Emery Severin, chief executive of resins company Nuplex Industries, is due a $10.3 million cash payout following a shareholder vote in favour of a $1 billion proposed takeover by private equity-backed Belgian company Allnex.
At a special shareholders meeting in Auckland today, 98 per cent of the votes cast were in favour of the deal, with institutional shareholders overriding a desire of smaller long-term shareholders to hang in there. 76.5 per cent of the total shares on issue voted in favour of the deal, ensuring the takeover can proceed.
The takeover needed support from at least 75 per cent of the votes cast and more than 50 per cent of the total number of Nuplex shares to proceed, less than the typical threshold required because it was made under the first scheme of arrangement of a significant size since law changes in 2014.
Under the Nuplex long-term incentive scheme, senior executives including the chief executive receive performance share rights which vest if performance targets are met over a three-year period.
But the Management LTI Plan means that 100 percent of the rights vest automatically under a change in control such as the Allnex bid.
Severin currently holds 1,907,578 performance share rights which will deliver a cash payout of $10,358,148 if the deal is completed as expected in mid-August.
Documents presented to shareholders prior to the vote said the total amount paid to the other scheme participants will be around A$3.3 million and will be a cost to the new owner.
Around 177 Nuplex executives and managers also participate in a short-term incentive plan under which around $10 million is being paid out on in the 2016 financial year just ended.
In addition, Severin already holds 772,746 Nuplex shares which he'll get paid out on and under the terms of his employment contract, he'll receive a A$1.23 million "loyalty payment" if he loses his job within six months of a change of control of the company. The board could also decide to make him a pro-rated payment under the STI plan from the start of the new financial year to when he was asked to leave.
The company said Allnex had given no assurances about the future of any staff, of whom only around 100 are based in New Zealand.
Severin has been on the Nuplex board since 2010 when he joined the company as managing director and chief executive but company corporate communications director Josie Ashton said he took no part in decisions on the Allnex offer because of the conflict over the incentive payments.
Independent directors had recommended shareholders accept the offer of $5.43 per share, plus a 12 cents per share interim dividend already paid. That was a premium of 44 per cent to the share price at the time the offer was made in February. The board had rejected three previous Allnex offers, which first approached Nuplex in October last year.
Allnex has been very smart in buying an increasing earnings stream and new technology at a modest premium even before the value of the synergies are taken into account.
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Chairman Peter Springford said the board felt obliged to put the final offer to shareholders, given it was at a premium to the share price and above analysts' valuations.
An independent report by Grant Samuel said the company's underlying value was in the range of $5.36 to $5.86 per share.
Nuplex was founded in New Zealand in 1952 and listed on the NZX in 1967 and the ASX in 1999. It's had a chequered history but its financial performance has started to turn in the past two years. In May the company said the 2016 financial year earnings before interest, tax, depreciation and amortisation were expected to be between $157 million and $161 million, more than the previous guidance of $145 million to $157 million announced in February.
Shareholders' Association chairman John Hawkins, speaking in his private capacity as a shareholder, said the offer was not a great deal for Nuplex shareholders despite the premium, which was only 15 percent above the share price at the end of last year.
The share price of technology companies were marked back substantially in January, a situation that has since reversed, he said. He accused the board and management of bailing out rather than being "willing to do the hard yards to grow a good company into a great company".
If other boards adopted the same approach we would never have had Microsoft, Google, or Bayer Chemicals.
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"If other boards adopted the same approach we would never have had Microsoft, Google, or Bayer Chemicals," Hawkins said. "Allnex has been very smart in buying an increasing earnings stream and new technology at a modest premium even before the value of the synergies are taken into account."
Springford said the board would have liked to have and considered a few years ago taking over Allnex but it required a lot of money that Nuplex shareholders were unlikely to want to stump up while Allnex is a bigger company and had money in the bank.
He said the opposition of small retail shareholders to the deal was probably because they want somewhere to place their money and it was hard to get exposure to a company with global reach like Nuplex that also provided a reasonably steady dividend. "Institutional investors can put their money anywhere and get a return," he said.
The scheme still requires High Court approval which is expected to take a further 10 days.
Completion of the deal had been expected on Aug.2 but anti-trust clearance in the European Union is taking longer than expected. Springford said they're now hoping payment to shareholders will occur in mid to late August.
If the acquisition is not completed by August 2 because of the clearance delay, the company has to pay a compensatory dividend of 0.075 cents per share to shareholders for every day of delay in addition to the $5.43 cash offer. The final deadline for getting all approvals is November 9. unless both parties agree to an extension.
Nuplex shares rose 1.9 per cent to $5.28.