The NZ Super Fund faced a stark choice with its 19.9 per cent stake in Metlifecare.
Ultimately, it came down to a question of holding out for a higher price and facing the prospect of litigation or taking less money and cashing in.
The fund decided to take the money, agreeing to quit its cornerstone stake at $6 a share, although that decision drew criticism from company chairman Kim Ellis and the NZ Shareholders' Association.
A fund spokesman today indicated satisfaction with the takeover offer as it stands, lowered from $1.49b pre-pandemic to $1.27b now.
• Revenue up but pandemic drives Metlifecare property values down to report $33.7m net loss
• Metlifecare suitor gets OIO consent as shareholder vote looms
• $1.27b Metlifecare takeover suddenly announced, Asia Pacific lowers offer from $1.49b
• Metlifecare and EQT enter new $6 per share takeover agreement
That takeover is subject to a vote on Friday and is at a lower than the $7 first offered pre-Covid.
But Ellis disagrees with the $6 offer and wants a higher price.
He criticised the fund's intention to sell its 19.9 per cent shareholding at $6 a share. He has made his support for the higher price well known and said the lower-priced takeover was a fait accompli when the largest shareholder in the fund left no opportunity for the board to use litigation to negotiate the offer price up to the $6.35 valuation midpoint of the earlier independent adviser's report.
He considers Metlifecare's strong litigation position was displayed in the full-year underlying profit announced on August 26.
For the takeover scheme to succeed, more than 75 per cent of the votes cast and more than 50 per cent of the total number of Metlifecare shares on issue must back the deal.
Shareholders meet in a virtual forum on Friday at midday, voting on the takeover which Metlifecare said this month was approved by the Overseas Investment Office.
The fund spokesman said the guardians entered into a voting deed on July 10 where they agreed to vote for the proposed scheme of arrangement at $6 a share, unless a higher offer was put on the table and EQT elected not to match or better that proposal.
"We invest the NZ Super Fund in a purely commercially manner in order to maximise returns and support superannuation payments for future generations of New Zealanders. We assess investment opportunities based on what we believe delivers the best long-term risk-adjusted return to the fund," the fund spokesman said today.
"The scheme consideration of $6 per Metlifecare share represents a 14.9 per cent premium to the last closing price of $5.22 per share on July 3, before announcement of APVG's alternative proposal on July 6 and an18.1 per cent premium to the share price of $5.08 a share on November 19 last year, prior to announcement of receipt of the unsolicited non-binding preliminary expression of interest to acquire Metlifecare," he said.
The guardians bought a 17 per cent stake in November 2013 at $3.53 a share, taking the holding to 19.9 per cent when that big purchase was combined with existing shareholdings it already held.
The spokesman said the fund agreed with the majority of directors on Metlifecare's board.
They have said: "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 some close to the deal are asking why investors did not battle for a higher price, particularly with New Zealand's residential market not falling to the extent economist were predicting in March
Westpac chief economist Dominick Stephens said this month the housing market had "shot the lights out", far exceeding the forecast his team had made when Covid first broke out.
"House prices have been boosted by a big drop in mortgage rates. Also, the adverse economic impact of Covid-19 has proven much less severe than anticipated. Today we are upgrading our house price forecasts. We now expect a 3.5 per cent increase in house prices between March and December 2020. That will mean 6.3 per cent annual house price inflation for 2020," Stephens said in Home Truths.
House prices will increase 8 per cent next year, he has forecast.
"At some point in the future interest rates will rise. When that happens the process driving house prices higher today will go into reverse, and house prices will fall," Stephens said.
With retirement village sales being pegged so closely to house prices and movements in the residential market, opponents of Metlifecare's takeover at the lowered price are asking "why?"
A majority of Metlifecare directors back the deal: Chris Aiken, Mark Binns, Alistair Ryan and Rod Snodgrass recommend shareholders vote in favour of the takeover offer.
Non-executive director Carolyn Steele didn't vote because she was appointed to represent the fund where she had worked until 2016 as a portfolio manager.
Metlifecare shares are trading around $5.95, just beneath the offer price.