NEW ZEALAND Law and Practice Contributed by: Ian Beaumont, Tom Gillespie and Sam Kember, Russell McVeagh
of competition” test includes “creating, strengthening, or entrenching a substantial degree of market power in a market”; granting the NZCC power to assess the cumulative effect of a series of acquisitions within a three-year period (‘creeping acquisitions’); allowing the NZCC to accept behavioural undertakings (which it currently cannot do for mergers) only in circum - stances where it has already been established that a structural remedy would be insufficient; granting the NZCC power to require parties to keep a transaction separate for 40 working days while it assesses poten - tial competition law concerns; and extending statu - tory timetables for clearances and authorisations to 140 and 160 working days respectively (extendable in 20 working-day increments in certain circumstances) and allowing a formal “clock stop” mechanism where third-party information is outstanding or an overseas review is ongoing. 3.2 Significant Changes to Takeover Law There have been no fundamental changes to the Takeovers Code in the past 12 months, although the Takeovers Panel continues to review the operation of the Code. The Panel has continued to issue updated guidance including in relation to disclosure require - ments, deal protections and the interaction between the Code and the NZX Listing Rules. 4. Stakebuilding 4.1 Principal Stakebuilding Strategies In public M&A transactions, it is common for a bidder to acquire a pre-bid stake in the target, particularly where the target is widely held. In New Zealand, stake - building is regulated by the Takeovers Code and is most commonly undertaken by acquiring shares on the market or through private transactions. Typically, a bidder is precluded from acquiring or con - trolling in excess of 20% of the voting rights in a code company, taking into account any interests held by associates. Any relevant interest in greater than 5% of the shares in a listed company must also be disclosed. Depending on the bidder’s existing level of control, limited further acquisitions may also be made in reli -
ance on specific Code exceptions or with shareholder approval. In scheme of arrangement transactions, bidders often adopt a more conservative approach to pre-bid stake - building, as any shares the bidder or its associates hold or control will typically be required to vote as a separate interest class. 4.2 Material Shareholding Disclosure Threshold Listed issuers are subject to an ownership disclosure regime intended to promote market transparency. Directors, senior managers and substantial product holders – being persons with a relevant interest in 5% or more of a listed issuer’s quoted financial products – are required to disclose their position when a substan - tial holding is first obtained, and thereafter whenever there is a material change, including an increase or decrease of 1% or more, or a change in the nature of their interest, or when they cease to hold a substantial interest. These disclosure obligations apply to both direct hold - ings and derivative positions, and interests of associ - ates are aggregated. Takeover documentation must also include details of shareholdings and derivative positions of the offeror, its associates, substantial product holders, and target company directors and senior managers. 4.3 Hurdles to Stakebuilding The most significant restriction on code companies is the “fundamental rule” in rule 6 (1) of the Takeovers Code, which provides that no person, together with their associates, may become the holder or controller of more than 20% of the voting rights in a code com - pany, subject to certain codified circumstances (see 6.2 Mandatory Offer Threshold ). The Code’s asso - ciation rules are broadly drawn and capture persons acting jointly or in concert, including under formal or informal arrangements, to acquire or exercise control of voting rights. This means a prospective acquirer should take care when engaging with existing share - holders or entering into lock-up or pre-bid agree - ments, as those arrangements may give rise to an
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