New Zealand Mergers & Acquisitions - Trends and insighTs March 2018 - Chapman Tripp
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New Zealand Mergers & Acquisitions T r e n ds a n d i n s ig h t s March 2018
NZ Law Firm of the Year Chambers Asia‑Pacific Awards 2018 Most Innovative National Law Firm of the Year (New Zealand) IFLR Asia Awards 2018 New Zealand Deal Team of the Year 2017, 2016 & 2015 Australasian Law Awards
Contents
Rational exuberance?...................................................................................................................3
2017 – ups and downs...................................................................................................................4
New Zealand M&A in 2018..........................................................................................................8
The private equity race continues.......................................................................................... 13
ComCom takes the gloves off ................................................................................................. 14
OIO – a year of change and challenges ahead...................................................................... 15
NZX a hunting ground (again) in 2018? ................................................................................ 17
Chapman Tripp’s M&A team..................................................................................................... 18
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 1We look back at New Zealand’s mergers and acquisitions activity
last year and identify the likely trends for 2018.
Rational exuberance?
M&A has kicked off with a strong start, with deal
momentum from the end of 2017 in full swing.
2017 was another solid year for global M&A activity, Speed wobbles?
although slightly down on 2016 for both deal volumes
Market frenzies around exotic financial instruments,
and values.
such as Bitcoin et al, bring to mind some of the
excesses of the period leading up to the 2008
In New Zealand the story was similar. The absence
financial crisis. More conventional markets are also
of a few major transactions relative to 2016 had a
encountering increased volatility, spurred on by the
significant effect on aggregate deal value, as it will in
end of quantitative easing and the spectre of rising
a market as small as New Zealand’s, and there were
interest rates in the world’s largest economies.
slow periods, especially around the general election,
but the pace picked up in the closing months of the
If the economists promoting the ten year economic
year to deliver a respectable result.
cycle are right, we could be in for a bumpy ride.
The impact of China’s government‑mandated M&A
Looking ahead, we expect a strong M&A pipeline
pull back could also be felt here, given the prominent
in 2018, underpinned by cashed‑up private equity
role of Chinese buyers in the New Zealand market
buyers, strategic investors with money to spend
over the last decade.
following several years of solid corporate profits,
and generally favourable economic conditions, with
Regulatory static?
continuing low interest rates (in New Zealand, at least)
ensuring affordable debt financing. On the regulatory front, dealmakers may also face
additional hurdles this year.
“
Chief among them will be that old perennial, our
Looking ahead, we expect a overseas investment regime, where legislative
strong M&A pipeline in 2018.” amendments may lead to longer assessment times
for overseas investors (and the domestic vendors
selling to them) – at least in the short term.
An increasingly hands‑on Commerce Commission
could also prove a challenge for transactions which
look to consolidate markets.
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 32017 – ups and downs
The good The bad The ugly?
Increase in deal volume Decrease in deal value Several big deals
stymied by regulators
Increase in deal
execution timeframes
Globally, 2017 was another impressive year for The pace of New Zealand M&A activity varied
M&A, although the data showed a slight decrease throughout the year. After a slow start, M&A activity
in aggregate deal value and volume relative to 2016 increased in the second quarter, before declining
– total value US$3.15 trillion, down from US$3.26 again in the third quarter (predictably coinciding
trillion in 2016; total volume 18,433 deals, down from with the lead up to New Zealand’s general election).
18,592 in 2016. Once the election and subsequent lengthy coalition
talks concluded, 2017 ended with a flurry of M&A
In New Zealand, total deal value was down activity, which has carried over to the start of 2018.
significantly (from US$8.6 billion to US$3.5 billion).
This reflects the comparative lack of big deals, like There is significant momentum heading toward
2016’s Sistema or Nuplex. It is also worth noting that the end of the March quarter in New Zealand and,
the information is incomplete as there were more than anecdotally at least, bankers, lawyers and other
60 announced transactions with no disclosed value. advisors have more on their plates than they did
this time last year.
Deal volume, on the other hand, was up 30% on 2016
– 127 transactions in 2017 versus 97 the previous year.
Global New Zealand
2016 2017 2016 2017
Total value (US$) 3.26tn 3.15tn 8.6bn 3.5bn
Total volume 18,592 18,433 97 127
Source: Mergermarket
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 42017 – ups and downs (continued)
New Zealand M&A highlights in 2017
A busy year in the consumer sector, including:
VF Corporation’s Direct Capital’s investment Navis Capital’s acquisition of
acquisition of New in the rapidly growing a majority stake in Mainland
Zealand outdoor apparel New Zealand clothing Poultry, New Zealand’s
manufacturer, Icebreaker manufacturer, AS Colour largest egg producer
Financial services businesses were on the radar in 2017, with several high‑profile
transactions taking place, including:
AIA’s announced acquisition Finance Now’s acquisition The NZ Superannuation
of Sovereign, New Zealand’s of The Warehouse Group’s Fund’s investment
largest life insurance business Financial Services arm in Fidelity Life
The transport and services sectors gained popularity in 2017,
with PE buyers showing a clear interest, including:
Waterman Capital’s Direct Capital’s investment
acquisition of freight solutions in the trustee services
business, PBT Transport business Complectus
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 52017 – ups and downs (continued)
The proportion of cross‑border deals rose in 2017 –
up to 58% from 43% in 2016. These included:
Opus was acquired
by WSP Global, the “Hot” sectors
Canadian headquartered
global consultancy
ANZCO Foods was acquired
by Itoham Yonekyu Holdings,
a Japanese listed entity Transport
Up 350%
Some large would‑be deals failed to obtain
regulatory approval, including: Services
Up 150%
the proposed merger between
Vodafone NZ and Sky TV
Financial
Services
NZME and Fairfax Up 33% Consumer
NZ’s proposed merger
(now on appeal) Up 31%
Vero’s scheme of
arrangement with Tower
HNA’s $660m bid for
UDC Finance
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 62017 – ups and downs (continued)
2017 by the numbers
Sector spread of top 40 New Zealand deals by disclosed purchase price
Consumer
Financial Services
Services
20% Medical
Agriculture
~3% each Transportation
Energy
Automotive
15% Chemicals and materials
Computer software
Industrial products and services
5% Industrial: Electronics
13% Leisure
8%
10% Manufacturing
Media
Real Estate
Telecommunications: Carriers
Utilities
Source: Mergermarket
All New Zealand deals by disclosed All New Zealand deals
purchase price (USD) cross-border/domestic split
18
16
2015
14
12
10
2016
8
6
4
2017
2
0
0% 20% 40% 60% 80% 100%
9m
m
m
9m
n
n
1b
1b
49
99
‑$
49
‑$
>$
‑$
‑$
1m
m
‑$
0m
0m
Domestic Cross‑border
00New Zealand M&A in 2018
The good The bad The ugly?
Strong year anticipated Economic uncertainty? Signalled OIO reforms
with high levels of could prove painful for
competition between Excess froth? dealmakers, at least
cashed up purchasers in the short term
Expected commercial and legal trends
• A sellers’ market – The seller‑friendly market • PE continuing its run – Private equity firms raised
dynamic we saw in 2017 will continue (and perhaps more capital in 2017, after an already‑strong
reach its apex), as demand for high quality assets year of fundraising in 2016, and will remain in
outstrips supply, debt remains readily accessible, acquisition mode, with bolt‑on acquisitions likely
and both trade and financial investors command to feature.
sizeable war chests.
• An interventionist ComCom – Several high‑profile
• Rationality (hopefully) prevails – High price declines in 2017 and more proactive enforcement
expectations should drive more scrutiny of signal that the gloves may be off at the
potential deals and a greater need for dealmakers Commerce Commission.
to build a strategic case for proposed acquisitions.
• Action on the Main Board – Takeovers of listed
Likely effects of these trends will be fewer
companies will remain in vogue, despite the
deals passing initial screening and longer
relatively full pricing of listed equities.
execution timeframes.
• Pragmatism not idealism – M&A deal terms will
• OIO a persistent challenge – The Overseas
continue to drift towards more seller-friendly
Investment Office consent process is likely to
positions, given the high level of competition
become more fraught, after a recent period of
for quality assets.
improvement. Processing times will probably
lengthen, at least in the short term, as the • Shareholder activism is here to stay – The
OIO’s resources are redirected towards the emergent and welcome trend towards increased
new government’s tougher residential land shareholder activism will create greater impetus
requirements. Vendors looking for a quick sale may for boards to consider strategic acquisitions or
favour domestic bids as a result. The possibility divestments of non‑core assets.
of more far‑reaching amendments in future
• Disrupt or be disrupted – We will see a rise in
should also be kept in mind. Beyond the possible
convergence and “defensive” M&A, as businesses
inclusion of forestry cutting rights within the
seek to acquire talent and technology, sometimes
sensitive land regime, nothing has been announced
outside their traditional sectors, in order to stay
yet, but the policy preferences of key members
one step ahead of existing competitors and
of the government mean further changes can’t
disruptive new players.
be discounted.
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 8New Zealand M&A in 2018 (continued)
Key sectors to watch
Financial services Media Forestry
Banks, driven by regulatory Traditional media business Uncertainty regarding
demands, will be looking will continue to look to M&A upcoming changes to the
for opportunities to for quicker access to digital regulation of this primary
divest underperforming transmission channels industry may prompt increased
or non‑core assets. (Commerce Commission divestment activity in 2018.
permitting).
Consumer Technology
Consumer confidence and spending are expected Global PE interest in high‑tech businesses
to remain buoyant in the short to medium-term. is strong, including among New Zealand and
Export businesses should thrive, with a low OCR Australian PE firms. Strategic investors continue
keeping the New Zealand dollar in check. There to pursue digital transformation strategies,
are a lot of high quality New Zealand businesses both internally and by acquiring the necessary
in this sector, which are achieving increased technology and talent.
global exposure.
KEY MACROECONOMIC THEMES IN 2018
Faltering business confidence – Softening housing market – Capacity constraints – New
According to some surveys (not All signs point to a slowdown in Zealand’s unemployment rate
all), business confidence is at its the overheated housing market dropped to a nine‑year low in the
lowest point since 2009. It is too (though this is looking more last quarter of 2017. With more
early to say whether or not this is like a gradual correction than restrictive policy settings towards
a lasting or rational reaction to the the bursting of a bubble). If the immigration and existing plant
election of the Labour/NZ First downward trend in house prices and equipment nearing capacity,
coalition government. continues, there could be flow‑on our economy faces significant
effects for consumer spending in constraints on further growth.
Consumer confidence remains
the longer term.
strong – Despite concerns among NZ dollar subdued – Lower than
business leaders (for the moment expected inflation has prompted
at least), consumer confidence the RBNZ to forecast no changes
remains strong. to the OCR until June 2019, which
is likely to be a boon to export-
driven businesses.
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 9New Zealand M&A in 2018 (continued)
A frothy market is driving more
seller‑friendly deal terms
An analysis of key deal terms in the M&A transactions we
worked on in 2017 has yielded some interesting findings,
both a continuation of existing trends and some new patterns.
The dominant trend from our Warranty and indemnity Tax indemnity: a greater
database is a drift towards more liability caps proportion of deals featured
seller‑friendly positions in some caps on the seller’s liability under
Warranties: surprisingly there
(but not all) areas. the tax indemnity (52% of deals
was an increase in the percentage
featured no cap in 2016, versus
of deals which had higher liability
This may indicate a willingness 27% in 2017).
caps for warranties other than
from buyers to be slightly more
title and tax (or no cap altogether).
pragmatic in order to get deals Warranty minimum claims
across the line.
Sale agreements often provide for
a minimum warranty claim amount,
on a per claim basis (“de minimis”),
Warranty liability cap as percentage of purchase
and in aggregate (“basket”). Based
price (other than title and tax)
on our review it appears that
buyers accepted a slightly more
40
seller‑friendly position on these
35 points in 2017.
30
Warranty claim time limits
25
So that sellers do not remain
20 indefinitely exposed to potential
warranty or indemnity liability,
15 sale agreements typically include
10
time limits for claims to be made.
In 2017, claim time limits were
5 generally consistent with our
analysis in previous years:
0%
N/A 0‑20% 21‑40% 41‑60% 61‑80% 81‑100%
• caps ranged from 12 months
2016 2017
to 48 months for business-
related warranties
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 10New Zealand M&A in 2018 (continued)
• the 12‑23 month bracket tend to be relatively complex and Purchase price adjustments
remained the most popular for highly negotiated, since they can based on the difference between
claims under business-related result in significant additional a target working capital figure,
warranties (of the deals which value transfer between buyer and and actual working capital
featured a time limit, 40% fell seller (depending on which party at settlement, remained the
within this bracket, compared the adjustment favours). preferred mechanism (47% of
to 71% in 2016) deals). Adjustments based on
Last year we predicted that the net assets at settlement (which
• 24% of deals included no time
“locked box” mechanism (under also take into account changes in
limit on claims under business-
which the economic benefit and fixed assets) were the next most
related warranties, up from
risk of the business effectively popular (12% of deals).
9% in 2016.
transfers to the buyer at signing)
would become more popular, Slightly fewer deals included any
Purchase price adjustment
however, based on our data, this has kind of purchase price adjustment
mechanisms
not occurred. Only 8% of the deals in 2017, suggesting that parties
Purchase price adjustment we worked on last year followed may be more prepared to take
mechanisms are a common feature this approach, a low percentage any downside risk of trading
of sale agreements, reflecting the compared with markets in the between signing and settlement
fact that there is often a time‑lag northern hemisphere. This perhaps in the interest of getting deals
between when the agreement is reflects a general unfamiliarity finalised quickly.
signed and when the transaction with the “locked box” approach
is completed. These adjustments in New Zealand.
Warranties other than title/tax – time periods (percentage of deals) Completion accounts mechanism
80
70
60
31%
50
47%
40
30 2%
8%
20
12%
10
0% Working capital
N/A 48 months
months months months Net assets
2016 2017
Locked box
Other
None
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 11New Zealand M&A in 2018 (continued)
Deposits Historically, W&I insurance has been favoured
primarily by PE firms seeking a clean exit from their
Deposits were an even less common feature in
investee companies. However, in 2017 deals with PE
the deals observed in 2017 than they were in 2016,
sellers made up only about a third of insured deals and
payable in only 8% of deals (versus 10% in 2016). We
a third of insured deals featured no PE involvement
suspect that the slight uptick in the use of deposits
at all. This suggests that the value and utility of the
in 2016 was due to increased nervousness regarding
product is becoming more widely recognised by
regulatory risk for bidders based in China (of which
strategic/trade investors.
there were fewer in 2017).
We expect the following trends in W&I insurance
Escrow/retention amounts
in 2018:
Amounts held in escrow (e.g. to satisfy warranty
claims) featured in 27% of the deals we acted on in • lower premiums on larger deals – premiums are
2017, a significant drop from 2016 where nearly half of trending down as the market becomes increasingly
deals featured an escrow amount. In part, this may be competitive – although competition isn’t as strong
explained by the increased prominence of Warranty at the low end
and Indemnity (W&I) insurance in 2017. It also tends to
• lower deductibles – deductibles are trending down
indicate a higher risk appetite among buyers in a more
(and more policies are featuring no deductible,
seller‑friendly market.
although not all insurers are willing to go there).
This is also a function of increasing competition
Material adverse change (MAC) conditions
and better aligns W&I insurance coverage with the
MAC conditions (which provide an “out” for the buyer positions traditionally taken in non‑insured deals
in the event of a significant material adverse event
• stapled insurance – W&I insurance will increasingly
affecting target business between signing of the
be “pre‑packed” in competitive processes. Sellers
sale agreement and the settlement date) were widely
will pre‑arrange a broker, underwriter and draft
used in 2017, though less so than in 2016, when they
policy to streamline the process
featured in more than half the deals we observed.
Again, this suggests buyers were more willing to • coverage percentages – in larger deals, coverage
take on risk in 2017. (as a percentage) may be lower, as buyers take
a view on the likelihood of an “Armageddon”
Warranty & indemnity insurance event occurring, and
W&I insurance, which allows sellers to lay off the • warranties covered – although there will
risk of claims under warranties and indemnities to an remain some no‑go areas for underwriters
insurer, was a feature of 19% of the deals we worked (e.g. environmental warranties, at least in the
on in 2017, up from 15% in 2016. absence of comprehensive due diligence). As a
general rule, insurers are taking a slightly more
commercial approach to the range of warranties
that are insurable (again subject to appropriate
due diligence having been carried out).
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 12The private equity
race continues
Private equity houses were again active in 2017, with global
PE M&A values and volumes up on 2016 levels.
Locally, PE deal volumes (both entries and exits) focus on smaller bolt‑on acquisitions which can add
increased 90% on 2016, according to Mergermarket, more value through synergies with their existing
but value was down, suggesting some hesitancy to portfolio companies.
write larger cheques early in fund life‑cycles. Pressure
will be building on PE firms to deploy capital in 2018. The IPO market is tipped to remain subdued in 2018,
so PE sellers will continue to prefer exits by way
Consumer and technology (particularly artificial of trade sale (rather than pure IPO or “dual track”
intelligence) sectors are expected to be of particular processes as we saw in earlier years). We expect that
interest to PE buyers. We also expect that, given IPOs will be back on the agenda in subsequent years,
higher seller price expectations, PE firms may find as changes to regulatory settings and solid market
it harder to find deals which meet their IRR (internal performance will drive increased interest in the
rate of return) expectations, and may instead equity capital markets.
2017 PE highlights by sector
Consumer Leisure Industrial
AS Colour International Contract Resources
Direct Capital (NZ) Anchorage Capital (Australia)
Volunteer HQ
Mercury Capital (Australia)
Mix Smart Environmental
Pencarrow (NZ) Maui Capital (NZ)
Medical
Mainland Poultry
Navis Capital (Australia) Services
HealthLink
Waterman (NZ)
Trilogy Smart Trade
CITIC (China)
Nirvana Health International
Mercury Capital (Australia) Pemba Capital (Australia)
Number One Shoes
Allegro (Australia)
Heritage Lifecare
Transport
Adamantem Capital (Australia)
Icebreaker
Pencarrow (NZ)
Netlogix
Pencarrow (NZ)
Provincial
Education PBT
Waterman (NZ) Waterman (NZ)
Target PE Firm (Location) Investment Divestment
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 13ComCom takes
the gloves off
In 2017, the Commerce Commission declined to clear • In the Fairfax/NZME authorisation, the Commission
or authorise three high‑profile deals: Sky/Vodafone, was willing to look beyond economic outcomes to
NZME/Fairfax (which it also successfully defended on potential detriments to news quality and media
appeal) and Vero/Tower. It also declined to clear a fire plurality, and those concerns tipped the scales
protection services deal,1 while Trade Me’s acquisition against the merger. More generally the Commission
of Motorcentral (a supplier of software and websites signalled that it is willing to consider a broad range of
for motor vehicle dealers) remains stalled pending potential detriments in its decision‑making (e.g. the
further Commerce Commission consideration. environment, employment, privacy interests).
Overall, 2017 was an outlier year for the number of Given the higher proportion of declines in recent times,
deals the regulator has turned down. it is possible that sellers may look even less fondly on
bids that are conditional on clearance or authorisation.
“
Commerce Commission merger clearance
and authorisation decisions 2012‑2017 Overall, 2017 was an outlier
year for the number of deals the
18
16 regulator has turned down.”
14
12 The Commission has also been active in merger
10 control enforcement. Some of the Commission’s
8
enforcement work is typically not public, at least in its
early stages. But the publicly known cases give a sense
6
of the Commission’s willingness to get into the ring
4
when parties don’t apply for clearance for a deal the
2
Commission is interested in:
0
2012 2013 2014 2015 2016 2017
• Vero came under investigation for acquiring 19.99%
Approved Declined of Tower, on the basis the stake may have given Vero
a substantial degree of influence, or the ability to
bring real pressure to bear on the decision‑making
These numbers include some large transactions in of its rival
sensitive and/or concentrated markets. But there is
• The Commission joined Complete Office Supplies
no doubt the Commission is displaying a high degree
in seeking an interim injunction to prevent the
of confidence:
acquisition of OfficeMax by Platinum (owner of
Staples), pending a trial on competition concerns.
• In Sky/Vodafone and Vero/Tower, the prospect
The Commission had previously cleared the merger
of a more competitive alternative scenario wasn’t
but the clearance lapsed because the deal was not
necessarily obvious but the Commission concluded
completed within the 12 month statutory timeframe.
that an alternative scenario (that would be more
competitive) had a “real chance” of emerging,
This more proactive approach to enforcement may
which, under the legal test, was sufficient to justify
cause buyers to think twice before proceeding with
declining clearance
acquisitions in concentrated markets without the
Commission’s blessing.
1 Aon/Fire Protection Services Limited.
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 14OIO – a year of change
and challenges ahead
Proposed legislative amendments spearheaded by the new
Labour‑led coalition government appear likely to present a number
of challenges for the Overseas Investment Office (OIO).
Current application processing timeframes
The OIO is still working through the bottleneck of applications which built‑up before and during the
“interregnum” period following the general election. Recent indications are that, despite the refinements to the
OIO process introduced last year, the OIO is having difficulty meeting its processing KPIs, due to both volume
of applications, and perhaps, the approach to the assessment of certain sensitive land applications mandated
by the new government.
History of OIO application work‑in‑progress Current OIO average
numbers as at end of each month* timeframes (Feb 17‑Jan 18)
80
Significant business assets
Number of applications being processed
47 business days
70
Sensitive land (OIO consent
under delegated authority)
52 business days
60
Sensitive land
(ministerial consent)
73 business days
50
01‑17 01‑17 03‑17 04‑17 05‑17 06‑17 07‑17 08‑17 09‑17 10‑17 11‑17 12‑17 01‑18
*Above timeframes exclude time spent by OIO waiting for information/details from applicant.
Interestingly, there was little difference in processing time between sensitive land applications decided under
delegated authority and significant business assets applications.
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 15OIO – a year of change
and challenges ahead (continued)
Legislative reform means On the other hand, as part Need for transparency
possible resourcing issues ahead of the Comprehensive and highlighted
Progressive Agreement for
The OIO may face significant The OIO’s high‑profile decision to
Transpacific Partnership (CPTPP),
resourcing challenges once the decline consent to China‑based
the threshold above which
Overseas Investment Amendment HNA to acquire UDC Finance
transactions involving overseas
Bill (which regulates purchases (which had been shaping up to
acquirers from countries which are
of residential land by overseas be one of the banner deals of
parties to the CPTPP will require
persons) comes into effect. 2017) on the grounds that it could
OIO consent (as acquisitions of
not determine who ultimately
“significant business assets”) will
Treasury has estimated that the owned and controlled HNA has
increase from $100m to $200m.
law change could blow out the brought the need for transparency
number of transactions involving in consent applications into
The upshot for 2018 is that
“sensitive land” from around 150 sharp relief.
consents will likely take longer,
a year to more than 4,700. We
and may be more challenging
don’t expect the increase to be HNA publicly expressed its
to obtain. Foreign bidders may
so dramatic due to innovations disappointment in the OIO’s
be at a further disadvantage,
such as “standing” consents. But decision, calling it “inconsistent
particularly if sellers are prepared
it will be important for the new with the views of other regulators
to leave some money on the table
government to ensure that the OIO around the world”. Whether or not
to secure a certain and timely exit
is adequately resourced to handle this is a fair comment, the decision
from a domestic acquirer.
its increased responsibilities. may give offshore investors
with similar issues pause when
A new Ministerial Directive Letter considering bidding for New
came into effect in late 2017 Zealand assets.
raising the threshold for acquiring
rural land and forest land by Sellers should also take steps
requiring applicants to satisfy to ensure bidders are willing to
the OIO that the benefits from be frank with the OIO, and carry
their investments are “genuinely out their own OIO‑style “good
substantial and identifiable”. character” checks on bidders,
prior to signing.
“ The upshot for 2018 is that consents will likely take longer, and
may be more challenging to obtain. Foreign bidders may be at a
further disadvantage, particularly if sellers are prepared to leave
some money on the table to secure a certain and timely exit from a
domestic acquirer.”
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 16NZX a hunting ground
(again) in 2018?
Despite listed equities in New A notable feature of two of the It is pleasing to note that the
Zealand being fully priced in successful takeover offers were documentation around takeover
historic terms, takeover activity the significant premiums on and scheme transactions was
was relatively strong last year. offer. Elongated OIO approval considerably more clear, concise
2017 saw eight “take private” timeframes continued to impact and effective in those documents
transactions launched, coming transaction execution. produced in the last quarter
in the form of both traditional of 2017, after the Takeovers
Code offers and schemes of With a shortage of quality assets Panel published new guidance/
arrangement, although three coming to market through expectations in August.
failed. The most recent takeover traditional M&A channels, we
attempt for Abano launched in expect a high level of takeover In March 2017, the Takeovers Panel
2016 also faltered. activity, and high premiums recommended for ministerial
for fortunate shareholders, approval a number of technical
to continue in 2018. amendments to the Takeovers
Code which will reduce compliance
costs and provide clarity. These
include altering the Code’s
Premium to the previous close prior
application to small companies
to the announcement of the offer
by excluding those with less than
$15m of annual revenue or $30m
WSP Global’s successful full takeover
of Opus International Consultants
87% of assets, as well as clarifying
the Code’s timing rules and
providing for greater electronic
OG Oil and Gas’s successful partial takeover communication with shareholders.
of New Zealand Oil and Gas
25%
Technical changes to the
Zeta’s unsuccessful partial takeover Code should be in place by
of New Zealand Oil and Gas
18% 30 September, but the proposed
“small companies” change to the
Zhejiang RIFA’s successful full takeover of Airwork 20%* Act will take longer.
CITIC’s scheme of arrangement with Trilogy 27% The Panel was also conferred
with a new power to settle
Fairfax’s failed scheme of arrangement with Tower 48% takeover cost recovery disputes,
but to date has not used it.
Vero’s failed scheme of arrangement with Tower 77% The Kathmandu/Briscoe Group
court action over disputed costs
Yang Kee successful Logistics’ takeover of Fliway 13% settled, but the acrimonious
Abano/Healthcare Industry court
proceeding over costs, and Abano
*Bid price less than 2016’s partial offer. withholding a dividend due to
Healthcare, continues.
“ With a shortage of quality assets coming to market through
traditional M&A channels, we expect a high level of takeover activity,
and high premiums for fortunate shareholders to continue in 2018.”
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 17Chapman Tripp’s
M&A team
Chapman Tripp’s national M&A team partners with We play a significant role in
merger, acquisition and disposal
clients to successfully execute some of the biggest, most transactions for international
complex and challenging transactions in New Zealand. and New Zealand clients, large
multinationals and leading private
Our team has advised on more Clients value our long history of equity players across many
M&A work than any other New innovation, strong relationships industries. We regularly advise
Zealand law firm, including many with regulators and proven on the structure, strategy and
of New Zealand’s most significant ability to get even the most implementation of takeovers,
cross‑border deals. challenging deals across the line. schemes, joint ventures and
We maximise opportunity, identify other complex transactions.
and manage risk early on and work
strategically with our clients to Chapman Tripp’s work for
achieve the outcome they want. international clients has involved
some of the most high profile OIO
applications in recent times.
Chapman Tripp recent M&A highlights
In 2017 we advised on: • Southern Pastures’ 25% • Ireland’s Clanwilliam Group’s
acquisition of Lewis staged acquisition of Toniq
• First Gas’s $200m acquisition Road Creamery Limited (a developer of retail
of the Ahuroa gas facility from and pharmacy software), and
• New Zealand law firm AJ Park’s
Contact Energy a 50% stake in Healthlink
sale of its intellectual property
Ltd from Waterman
• outdoor apparel manufacturer business to publicly‑listed
Holdings Limited
Icebreaker’s sale to US‑based Asia‑Pacific IP group (IPH
VF Corporation, which owns Limited) for $66.1m • Arvida Group Limited’s
The North Face, Timberland acquisition of three retirement
• Waterman Capital’s acquisition
and Vans villages (Mary Doyle Lifecare
of freight solutions business,
(in Havelock North), Strathallan
• Australasian carpet‑maker PBT Transport
Lifecare (in Timaru) and 50% of
Godfrey Hirst’s sale to
• Beach Energy’s acquisition of Village at the Park Lifecare (in
global flooring manufacturer
the Origin Energy subsidiary Wellington)) for $106m
Mohawk Industries
Lattice Energy for AU$1.585b
• digital agency Little Giant’s
• New Zealand Superannuation
sale to Japan’s Dentsu
Fund’s 41.1% investment in
Aegis Network
insurer Fidelity Life
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 18Chapman Tripp’s
M&A team (continued)
• Direct Capital’s investment • ACG Education’s acquisition • Hawkins Group’s sale of Harker
to acquire a minority of NZX‑listed private training Underground Construction’s
shareholding in AS Colour, a provider Intueri Education assets to Abergeldie Harker
leading international provider Group’s seven New Zealand
• Tenon Clearwood LP’s
of high quality blank apparel vocational schools
purchase of Tenon’s New
and other merchandise
• Australia’s Evolution Zealand‑based Clearwood
• WSP NZ Acquisition Limited Healthcare’s sale of two manufacturing and global sales
(WSP), a wholly‑owned hospitals (Bowen Hospital operations, for US$55m
subsidiary of Canadian and Wakefield Hospital) to
• Pencarrow Private Equity’s
WSP Global Inc. takeover of Vital Healthcare Property
acquisition of interests in Mix,
NZX‑listed Opus International Limited for $68m
a leading manufacturer of
Consultants for $263.2m
• Shell’s sale of its Kapuni natural beauty and personal
• Finance Now’s acquisition onshore oil and gas field care products
of The Warehouse Group’s to its joint venture partner
• Australia’s Home Care BidCo
Financial Services arm Todd Energy
Pty Limited’s acquisition of up
• Trilogy International’s • ASX‑listed BlueScope Steel, to 40% of Healthcare of New
acquisition of 80% of Lanocorp which owns New Zealand Steel, Zealand Holding, and
New Zealand for $12.5m plus sale of its Taharoa export
• NZX‑listed code company
future earn‑out payments ironsands business to Taharoa
Airwork Holdings’ response
Mining Investments Limited
• Trilogy International’s scheme to the $211.4m full takeover
of arrangement with CITIC • Downer EDI’s acquisition of offer by China’s Zhejiang Rifa
Capital in respect of 100% Hawkins construction from Holding Group Co. Limited.
of the shares in Trilogy the McConnell family
• Australia’s Blue Sky Private • Precinct Properties’
Equity’s formation of, and its acquisition of 50%
investment in, Active New of co‑working space
Zealand LP operator Generator
New Zealand Mergers & Acquisitions
Trends and insights
March 2018 home 19Primary contacts Tim Tubman – Partner Joshua Pringle – Partner John Strowger – Partner T: +64 9 357 9076 M: +64 27 344 2178 T: +64 9 358 9831 M: +64 27 504 6572 T: +64 9 357 9081 M: +64 27 478 1854 E: tim.tubman@chapmantripp.com E: joshua.pringle@chapmantripp.com E: john.strowger@chapmantripp.com Josh Blackmore – Partner T: +64 4 498 4904 M: +64 21 828 814 E: josh.blackmore@chapmantripp.com Other contacts Fiona Bennett – partner Rachel Dunne – partner Pip England – Partner T: +64 3 353 0341 M: +64 27 209 5871 T: +64 9 357 9626 M: +64 27 553 4924 T: +64 9 357 9069 M: +64 27 434 8854 E: fiona.bennett@chapmantripp.com E: rachel.dunne@chapmantripp.com E: pip.england@chapmantripp.com Hamish Foote – Partner Bradley Kidd – Partner Alister McDonald – Partner T: +64 3 353 0397 M: +64 27 289 9151 T: +64 4 498 6356 M: +64 27 224 1271 T: +64 3 353 0392 M: +64 21 477 935 E: hamish.foote@chapmantripp.com E: bradley.kidd@chapmantripp.com E: alister.mcdonald@chapmantripp.com Geof Shirtcliffe – Partner Roger Wallis – PartneR T: +64 4 498 6322 M: +64 27 481 1699 T: +64 9 357 9077 M: +64 27 478 3192 E: geof.shirtcliffe@chapmantripp.com E: roger.wallis@chapmantripp.com New Zealand Mergers & Acquisitions Trends and insights March 2018 home 21
Our thanks to Jeremy Gray and
Kit Adamson for helping to write
this report.
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