COVID-19 is having a significant impact on businesses and economies globally. The global impacts are expected to be substantial and continue for the foreseeable future.
Afimilk operates in markets currently most impacted by COVID-19 namely Europe, USA and China. While the long-term impact is uncertain, there will be at least a short-term impact on the Afimilk business.
In addition, given current border closures and other movement restrictions, an efficient transfer of governance will be difficult.
As outlined in the Notice of Meeting, the parties were discussing and are continuing to discuss a potential sale by LIC of complementary parts of its automation business to Afimilk. These discussions are continuing but some due diligence activity has had to be deferred given the travel restrictions in place.
Material Impact on Price
There is a material current impact on the LIC acquisition price.
The Notice of Meeting assumed an NZD/USD exchange rate of 0.64 for the purpose of setting out the financial aspects of the transaction in New Zealand dollars. At 10:00am NZ time on 20 March 2020 this rate had reduced to 0.5675.
Assuming an exchange rate of 0.5675 on 1 June 2020 the amount required to be paid by LIC for the proposed 50% stake in Afimilk would increase from NZD108.7m to NZD123.3m, an increase of NZD14.6m.
While the acquisition is conditional on there being no material adverse effect specifically affecting the Afimilk business, the definition contains a number of typical exclusions (and excludes pandemics). The agreement does not give LIC the ability to unilaterally defer the acquisition.
The acquisition remains conditional on a number of other matters (including LIC shareholder approval). If LIC shareholders do not approve the acquisition, the LIC shareholder approval condition will not be met.
As previously advised, in light of COVID-19, the unprecedented measures required to prevent the spread of the virus and the Government’s directions about gatherings at indoor events, the format of this meeting has been changed from an in-person meeting to a virtual meeting.
The Special Meeting scheduled for 7 April 2020 will now be livestreamed so shareholders can attend and participate online only.
Shareholders can vote for or against electronically (at investment.lic.co.nz or on LIC’s website), by post or by appointing a proxy until 10.30am on Sunday 5 April.
The details for the online meeting are:
10:30am Tuesday 7 April 2020 with online registration from 10:15am
The meeting will be livestreamed on the LIC website.
To register for the online meeting you will need your participant code(s).
No physical meeting will be held.
The Board considers that this is a very prudent step to protect our staff and shareholders, and to ensure business continuity.
For further information, see the Market Announcement and the Chairman's letter.