Mainfreight Limited (MFT) / Announcements

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Share Buyback Disclosure Doc re Partly Paid Share Scheme

10:30am, 30 May 2011 | BUYBACK

Please find below documentation that we are required to send to our shareholders under the Companies Act 1993. (No action is required by shareholders as this communication is for disclosure purposes only).

This relates to our Partly Paid Share Scheme which is in place for some of our key people. The Board of Directors has opted to provide a treasury share buy-back alternative to these key people should they wish to take it up. Please refer to paragraph 8 of the Board resolutions set out in the appendix for easy reference. We apologise for the formality of these documents.

Share Buyback Disclosure Document
(Sections 61(5) and 62 of the Companies Act 1993)

1. Introduction
1.1 Mainfreight Limited (the Company) and Mainfreight Share Scheme Trustee Limited (the Trustee) established an employee share scheme called the Mainfreight Limited Partly Paid Share Scheme (the Scheme), under which redeemable ordinary shares in the Company have been issued to the Trustee on a partly paid basis, to hold for the benefit of selected employees of the Company in accordance with the terms of the Scheme. This disclosure relates to the partly paid redeemable ordinary shares issued for the benefit of selected employees on 13 June 2008. 1,905,000 shares were issued on that date, of which 1,830,000 shares remain held by the Trustee for the benefit of selected employees (the Relevant Shares).
1.2 In accordance with the terms of the Scheme, the Relevant Shares held for the benefit of each selected employee may be converted into fully paid non-redeemable ordinary shares, ranking pari passu with the ordinary shares in the Company, by payment by the selected employee of the outstanding issue price to the Trustee within the period from 12 June 2011 to 12 July 2011. Any shares so converted will then be transferred to the relevant employee.
1.3 The board of the Company has resolved that it intends to offer to buy back up to a maximum of 1,372,000 ordinary shares in the Company (the Offer) from selected employees who choose to convert their entitlement under the Scheme and have the ordinary shares transferred to them (the Selected Shareholders).
1.4 The Companies Act 1993 (Companies Act) requires the Company to send shareholders a “Disclosure Document” for the Offer, explaining the nature and terms of the Offer and its implications for the Company and its shareholders.

2. Board authorisation
2.1 In accordance with the requirements of the Companies Act, the Offer has been approved by the board of the Company. The full text of the board’s resolutions and the reasons for the conclusions expressed in those resolutions in respect of the Offer is set out in the Appendix to this Disclosure Document.
2.2 In accordance with the Companies Act, the board of the Company resolved that:
(a) The acquisition of the shares is in the best interests of the Company.
(b) The acquisition of the shares is of benefit to the shareholders to whom the offer is not made.
(c) The terms of the offer and the consideration offered for the shares are fair and reasonable to:
(i) the Company; and
(ii) the shareholders to whom the offer is not made.
(d) The board is not aware of any information that will not be disclosed to shareholders:
(i) which is material to an assessment of the value of the shares; and
(ii) as a result of which the terms of the offer and consideration for the shares are unfair to shareholders accepting the offer.
2.3 To assist shareholders to understand the nature and implications of the Offer both for the Company and for shareholders, this Disclosure Document contains a discussion of the Offer and its terms and the manner in which the Offer will be completed.
3. Nature and terms of the Offer
3.1 The board has resolved to acquire up to 1,372,500 ordinary shares in the Company from the Selected Shareholders, being up to 75% of each Selected Shareholder’s entitlement to Relevant Shares under the Scheme. The acquisition will be effected by way of an off-market buy back from each Selected Shareholder that accepts the Offer.
3.2 The purchase price for the share acquisition will be at a price per share determined by the volume weighted average market price of the Company’s ordinary shares on NZX over the five business days prior to 27 June 2011, being a date shortly before the purchase will be completed.
3.3 The Company will make the Offer not less than 10 working days and not more than 12 months after this Disclosure Document has been sent to each shareholder.
3.4 The ordinary shares acquired by the Company will be held as treasury stock following the acquisition.
4. Loan
4.1 The Company’s wholly-owned subsidiary, Daily Freight (1994) Limited will offer to lend to each Selected Shareholder the outstanding issue price required to convert the redeemable ordinary shares into ordinary shares, on the terms that the purchase price paid to the Selected Shareholder under the Offer must be applied first to repay that loan.

5. Board Rationale for the Offer
5.1 The reasons for the board’s decision to make the Offer are set out in paragraph 8 of the board resolutions set out in the Appendix to this Disclosure Document.
6. Disclosure of Material Information to Shareholders and Timing of the Offer
6.1 As required by the Companies Act, the Company may not purchase shares under the Offer if the board becomes aware of any information which has not been disclosed to shareholders that is material to an assessment of the value of shares and as a result of which the terms of the Offer and consideration offered for shares under the Offer would be unfair to shareholders accepting the Offer.
6.2 As at the date of this Disclosure Document, the board is not aware of any information of this nature which has not been disclosed to shareholders. The board will closely monitor compliance with the various information disclosure requirements and safeguards concerning the availability to shareholders of all price-material information about the Company and its business activities which is known to the board. If circumstances change and the criteria considered by the board in approving the Offer programme are no longer satisfied, the board will suspend the Offer.
6.3 Accordingly, the board currently proposes to make the Offer at or around the end of the 10 business day notice period required by the Companies Act, being 15 June 2011. It is anticipated that the Offer will be effected on or about 1 July 2011.
7. No Interested Directors
7.1 None of the directors of the Company are interested (as that term is defined in the Act) in the Offer.

Mainfreight Limited
30 May 2011

Appendix: Text of board resolution dated 25 May 2011 approving share buyback:

Noted

Resolution to acquire the Company’s shares on a selective basis
(Section 60(1)(b)(ii) Companies Act 1993)
A. The Company and Mainfreight Share Scheme Trustee Limited (the Trustee) established an employee share scheme called the Mainfreight Limited Partly Paid Share Scheme (the Scheme), under which redeemable ordinary shares in the Company are issued to the Trustee on a partly paid basis, to hold for the benefit of selected team members of the Company in accordance with the terms of the Scheme.
B. In June 2008, certain team members were offered participation in the Scheme (the Selected Team Members) and the board resolved to issue 1,905,000 redeemable ordinary shares to the Trustee on a partly paid basis.
C. In accordance with the terms of the Scheme, the partly paid redeemable ordinary shares held for the benefit of each Selected Team Member may be converted to fully paid ordinary shares by payment by the Selected Team Member of the outstanding issue price to the Trustee within the period from 12 June 2011 to 12 July 2011.
D. The board proposes that the Company make an offer, pursuant to section 60(1)(b)(ii) of the Companies Act 1993, to acquire up to 75% of the 1,830,000 ordinary shares in the Company from the Selected Team Members (being up to 75% of the holding of each Selected Team Member remaining in the Scheme), following any conversion and transfer of those shares elected by a Selected Team Member under the Scheme, at a price per share determined by the volume weighted average market price of the Company’s ordinary shares on NZX over the five business days prior to 27 June 2011 (the Offer).
E. No Selected Team Member is a director or an associated person (as that term is defined in the NZSX Listing Rules) of a director of the Company.
Resolution that shares acquired by Company not be cancelled
(Section 67A(1) Companies Act 1993)

F. Clause 5.1(c) of the Company’s constitution expressly permits the Company to hold its own shares if the number of shares acquired, when aggregated with shares of the same class held by the Company, does not exceed 5% of the shares of that class previously issued by the Company.
G. It is proposed that the shares acquired by the Company are not cancelled on acquisition.
Resolved as a resolution in writing:
1. Subject to the receipt of tax and accounting advice satisfactory to any one director, the Company send to each shareholder a disclosure document as required by section 61(5) of the Companies Act 1993, the form of that disclosure document to be approved by CFO Tim Williams.
2. Subject to the receipt of tax and accounting advice satisfactory to any one director, not less than 10 working days and not more than 12 months after the disclosure document has been sent to each shareholder, the Company make an offer to acquire up to 1,372,500 ordinary shares in the Company from the Selected Team Members, being 75% of each Selected Team Member’s entitlement.
3. The total number of ordinary shares that the Company proposes to acquire, together with all other ordinary shares acquired during the 12 month period preceding the date of acquisition, will not exceed (and will be substantially less than) 15% of the total number of ordinary shares on issue at the commencement of that period.
4. The acquisition of the shares is in the best interests of the Company.
5. The acquisition of the shares is of benefit to the shareholders to whom the offer is not made.
6. The terms of the offer and the consideration offered for the shares are fair and reasonable to:
(a) the Company; and
(b) the shareholders to whom the offer is not made.
7. The board is not aware of any information that will not be disclosed to shareholders:
(a) which is material to an assessment of the value of the shares; and
(b) as a result of which the terms of the offer and consideration for the shares are unfair to shareholders accepting the offer.
8. The reasons for the board’s conclusions are:
(a) The Scheme was established to enable individually selected senior team members to participate in the success of the Company and has been effective in achieving this objective. This will be enhanced by the offer because the offer will provide a mechanism by which the Selected Team Members may realise the benefits provided by the success of the Company, to which they have contributed. The offer will also provide funds to the Selected Team Members which will facilitate the retention by the Selected Team Members of a portion of their share entitlement under the Scheme.
(b) If the offer is not made, some or all of the Selected Team Members may sell some or all of their shares on the market. The sale of a block of shares of this size on the market, which would not otherwise occur, could have the effect of depressing the market price of shares. This would have a detrimental effect on shareholders generally.
(c) The purchase price will be the volume weighted average market price over the five business days prior to 27 June 2011, being a date shortly before the date of the purchases.
(d) The Company has no immediate need for additional share capital at this point in time and the overall impact for the Company is expected to be cash neutral at worst.
9. Pursuant to section 67A(1) of the Companies Act 1993, and clause 5.1(c) of the Company’s constitution, any shares acquired by the Company from the Selected Team Members under the offer are not cancelled on acquisition.

10. Any one of the directors of the Company be and is hereby authorised and empowered to:
(a) enter into, execute and deliver on behalf of the Company the documentation relating to the offer;
(b) enter into, execute and deliver on behalf of the Company any deeds, agreements, instruments, certificates, requests, notices or other documentation (the Other Documents) contemplated by, or necessary, or expedient under or in connection with the offer in such form as any one of the directors of the Company may approve (execution by or on behalf of the Company to be conclusive evidence of such approval); and
(c) take such other actions on behalf of the Company as may be necessary or expedient under or in connection with the offer, the Other Documents and/or the transactions contemplated thereby.
11. These resolutions may be signed by the directors of the Company in counterpart (by facsimile or otherwise), each of which when so signed will be deemed to be an original, and such counterparts together will constitute one and the same instrument and, notwithstanding the date of execution, will be deemed to bear the date 25 May 2011.