Metlifecare shareholders vote back EQT's $1.27b takeover offer after fiery meeting

The Poynton, a Metlifecare village in Takapuna. Photo / Jason Oxenham

Shareholders in Metlifecare have approved the $1.27 billion takeover offer with 148 million votes in favour and just 14m against.

The company has just announced the results to the NZX saying 69 per cent voted in favour of the scheme which only needed 50 per cent support to succeed.

That announcement follows chairman Kim Ellis telling a meeting in Auckland today 90.7 per cent of Metlifecare proxy shares were voted in favour of the deal and only 8.8 per cent against.

Asia Pacific Village Group, owned by Sweden's EQT, can now buy all of Metlifecare and has agreement from the NZ Super Fund that it will sell its 19.9 per cent stake - a point which rankles Ellis.

Ken Wong, EQT Australia & New Zealand managing director, welcomed today's result which he said was "overwhelmingly in favour. EQT looks forward to applying its long-term vision to accelerate Metlifecare's growth and deliver the highest quality care to its residents."

Wong also thanked Metlifecare staff for protecting the health and wellbeing of its residents during Covid.

Ellis said the $1.27b was made on a Sunday afternoon and the board was under pressure to decide on whether to put the new offer to shareholders.

"There was very little interest in taking the thing to the contrary of NZ Super's position," he said. "I think I used the term a fait accompli in the statement in the booklet. I hope that explains the rather awkward position we were put in."

Ellis asked himself at the end of the meeting if he had any regrets about how the board had handled the offer: "At all times we sought to put the interests and rights of shareholders first," he said at the end of the questions session which started today at midday. "Throughout the past nine months, particularly with a very challenging March to August, we ensured the executive team didn't lose their focus on the business which proved very resilient."

Kim Ellis, chairman of Metlifecare. Photo / File

A shareholder said he felt with a change of control he was unsure how long EQT would keep Metlifecare.

"I know nothing about their intentions," Ellis said, referring to chief executive Glen Sowry "who'll be there after we go."

Sowry said that, during recent months, there had been a transition committee process between EQT as the new potential owner and senior management team to ensure a smooth and productive transition of governance and ownership.

"Having been dealing with EQT as the ultimate owners over recent months, those discussions and planning for the transition have been entirely constructive. EQT has had significant experience in aged care," he said citing business in Germany and elsewhere.

"They have ambitions for Metlifecare to grow it and invest in it and ensure it continues to improve and be a better company in the future. You are residents ultimately is what our business is about and if we don't serve our residents well, that will be to the detriment of the business and that's something EQT understands very well," Sowry said.

Ellis said Asia Pacific was a private equity "but they claim they are holders in the medium term rather than the three or four-year cycle so we were told seven years plus, that kind of thing."

A shareholder asked about the potential of the business.

Metlifecare chief financial officer Richard Thomson said the figures in the independent advisers' report were long-term unit price growth assumptions. Short-term movements would be both positive and negative but a longer-term view was needed. The housing market had defied Covid gloom, he said.

"Plus we're transacting at or close to valuation and in some cases above," he said of retirement village unit sales," Thomson said.

About 400 to 500 real estate transactions were carried out annually by Metlifecare and the market was showing robustness, he said.

A shareholder asked why director Carolyn Steele voted for the first scheme but abstained when the second deal was put. Ellis said he was sorry she wasn't there to answer herself. Other directors said she would need to be questioned.

A lawyer spoke on behalf of the board and explained how circumstances changed after the NZ Super Fund made its position clear with regard to the second offer.

A shareholder asked why the board felt the revised scheme terms were a fait accompli on the second deal.

Ellis said: "In the context of the moment back then, we got a very clear direction from a majority of shareholders that we canvassed that they wanted to vote on the scheme and would vote in favour of it. There was no way at all we could not take the opportunity for shareholders to allow them to make the decision. The snag was that the terms had been placed in front of us and it was on a take it or leave it basis so that put us in a very delicate position that if we had attempted to renegotiate core three terms, there's a danger it could slip away.

"Yet we had a majority saying they were happy so we'd be putting at risk an offer that a majority were keen to vote on and vote positively for. So we didn't want to get presumptuous and felt it was absolutely imperative to get the scheme in front of shareholders," Ellis said.

"There had to be a majority of shareholders voting on it. As it turned out, a majority did feel comfortable with what had been placed in front of us."

Metlifecare director Mark Binns. Photo / Richard Robinson

Director Mark Binns said: "We had no choice about letting the litigation go. We had tried to put forward a proposal that would allow a decision to be made. We had to make a decision whether we accept the package as offered which meant letting go of the litigation rights and offering the shareholders a vote."

Another shareholder said the $6 offer would have been more palatable if a dividend had been paid and he said he was disappointed.

Ellis said he agreed "except the dividend".

"It was just part of the package. That was the offer. Other than that, yeah, it's pretty cheap. You know my position anyway," he said referring to him voting against the deal.

Director Alistair Ryan said the board had to consider the $6 "as a take it or leave it offer".

"As a director, I didn't find it a situation where I would reject an offer by voting that way and that opportunity or vote didn't come to shareholders. So I had to get my head around $6. Everyone wanted it to be more but it wasn't. Was $6 a price where I could say that price is defendable and something that represents a value for the assets? It's at the bottom end of the range," he said.

Ryan said he had to ask about risks, share price changes, property market prospects "which means there's a significant risk element".

"The alternative was to pursue the $7 and go through litigation. That would take two years. The discounted value comes right down to $6 or can be below. That would be very disruptive for the company, to have ongoing litigation going on for two years over ownership. The $6 was a reasonable but low price offer and should come forward for shareholder consideration and I'm voting my shares in favour of the $6," Ryan said.

An online question came from a Highlands Metlifecare resident: "What will the new owner do for older villages in terms of maintenance and repair?. Also, would the support office stay in Newmarket?

Ellis said Asia Pacific "are not here to tell us".

Sowry said it was hard to speak on behalf of Asia Pacific but under the Overseas Investment Office application, which had been approved for the takeover, Asia Pacific had to demonstrate they would invest in the business.

"They have given that commitment which includes long-term maintenance and other activity in some of Metlifecare's existing villages," Sowry said. "They realise there's potential to enhance some of the older villages but what that might look like, it's too early to say."

Another shareholder asked why no premium was paid for control of the business. Ellis said the independent report had priced a premium for control in the target range of $5.80 to $6.90.

A shareholder said independent directors appeared to be "missing in action" but was told Steele was not an independent director but instead on the board for the NZ Super, which she had worked for previously. She was a non-independent director, the meeting heard.

Why did the board not drop the litigation and reinstate the on-market buyback, a shareholder asked.

Ellis said that was a good question "and if an offer had not come through that was turned into a scheme arrangement, we would have given consideration to how we might extract ourselves from litigation with $1 in the pocket. But that was about timing and keeping the heat on."

Binns said he was head of the litigation subcommittee "and let's get this very clear. We had two QCs," he said, telling how directors had to act in shareholders' best interests.

A shareholder asked if the company would be subject to legal action if the takeover was rejected. Ellis said he imagined there would be no case, "but you can't promise there won't be action".

Would the company institute the living wage after the sale on October 29, a shareholder asked. Sowry said the company was bargaining with its unions on behalf of its staff in the collective agreements. It wanted to reflect the efforts of the staff and being in the midst of negotiations, it was inappropriate to discuss where those talks would end.

If the sale was rejected, would directors who supported it resign?

Director Chris Aiken said he would consider the mood of the shareholders in relation to the decision they had to make. Ellis said if he wasn't "kicked out", he would encourage directors not to resign.

Lack of board diversity was reflected in the sale position, a shareholder said, asking why there was only one woman director. A better gender split could have changed the outcome, the shareholder said.

Ellis said two months ago, the board had two female directors but one resigned "so that was two out of seven which isn't bad in the New Zealand context". The board would have been refreshed if it was business as usual, he indicated.

"If you want diversity it's a lot more than females and males. It's about views. If you wanted to put a camera into our boardroom, it's a very vigorous debating chamber," Ellis said.

A shareholder asked if the NZ Super Fund could influence a deal without full market disclosure, did that create a precedent and warning for all other companies that it would act without full transparency. Ellis said fund didn't direct the board but urged it to expedite the scheme and indicated they were supportive of it.

"They were the catalyst for our taking the position," he said, citing a difficult 48 hours when Asia Pacific put the proposal.

A shareholder said if the deal went ahead, more than 100ha of land would be transferred to a foreign entity, which would make New Zealanders tenants in their own land.

Aiken said: "That land gets transferred to New Zealand residents who live in our villages and participate fully in them. Technically there's a transfer of the assets to the business but they're then divested into the hands of residents who are retired."