Mercer Group Limited
Transaction Type: Company meeting (Allotment)
Allottee: Humphry Rolleston, Murray Capital Rakaia Fund Limited Partnership, and Asset Management Limited
Independent Adviser(s): Simmons Corporate Finance (Rule 18)
Date of meeting: 17/12/2010
On 30 August 2010, Mercer Group Limited (Mercer) announced it had entered into a conditional agreement with a new institutional investor for a $9 million capital raise.
Further to that announcement, on 16 November 2010, Mercer announced that it intended to undertake a renounceable 4.6 for 1 rights issue at an issue price of $0.05 per share, to raise funds to reduce borrowings and provide working capital. The rights issue would be fully underwritten by Murray Capital Rakaia Fund Limited Partnership (Rakaia Fund) and Asset Management Limited (AML). At the time, AML held or controlled 2.03%, and the Rakaia Fund did not hold or control any shares in Mercer.
Mercer also proposed to issue warrants to Rakaia Fund to be allotted further new ordinary shares in Mercer at $0.05 per share to the extent required to take Rakaia Fund’s total investment in Mercer up to $5 million. The warrants would be exercisable at any time over the three years subsequent to the rights issue.
Both AML and Rakaia Fund were associates of Mr Humphry Rolleston, a shareholder who at the time held or controlled 16.59% of the voting rights in Mercer (together the Rolleston Associates). As a result of the combined effect of the rights issue, underwriting, and warrants, the control percentage of the Rolleston Associates would potentially increase to a maximum of 87.08%. As such, shareholder approval for the transactions was required under rule 7(d) of the Code.
Because the number of shares that would be allotted to each of the parties was dependent on the extent to which shareholders opted to participate in the rights issue, Mercer was unable to comply with rule 16(b) of the Code. As such, Mercer modified its disclosures in accordance with clause 10A of the Takeovers Code (Class Exemptions) Notice (No 2) 2001 (which has since been repealed).
At an annual meeting held on 17 December 2010, the non-associated Mercer shareholders approved all resolutions relating to the rights issue, underwriting, and warrants.
Simmons Corporate Finance prepared a rule 18 independent adviser’s report on the merits of the allotments.
