New Zealand Mergers & Acquisitions Trends and insights March 2018 NZ Law Firm of the Year

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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 1

We 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 could also prove a challenge for transactions which look to consolidate markets.

New Zealand Mergers & Acquisitions Trends and insights March 2018 home 3 2017 – 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

tn tn bn bn Total value (US$) 3.26 3.15 8.6 3.5

Total volume 18,592 18,433 97 127

Source: Mergermarket

New Zealand Mergers & Acquisitions Trends and insights March 2018 home 4 2017 – 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 5 2017 – 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% NZ’s proposed merger Consumer (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 6 2017 – 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% >$1bn

<$1m‑$9m Domestic Cross‑border $10m‑$49m $50m‑$99m $500m‑$1bn $100m‑$499m Source: Mergermarket Source: Mergermarket

New Zealand Mergers & Acquisitions Trends and insights March 2018 home 7 New 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 8 New 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 9 New 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 time limits for claims to be made. 10 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 10 New 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 <12 months 12‑23 24‑35 36‑47 >48 months months months months Net assets

2016 2017 Locked box Other None

New Zealand Mergers & Acquisitions Trends and insights March 2018 home 11 New 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 12 The 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) Volunteer HQ Anchorage Capital (Australia) Mercury Capital (Australia) Mix Smart Environmental Pencarrow (NZ) Maui Capital (NZ) Medical Mainland Poultry Services Navis Capital (Australia) 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 Icebreaker Adamantem Capital (Australia) 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 13 ComCom 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 14 OIO – 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 47 business days 70 Sensitive land (OIO consent under delegated authority) 52 business days

60 Sensitive land (ministerial consent) Number of applications being processed being applications of Number 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 15 OIO – 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 16 NZX 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 assets, as well as clarifying of Opus International Consultants 87% 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 17 Chapman Tripp’s M&A team

Chapman Tripp’s national M&A team partners with We play a significant role in clients to successfully execute some of the biggest, most merger, acquisition and disposal 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 )) 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 18 Chapman 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 19

Primary 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: [email protected] E: [email protected] E: [email protected]

Josh Blackmore – Partner T: +64 4 498 4904 M: +64 21 828 814 E: [email protected]

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: [email protected] E: [email protected] E: [email protected]

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: [email protected] E: [email protected] E: [email protected]

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: [email protected] E: [email protected]

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. If you would prefer to receive this publication by email, or if you would like to be removed from the mailing list, please send us an email at Chapman Tripp is New Zealand’s leading full‑service commercial law firm, [email protected]. with offices in , Wellington and . Our lawyers are Every effort has been made to ensure recognised leaders in corporate and commercial, mergers and acquisitions, accuracy in this publication. However, capital markets, banking and finance, restructuring and insolvency, litigation the items are necessarily generalised and readers are urged to seek and dispute resolution, employment, government and public law, intellectual specific advice on particular matters property, telecommunications, real estate and construction, energy and and not rely solely on this text. natural resources, and tax law. © Chapman Tripp

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