NEW ZEALAND Law and Practice Contributed by: Ben Paterson, Cath Shirley-Brown and David Hoare, Russell McVeagh
an increase in deals implemented by way of private treaty/a bilateral process. In a formal process, competitive tension inevitably impacts on the form of the sale documentation – typi - cally, the SPA will be more seller-friendly than might be the case in a private treaty sale (in particular, sellers will be very focused on the certainty of closing and will be averse to conditionality – see also 6.4 Conditional- ity in Acquisition Documentation ). Code Companies A “Code Transaction” will be effected: • as a takeover offer under the Code, which may be a full or partial offer; • by the acquisition or allotment of voting securi - ties above the control threshold, which has been “white-washed” by an ordinary resolution of the target; • pursuant to “creep” provisions for holders of more than 50% and less than 90% (less than an addi - tional 5% in a 12-month period); or • by a court-approved scheme of arrangement (“scheme”) approved by 75% of the votes of the shareholders of the Code company entitled to vote (and with 75% approval by any separate interest group). If a buyer acquires 90% or more of the voting securi - ties of a target, it can rely on compulsory acquisition provisions to acquire the balance of the voting shares. Increasingly, schemes are becoming the preferred (though not exclusive) route for private equity public acquisitions, in view of the following factors: • the lower shareholder consent threshold to obtain 100% ownership of the target compared with a takeover (generally 75% for a scheme versus 90% for a takeover); and • the fact that schemes generally permit a longer time period to obtain any requisite regulatory approvals (eg, OIO or NZCC approval), although regulators will generally try to adhere to timeframes prescribed by the Code (it is also possible to obtain a limited set of warranties, backed up by W&I, for a scheme).
It is usual for control transactions in New Zealand to be conducted on a consensual, “friendly” basis, as opposed to hostile takeovers (which are very rare). In this context, the buyer and seller will often enter into an agreement that contains deal protection mecha - nisms, such as “no-talk” and “no-shop” provisions, the requirement for irrevocable undertakings, any break fee arrangements and the key terms of the offer to shareholders (see also 7.1 Public-to-Private ). 5.2 Structure of the Buyer The buyer in a New Zealand private equity transaction is typically a New Zealand-incorporated special-pur - pose vehicle (Bidco) established by the private equity buyer specifically for the purpose of the acquisition. A Bidco will normally have a holding company and an interposed entity for funding (Finco). Other interme - diary special-purpose vehicles may be interposed if required (by way of example, there may be a second - ary Finco if it is proposed that mezzanine debt is intro - duced into the structure). Typically, these companies will all be incorporated in New Zealand and are almost always incorporated as limited-liability companies. The only capacity in which a private equity fund will enter into transaction documentation is as a party to an equity commitment letter (see also 5.3 Funding Structure of Private Equity Transactions ). 5.3 Funding Structure of Private Equity Transactions In New Zealand, private equity transactions are gener - ally financed by a mixture of equity funding and senior debt. Certainty of equity funding is customarily evidenced by an equity commitment letter provided by the pri - vate equity fund, customarily enforceable by the seller. This provides comfort to the buyer that there will be committed funds available to a Bidco at closing. Where the private equity fund also intends to use debt, it will typically provide a debt commitment letter at signing from the relevant lender(s), attaching either a term sheet or a facility agreement. Despite the cur - rent market uncertainty (see 1.2 Market Activity and Impact of Macro-Economic Factors ), there contin - ues to be strong lender appetite to participate in the
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