Two offers, two very different outcomes
It has been a big week for the Dunphy family, with James Dunphy playing a key role in the rejection of the New Zealand Oil & Gas (NZOG) scheme of arrangement while sister Pip Dunphy is chair of Abano Healthcare, which has agreed to a scheme of arrangement with BGH Capital and the Ontario Teachers’ Pension Plan Board.
First, NZOG. On July 10, NZOG announced it had entered a scheme of arrangement whereby its 69.9 per cent controlling shareholder, Singapore based OGOG, would attempt to acquire the remaining shares at 62c each. The offer price represented a 25 per cent premium to the previous market close. It was a non-contestable offer and NZOG’s independent directors, led by Dr Rosalind Archer, immediately recommended that shareholders vote in favour of the bid.
The scheme was greeted with outrage, particularly the independent directors’ enthusiastic recommendation, and James Dunphy quickly jumped into the fray.
Dunphy is the brother of Mark Dunphy, who controls Greymouth Petroleum, although the latter doesn’t seem to have had any involvement in the opposition to the NZOG takeover offer. However, Mark Dunphy made an unsuccessful high-profile attempt to stop the sale of Fletcher Energy to Shell in March 2001.
That was yet another sale of a New Zealand company to foreign interests at an extremely low price.
Meanwhile, younger brother James spent 20 years with Credit Suisse in Australia following a stint with Jarden in his home country. After leaving Credit Suisse he became a high-profile critic of Spark Infrastructure, the ASX listed company.
He stood for a Spark Infrastructure board seat in 2017 and remained a strong critic of the company after failing to win sufficient shareholder support.
He was appalled with the response of the NZOG independent directors to the OGOG offer and was quick to comment that this would never happen in Australia.
Some of his correspondence with NZOG’s independent directors and regulators is available on make them accountable.com.au.
The scheme was roundly rejected by NZOG shareholders on Thursday and the focus should now be on replacing the independent directors and reducing costs, particularly senior management salaries.
NZOG shareholders will be hoping that James Dunphy continues his NZOG agitation because the recent performance of its independent directors and senior management team leaves a lot to be desired.
Meanwhile, Pip Dunphy was appointed chair of Abano Healthcare in October 2018, long after the company’s ambitious Australian expansion strategy had hit the rocks. This failed Australian strategy is yet another example of a poorly prepared New Zealand company making high-priced acquisitions across the Tasman.
On July 1, Abano announced it had received expressions of interest for the company from various parties and it was reviewing these and other options.
Unlike NZOG, the Abano board was determined to establish a contestable bidding process, with more than 30 parties showing interest in acquiring either 100 per cent of the NZX-listed company or its Australian assets. Two potential offerors undertook due diligence, which can cost up to $5m per party, and final bids were due on Friday, November 8.
Bidders, investment bankers and their lawyers worked late into Sunday night and at 9.25am on Monday Pip Dunphy announced the company had entered a scheme of arrangement with BGH Capital and Ontario Teachers’ Pension Plan Board to acquire Abano at $5.70 a share.
This column has been a strong critic of schemes of arrangement, but there is a huge difference between contestable and noncontestable schemes. The Abano contestable process enabled shareholders to receive a 63 per cent premium over the company’s pre-announcement share price whereas OGOG’s first offer at 62c represented a share price premium of only 25 per cent. Its revised offer, at 74c, was a 49 per cent premium but minority shareholders had turned against the offer at this stage because of the unacceptable response by NZOG’s independent directors to the earlier offer.
Abano Healthcare shareholders are much happier than their NZOG counterparts while James Dunphy and Pip Dunphy can feel very satisfied with their week’s work.