New Zealand’s Metlifecare has sought legal action again Swedish private equity firm EQT AB, which intends to terminate its NZ$1.49 billion ($899.66 million) offer to acquire the retirement village operator, according to its statement.
Metlifecare, one of New Zealand’s largest retirement village providers, had asked the country’s High Court to order Asia Pacific Village Group Limited (APVG), a unit of EQT, to fulfil its contractual obligations under the Scheme Implementation Agreement (SIA) entered on December 29, 2019.
APGV had agreed to acquire 100 per cent of Metlifecare shares by way of a scheme arrangement at a sweetened bid of NZ$7 per share in December.
In a statement in April, however, EQT issued a notice to Metlifecare that it intends to terminate the SIA due to “circumstances having arisen,” which APGV considers permit it to terminate the agreement.
APVG said the coronavirus pandemic triggered the Material Adverse Change clause under the companies’ agreement because it has reduced or could reduce Metlifecare’s tangible assets and could reduce its underlying net profit by at least 10 per cent in the fiscal year 2020, or in the following two years.
It also alleged that Metlifecare “has failed to comply with its obligations under the SIA” to carry on the business in the ordinary course and in the same manner as conducted in the 12 months prior to the date the SIA was signed.
“APVG does not consider that the relevant circumstances are capable of remedy and, assuming they are not in fact remedied within 10 business days, APVG intends to terminate the SIA within the following 5 business days,” the firm said in a statement in April.
Metlifecare, however, filed the Statement of Claim, challenging the validity of APVG’s notice to terminate the agreement. It also sought orders against the EQT Infrastructure Fund IV investors, who have agreed to fund the transaction under an Equity Commitment Letter.
“In refusing to fulfill their contractual obligations under the Scheme Implementation Agreement, APVG has left us with no choice but to take this legal action to protect the rights of Metlifecare and its shareholders. The Board of Metlifecare remains strongly committed to the successful completion of the scheme,” Metlifecare Chairman Kim Ellis said.
The proceeding reiterates the reasons why Metlifecare considers there is no lawful basis to terminate the SIA, namely that no Material Adverse Change (MAC) has occurred and that there have been no prescribed occurrences that would permit APVG to terminate the SIA.
The Statement of Claim also adds that APVG “has no reasonable basis to conclude that a prescribed occurrence has occurred that would represent a breach of the SIA”.
Metlifecare claims that it gave APVG “reasonable access to information about, kept APVG reasonably informed of, and consulted with APVG in relation to the steps Metlifecare took in response to the Level 4 lockdown restrictions in New Zealand”.
The matter is expected to initially be heard in the High Court on May 28, 2020.