VCT - Application for Waiver from NZSX Listing Rule 5.2.3
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Vector Limited (VCT) | 11:22 am, Wednesday 27 August 2008 | VCT | 1.950 |
 0.020 |
(+1.04%) |
NZX Regulation Decision
Vector Limited ("VCT")
Application for Waiver from NZSX Listing Rule 5.2.3
Background
Vector Limited ("VCT") is a company listed on the NZSX and has on issue
1,000,000,000 ordinary shares ("Shares"). VCT is proposing to undertake an
on-market share buyback programme pursuant to which VCT would acquire
approximately 25,000,000 Shares, being approximately 2.5% of the Shares.
Currently, 75.1% of the Shares are owned by the Auckland Energy Consumer
Trust ("AECT"). At the time of VCT's Initial Public Offering in 2005 ("IPO")
and in respect of AECT's shareholding, NZX granted VCT a waiver from the
requirement of NZSX Listing Rule ("Rule") 5.2.3 for at least 25% of the
Shares to be held by at least 500 Members of the Public. This waiver was
disclosed at page 104 of the Prospectus released relating to the IPO and
dated 27 June 2005.
AECT has advised VCT that it does not intend to sell shares into the buyback.
If AECT does not participate in the buyback, its percentage shareholding in
VCT will increase to the extent that shares are acquired by VCT and
cancelled. Accordingly, if VCT acquires 2.5% of Shares under the buyback
programme and AECT does not participate, AECT's shareholding would increase
to approximately 77%. If VCT acquires a lesser number of Shares, or not all
of the acquired Shares are cancelled, AECT's shareholding will still
increase, but by a lesser percentage.
Application
VCT has applied to NZX Regulation ("NZXR") for an extension to the waiver
from NZSX Listing Rule ("Rule") 5.2.3 to the extent necessary to allow AECT's
shareholding in VCT to increase to up to 80% of Shares (calculated as a
percentage of total Shares disregarding Treasury Stock).
In support of its application, VCT has submitted that:
(a) VCT has approximately 41,000 shareholders other than AECT and
therefore satisfies the 500 Members of the Public requirement set in Rule
5.2.3. Accordingly, the Shares are very widely held. VCT will continue to
satisfy the 500 Members of the Public requirement following completion of the
buyback programme. VCT already has a waiver permitting VCT to not meet the
25% threshold required by the Rule.
(b) 80% has been selected as the threshold for the AECT's shareholding to
provide VCT with additional flexibility to undertake additional share
buybacks in the future, without the need for further waivers. No additional
share buybacks are currently contemplated.
The policy set out in the NZX Guidance Note on Spread (1 May 2007) is met.
The Guidance Note states:
"Listing Rule 5.2.3 states that NZX may approve the spread of a Class of
Securities where it is satisfied that there will be a sufficiently liquid
market in that Class of Securities ... two instances where NZX would provide
such approval - (a) where there is sufficient free float; ...
Accordingly, NZX would grant approval under Listing Rule 5.2.3 where the
aggregate market capitalisation of securities held by at least 500 Members of
the Public is at least $50 million..."
As at market close on 20 June 2008, 249,000,000 Shares were held by Members
of the Public other than the AECT and the closing market price for Shares was
$2.03. Therefore, VCT currently comfortable meets the test set out in the
Guidance Note and would continue to do so following the acquisition and
cancellation of 2.5% of Shares. Based on the closing market price on 20 June
2008 and 224,000,000 Shares (i.e.249,000,000 less 25,000,000 Shares), the
aggregate market capitalisation of Shares held by Members of the Public other
than the AECT would still be in excess of $450 million. If 5% of the Shares
were acquired and cancelled the aggregate market capitalisation of Shares
held by Members of the Public other than the AECT would still be in excess of
$400 million. Accordingly, following completion of the buyback programme, VCT
will maintain a spread of shareholders and free float to ensure that there is
a sufficiently liquid market in the Shares, in the interests of shareholders.
(d) It would make no material difference in the liquidity of the market
for Shares if the AECT held up to 80% of Shares rather than 75.1% of the
Shares.
Rule 5.2.3
Rule 5.2.3 provides that:
"Spread: A Class of Securities will generally not be considered for
Quotation on the NZSX or NZDX unless those Securities are held by at least
500 Members of the Public holding at least 25% of the number of Securities of
that Class issued, with each Member of the Public holding at least a Minimum
Holding, and those requirements are maintained, or NZX is otherwise satisfied
that the Issuer will maintain a spread of Security holders which is
sufficient to ensue that there is a sufficiently liquid market in the Class
of Securities."
Decision
On the basis that the information provided to NZXR is full and accurate in
all material respects, NZXR grants VCT a waiver from Rule 5.2.3 to the extent
necessary, to allow AECT to increase its shareholding to up to 80%
(calculated as a percentage of total Shares disregarding Treasury Stock).
Reasons
In coming to the decision to grant VCT a waiver from Rule 5.2.3, NZXR has
considered that:
(a) The purpose of Rule 5.2.3 is to ensure that there is a market in an
Issuer's securities, by promoting liquidity through a sufficient investor
base in which to trade an Issuer's securities. The number of VCT shares held
by Members of the Public is well in excess of the requirement of the Rule,
therefore providing a significant investor pool for trading. Following
completion of the proposed buyback programme, the aggregate market
capitalisation of VCT Shares held by Members of the Public other than the
AECT will remain well in excess of $50 million;
(b) Liquidity in VCT Shares is unlikely to be significantly affected by
the proposed buyback programme. Trading data for VCT for the month of May
2008 shows that on average, 65 trades were completed daily and the average
trade size was approximately 12,000 Shares. VCT shares will remain widely
held following completion of the proposed buyback providing for this
liquidity; and
(c) NZXR considers the AECT is a unique and distinct shareholder,
in that it is a consumer trust that provides for 290,000 consumer
beneficiaries that are customers of VCT who live in Auckland
City, Manakau City and parts of Papakura. Accordingly, the nature of its
shareholding is in itself widely held and works for the benefit
of shareholders directly concerned with VCT's
activities.
Publication
VCT has applied that this decision remain confidential until the decision
whether to proceed with the share buyback programme is announced to the
market. NZXR grants this request in accordance with the footnote to Rule
1.7.2.
ENDS.
