NZSA says it will vote proxies in favour of 2 Cheap Cars deal

The NZ Shareholders' Association will vote in favour of a 2 Cheap Cars share transaction. Photo/File

The New Zealand Shareholders’ Association (NZSA) has come out in favour of a proposed deal that will see David Sena buy 30 per cent of the shares in NZX-listed 2 Cheap Cars from Eugene Williams, taking his holding to about 76 per cent.

NZSA said it would vote all undirected proxies it holds to approve the transaction at the annual meeting on September 28.

In making the recommendation, NZSA noted that Sena had “proactively agreed” to additional measures to further protect the interests of minority shareholders including not utilising the ‘creep’ provisions of the Takeovers Act for a period of three years from the date of the share acquisition.

The deal follows last year’s boardroom meltdown in which most of the company’s directors quit, as did its auditors and bankers.

NZSA said Sena had undertaken to maintain a majority of independent directors on the board and would enable consultation with minority shareholders and their representatives prior to the appointment of future independent directors.

2CC chairman Michael Stiassny said that having support for the transaction from the NZSA was welcome and confirmed the board’s view.

The board had recommended the transaction be approved on the basis of the independent adviser’s report.

“We firmly believe this transaction is in the best interests of all shareholders,” Stiassny said in a statement to the NZX.

“David is already deeply invested in the success of this company and has made a significant contribution to its transformation and increased profitability in recent months, as evidenced in upgraded guidance released on September 8,” Stiassny said.

The agreement was announced on the NZX earlier this morning.

The association said the commitment provided greater scope for effective, independent governance, creating better alignment between the interests of Sena and minority shareholders.

NZSA chief executive Oliver Mander said: “As far as we are aware, these commitments are a first for an NZX-listed company and go some way to encouraging greater alignment between the interests of major or controlling shareholders and minority shareholders.”

The association had recently made a submission relating to the director independence settings of the NZX Corporate Governance Code, including advocacy for a minority interests regime that would allow only minority shareholders to vote on the election of independent directors.

“Around 35 per cent of NZX-listed entities operate with a major shareholder owning 30 per cent or more. NZSA believes that investors need to assure themselves that their interests are aligned with those of the major shareholder,” Mander said.

“In this case, we’re pleased that David has come to a voluntary agreement that is likely to improve minority shareholder confidence in this alignment by including provisions that support effective and independent oversight to protect minority interests,” he said.

“2CC has recovered strongly over the last 12 months, and we feel this agreement provides an appropriate setting for that improved performance to continue,” he said.

Shares in 2 Cheap Cars last traded at 61c, more than double where they were in May.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.