An institutional fund manager will on Friday vote against the $1.27 billion Metlifecare takeover, following concern expressed by the company's chairman and the NZ Shareholders' Association.
Matthew Goodson, managing director of Salt Funds Management, said he did not agree with the deal and will vote with his feet at the virtual shareholders' meeting at midday on Friday this week.
"We supported the bid when it was $7 and reduced our holding when it traded close to that level. With our remaining holding, we have voted against the majority board recommendation at $6," Goodson said.
He acknowledged Swedish company EQT's bid fell within the fair value range derived by the independent adviser, Calibre Partners.
But he said it was well below the prior $7 offer yet the housing market hadn't crashed to the extent economists had predicted around March when New Zealand initiated pandemic measures.
"In our view, the New Zealand housing market has improved materially following the Covid-19 crisis in terms of both pricing and turnover due to the unprecedented easing actions of the RBNZ. Accordingly, there is no basis for the bid to be reduced," Goodson said today.
"In addition, we believe the adviser's report paid insufficient heed to the difference in price relative to net tangible assets across the listed retirement sector," he said.
The business was not perfect but had a lot going for it.
"While Metlifecare has not yet demonstrated consistently successful value accretion from property development, we see no fundamental reason that this cannot occur in the future. Accordingly, we view the discount of Metlifecare relative to its peers as excessive.
"We note the board's split view on the merits of the offer and would like to acknowledge the strenuous efforts of the chairman, Kim Ellis, to improve the bid on behalf of shareholders," Goodson said.
However, the majority of board members back the deal, along with the NZ Super Fund, which holds 19.9 per cent of Metlifecare. Chris Aiken, Mark Binns, Alistair Ryan and Rod Snodgrass recommend shareholders vote in favour of it.
A Super Fund spokesman said yesterday: "While a difficult and finely balanced decision, the members of the director majority consider that the scheme consideration of $6 per share, when weighed against the uncertainty, disruption and potential risks associated with the SIA litigation and inherent in continuing to operate Metlifecare's business in a Covid-19 environment over a significant period of time, and the indicated support of a majority of shareholders canvassed, is reasonable in all of the circumstances."
But the Shareholders Association has hit out at parties backing the deal, asking why most directors and the NZ Super Fund supported it instead of holding out for a higher price and fostering a home-grown company.
"Why would directors recommend this offer for a profitable company which, despite having been the retirement sector laggard, has now outperformed its own expectations? Many investors will have bought in to Metlifecare because they saw it as better value than its listed comparators. If the company is sold, current investors will lose the opportunity to see this value gap close," the association said.
"Has the board performed to the standard shareholders' [expectations]? Independent directors in other companies such as Tilt have shown that they can act robustly to secure better outcomes for shareholders by striving to resist takeover offers. Or is the problem simply that the actions of NZ Super Fund and the short-term players compromised the ability of the board to negotiate a better price?" the association asked.
That point backs to the position of Metlifecare chairman Kim Ellis, who said the Super Fund's agreement had meant the deal was effectively a fait accompli.