Origin’s recent sale of its Contact Energy shares for $1.81b was one of the largest secondary markets transactions in New Zealand in the last decade, and one of the largest deals ever undertaken in the country.
And the legal innovations utilised in the sale are being tipped by Bell Gully to be repeated, as big investors seek cleaner sales of shares they retained in recent IPOs.
Bell Gully advised Contact Energy in the transaction.
“We helped Contact through the process of considering whether it was in the interests of all its shareholders for Contact to assist with the block trade and to manage the process in a way that addressed the various risks and competing interests that could result from that,” Bell Gully partner and lead lawyer for the transaction Chris Gordon said.
The deal was completed under the new legislation, specifically, a clause in the new Financial Markets Conduct Act (FMCA) that allows greater flexibility for listed issuers to assist its shareholders to sell-down their shareholdings, particularly those with a controlling stake or who were issued the relevant shares in the 12 months prior to the intended sell-down.
“We also helped Contact understand the new cleansing notice regime, what was required of the company and its directors and the due diligence requirements for the cleansing notice,” Gordon said.
While cleansing notices have been used before in block trades in Australia, this is only the second time for a company-assisted block trade to retail investors in New Zealand. SLI Systems undertook one last year.
“This was an interesting process and we, along with Origin’s legal advisers, worked to ensure Contact and Origin were able to achieve their respective objectives and comply with various obligations to which each of them, as publicly-listed companies, are subject.”
Both companies saw clear advantages in using the Clause 19 cleansing notice process, which allowed Origin to sell to retail investors in New Zealand and for those investors who purchased the shares to on-sell them without timeframe restrictions, Origin’s lead legal adviser and Russell McVeagh partner Pip Greenwood said.
“The effect of this was it gave Origin a larger market of potential investors to sell to and, through that, maximised the benefit to both companies.”
Both partners agreed that they could well see a number of Clause 19 cleansing notices used in this way as shareholders who are coming off escrow restrictions from recent IPOs seek to sell shares in a straightforward way where on-sale restrictions would otherwise apply.
“This transaction has set the benchmark in how that process can be successfully conducted,” Gordon said.
Contact’s general counsel Catherine Thompson said there were many unique and complex aspects to the deal.
“Given Contact is listed on the NZX, and is planning to list on the ASX, where Origin is also listed, there were a number of regulatory issues to work through. The advisers worked well together and with the companies and we are delighted with the outcome.”
Bell Gully enjoyed working with the Contact team and are delighted to have been able to help Contact through this innovative transaction, Gordon said.
“We look forward to helping Contact transition to life without a controlling shareholder.”
Other lawyers involved included Brynn Gilbertson and Chris Goddard of Bell Gully and David Raudkivi of Russell McVeagh.
Simpson Grierson advised
underwriters Macquarie Capital.