Michael Hill International Limited [2016] NZHC 1393 (23 June 2016)

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IN THE MATTER	of an application for approval of an arrangement under Part 15 of the Companies Act 1993
BETWEEN	MICHAEL HILL INTERNATIONAL LIMITED First Applicant ACN 610 937 598 LTD Second Applicant

Hearing:	23 June 2016
Counsel:	GF Fitzgerald and AF Kissling for Applicants
_Judgment:	_{23 June 2016}

[1] Michael Hill International Ltd (the company) is seeking orders approving a scheme of arrangement, proposed by that company and ACN 610 937 598 Ltd (MHI Australia) under Part 15 of the Companies Act 1993. The scheme is part of a proposed restructure of the Michael Hill group of companies. The result of the restructure will be that MHI Australia will replace the company as the parent company of the group. MHI Australia will be an Australian incorporated company listed on the Australian Securities Exchange. It will also be listed on the NZX main board as a dual listed issuer.

[2] The details of the scheme were set out in a scheme booklet. In summary it was proposed under the scheme:

a MHI Australia acquires from each shareholder in the Company (Shareholder) other than Durante Holdings Pty Limited (Hill HoldCo) all their shares in the Company in consideration for the issue by MHI Australia of MHI Australia shares to each such Shareholder on a one-for-one basis subject to and on the terms set out in the Scheme Booklet;

c MHI Australia will change its name to ‘Michael Hill International Limited’ when, and provided that, it is available under Australian law; and

d all employee options are novated from the Company to MHI Australia on substantially the same terms except that the options will relate to MHI Australia shares in the place of shares in the Company.

[3] Together with a separate transaction involving MHI Australia acquiring the shares in Durante Holdings Pty Ltd (Hill HoldCo), the scheme will enable the restructure to occur.

[4] A without notice interlocutory application for orders dispensing with service and representation was filed, and for initial orders as to the procedure to be adopted for the Part 15 application. Following a hearing before me on 24 May 2016, after having discussed some changes and additions to the scheme booklet, which were made, I made initial orders under Part 15 of the Companies Act, orders dispensing

with service and representation, and following some amendments I made the interlocutory orders sought.¹

[5] In my assessment the material presented to the shareholders was in sufficient detail for the shareholders of all groups to form a reasoned judgment as to the proposal.²

[6] To grant an order under s 236 of the Companies Act the Court must be satisfied that:³

(a) There has been compliance with the statutory provisions as to meetings, resolutions, the Court orders and similar procedural requirements.

(b) The arrangement has been fairly put to the class or classes of shareholders concerned. The recipients of the proposal must be given the information reasonably necessary to judge on the proposals and vote upon them.

(c) The classes could be fairly represented by those who attended the meeting. The Court must be satisfied that the statutory majority are acting bona fide and are not coercing the minority in order to promote the interests of one class at the expense of another.

(d) The arrangement must be such that an intelligent and honest person of business, a member of the class concerned and acting in respect of that person’s interest, might reasonably approve.

_{Panel of the application on 12 May 2016. The company has now obtained a
letter}

from the Takeovers Panel dated 23 June 2016 stating that the Takeovers Panel has no objection to the scheme of arrangement based on the information provided to the Panel. The Panel has considered the disclosures made by the parties to the scheme of arrangement and the rights and protections relevant interest groups would have had if the scheme of arrangement were conducted under the Takeovers Code.

[8] In compliance with s 236A(2)(a), at a special meeting of shareholders held at

9 am on Thursday, 23 June 2016 the shareholders voted on the resolution in two separate interest classes as provided for in the scheme proposal referred to in my earlier judgment on pre-application procedures.⁴There was no change to the scheme during the course of the meeting, save for an amendment to the scheme implementation date. Most shareholders provided proxies, and approximately 50 attended.

[9] The first resolution to approve the transaction known as the Hill HoldCo transaction was approved by the necessary majority with 99.32 per cent of voting rights entitled to vote and voting on the question being in favour. The second resolution to approve the scheme, which is set out at page 3 of the final scheme booklet, obtained approval from 100 per cent of the votes of shareholders in interest class 1 that were entitled to vote and did vote, and 99.4 per cent of the votes of the shareholders in interest class 2 that were entitled to vote and did vote. This meant that 80.15 per cent of the total shareholders entitled to vote, voted in favour, the remaining 20 per cent being largely shareholders who did not vote. The company shareholders accordingly approved the scheme. The second resolution to approve the scheme was also approved at the special meeting with 99.32 per cent votes of the shareholders being in favour.

[10] I also note that all employees of the company to whom the novation of employee options component of the scheme applied, have signed novation deeds.

[11] Further, the material I have before me indicates that the position of creditors has been adequately taken into account. I am also satisfied that the position of

overseas shareholders referred to in my judgment of 24 May 2016 has been fairly dealt with by the procedures and the scheme.

[12] The scheme under s 236 is broad. I have earlier in this judgment set out matters on which the Court must be satisfied. In Weatherston v Waltus Property Investments Ltd it was held that the intelligent and honest man of business test involves a consideration of whether the arrangement was fair and equitable from an overall perspective.⁵

[13] The reason for this application has been that the Michael Hill group has evolved from a New Zealand based corporate group with most of its business in New Zealand to an international corporate group with the greatest proportion of its business in Australia. For some years, its senior management team and administrative support functions have been located in Brisbane. Most of the group’s supply, logistics, manufacturing and commercial relationships are Australian-based. The group reports in Australian currency. Having an Australian parent company is seen as aligning all these factors and considerably reducing administrative complexity to allow management to focus on creating shareholder value. Importantly, listing on the ASX is said to open the company to a much wider group of investors.

[14] No new capital is being raised. There will be no change to the existing levels of the group funding facilities and the operations of the group will continue without any change.

[15] I am unable to discern any prejudice to any particular group of shareholders, or for that matter employees or creditors. On the material before me I am satisfied that an intelligent and honest person of business might reasonably approve the scheme. It appears to me to be fair and equitable in the circumstances. Therefore I am prepared to approve the scheme of arrangement.

(a) The scheme of arrangement (scheme) between the company and ACN 610 937 598 Ltd (MHI Australia), a copy of which is annexed to the originating application, is approved.

(b) The scheme is declared binding upon the company, all its shareholders (shareholders), MHI Australia, and all such other necessary persons, with the effect that:

(i) On 29 June 2016, at 6 pm Brisbane local time, MHI Australia will acquire from each shareholder, other than Durante Holdings Pty Ltd (Hill HoldCo), all their shares in the company in consideration for the issue by MHI Australia of MHI Australia shares to each such shareholder on a one-for- one basis subject to and on the terms set out in the scheme booklet in respect of the scheme;

(iii) MHI Australia will change its name to ‘Michael Hill International Limited’ when, and provided that, it is available under Australian law; and

(iv) All employee options will be novated from the company to MHI Australia on substantially the same terms except that the options will relate to MHI Australia shares in the place of shares in the company.

(c) Formal service on, and representation by, any person in respect of this proceeding or any application made under it is dispensed with.

High Court of New Zealand Decisions

Michael Hill International Limited [2016] NZHC 1393 (23 June 2016)

High Court of New Zealand

Michael Hill International Limited [2016] NZHC 1393 (23 June 2016)