documentation. Ms Wen, solicitor employed by the applicant’s solicitors, has confirmed that a representative of the Panel attended the meeting. On 8 April 2019

the Panel provided Trade Me with a no objection statement indicating it had no objection to the Court making the orders sought.

[19]	The only outstanding condition requiring third party approval is the formal approval of this Court. I confirm that in a recent affidavit Mr Kooyers has confirmed that Titan is committed to paying the Scheme Consideration if the Scheme becomes effective.

[20]	As Dr Kirk has confirmed the Scheme is also however conditional upon:

(a)	no judgment, order, restraint or prohibition enforced or issued by any government agency being in effect as at 8.00 am on the Implementation Date8 that prohibits, prevents, materially delays or makes illegal the implementation of the Scheme; and

(b)	no prescribed occurrence as set out at schedule 1 of the Scheme Implementation Agreement (SIA) between Trade Me and Titan occurring before 8.00 am on the Implementation Date.

[21]	In Re Methven Ltd Jagose J held that outstanding conditions of this nature did not establish any supervening detriment to shareholders, as the failure of such a condition would simply be to restore the status quo.9 The conditions were disclosed in the shareholder materials provided to shareholders who gave their approval with knowledge of them. I agree that that aspect conditionality of the Scheme should not prevent the Court’s approval if otherwise satisfied the Scheme should be approved.

[22]	Having reviewed the amended application and the further information disclosed in the affidavits of Dr Kirk, Mr Kooyers, Mr Mutch who acted as scrutineer at the shareholders’ meeting, Ms Rawlinson, and Mr Lorimer, in particular, I am satisfied that:

8	The Implementation Date is the date two business days after the Record Date which is in turn
7.00	pm on the date two business days after the Trading Halt Date which is the later of 2 May 2019 and the date two business days after the unconditional date (or such other date Titan and Trade Me agree in writing).
9	Re Methven Ltd [2019] NZHC 608 at [10].

(a)	Trade Me has complied with the orders of the Court to ensure that interested parties were informed of the Scheme and had the opportunity to oppose it or to lodge an objection;

(b)	Trade Me has complied with the remainder of the initial orders granted under s 236(2) of the Act.

[23]	The Court was previously satisfied that the information proposed to be provided to shareholders fully and fairly explained what was proposed, its intended effect, the reason why it was proposed and the reason the Board supported it.

[24]	Mr Mutch has confirmed the process at the meeting. All classes were fairly represented by those attending the meeting to the extent they voted as a single class. The resolution was put to shareholders and was approved in accordance with the statutory majorities as required under s 236A(4). I am satisfied that the Scheme was fairly put and confirmed. There is no suggestion of coercion of any minority interests.

[25]	In the initial orders judgment the Court noted that 578,602 shares representing
0.15 per cent of the total shareholding were held on trust by a related company TMG Trustee Ltd (TMG) for Trade Me employees entitled to participate in the Trade Me’s Executive Long-Term Incentive Plan (LTI plan). All LTI participants will receive consideration for their shares under the terms of the Scheme. Each participant in the LTI Scheme is a current senior employee of Trade Me and is well aware of the Scheme and its progress. As Ms Rawlinson deposes all LTI participants who exercised their voting rights via proxy (representing 80.09 per cent of votes able to be exercised by LTI participants overall) voted in favour of the Scheme.

[26]	Next, I am satisfied that the Scheme is such that an intelligent and honest business person acting in respect of their own interests might reasonably approve the Scheme. The takeover purchase price of $6.45 per share is above the valuation range for Trade Me shares as set out in the Independent Advisor Report. It represents a premium of in excess of 20 per cent relative to the closing price of $5.10 per share on 20 November 2018, the last trading day prior to the initial announcement of the receipt of the initial non-binding indicative proposal from Titan.

[27]	Finally I accept that overall the Scheme is generally fair and equitable. In his second affidavit Dr Kirk has provided a summary of the questions received at the Scheme meeting and the responses to those questions. He has confirmed the Scheme has the unanimous support of the Board. The Board’s judgment ought to be given weight as well.10

[28]	In summary, although the sum involved in the Scheme is significant, the features of the proposed Scheme are otherwise relatively straightforward. The proposed Scheme is consistent with the authorities and the way the s 236 procedure has been applied in the past.

Result/orders

[29]	The Court is satisfied that it is appropriate to make the orders sought in the amended application. There will be orders as sought in that amended application dated 10 April 2019.

Venning J

10	Re Nuplex Industries Ltd [2016] NZHC 1677.