Overview of the New Zealand Takeovers Regime

New Zealand has a similar takeovers regime to that in other Commonwealth jurisdictions like Australia and England.  There are specific rules which govern when a takeover offer will need to be made and the process around doing so.  This article sets out the key thresholds involved and points to be aware of if an acquisition in New Zealand is being considered.

Where are the rules set out?

Takeovers are governed by the Takeovers Code which became law 15 years ago.  The purpose is to make sure that the acquirer of shares in a company complies with certain rules when certain thresholds are met.  This means that shareholders are informed where there is a potential change of control of the company they own shares in.

Which companies do the rules apply to?

The rules only apply to certain “Code Companies” which are only New Zealand registered companies that:

• have (or recently have had) listed shares that trade on the NZX; or
• have 50 or more shareholders who hold voting rights as well as 50 or more share parcels.

What are the key thresholds?

The fundamental threshold is 20% because acquisitions of shares which will take a shareholding above 20% are caught by the Takeovers Code.  In measuring this the percentage held by associates is also examined.  Such acquisitions must be done in compliance with the rules.

A takeover offer can either be a partial or full takeover offer.  Full takeover offers mean the offeror has to receive a minimum level of acceptance of the offer.  So if the offeror does not reach more than 50% then the entire takeover fails.

This is in contrast to a partial takeover offer where the offeror makes an offer for only some of the shares.  Whether it is successful will depend on the level that is sought – if for more than 50% then the acceptances need to be above that level.  If for less than 50% then shareholders vote for or against the offer – so the offer needs to get to the percentage specified and also be approved by a majority of the shareholders.  As this indicates, these rules are more complex than a full takeover.

The following are also important percentages to be aware of:

• 50% shareholding: As mentioned above, this is important in the context of a takeover to determine what rules apply;
• 5% creep: is permitted each year over a 12 month period for Shareholders who already own more than 50%; and
• 90% threshold: compulsory acquisition of shares is permitted above this level because they have become a dominant owner.

Conclusion

This short summary of some of the key points regarding takeovers in New Zealand is brief and the specific circumstances of any situation will need to be examined.  If you have a target in mind then it would pay to discuss the context of that particular proposal with your advisers to obtain input on the best approach to adopt as one size will not fit every situation.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Should you need any assistance, please contact Kris Morrison at Parry Field Lawyers (348-8480) krismorrison@parryfield.com