Waiver from NZX LR 5.2.1

NZX Regulation Decision
Infratil Limited (“IFT”)
Application for a waiver from NZX Listing Rule 5.2.1








22 May 2020

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Waiver from Rule 5.2.1
Background
1. NZX has updated the NZX Listing Rules (Rules), effective from 1 January 2020. This
waiver decision re-documents a prior waiver decision granted by NZX Regulation (NZXR)
dated 8 May 2017.

2. The information on which this decision is based is set out in Appendix One. This waiver
will not apply if that information is not, or ceases to be, full and accurate in all material
respects.
3. The Rules to which this decision relates are set out in Appendix Two.
4. Capitalised terms that are not defined in this decision have the meanings given to them in
the Rules.
Decision
5. Subject to the conditions set out in paragraph 6 below, and on the basis that the information
provided by Infratil Limited (IFT) is complete and accurate in all material respects, NZX
Regulation (NZXR) grants IFT a waiver from NZX Listing Rule (Rule) 5.2.1 to the extent
required to allow IFT (and related entities of IFT as contemplated by paragraph (b) of the
Issuer definition in the Rules) to enter into Transactions with Co-Investors without obtaining
shareholder approval.

6. The waiver in paragraph 5 above is provided on the conditions that:

(a) the waiver would only apply to a Transaction where IFT is not otherwise required
to obtain approval of its shareholders for the Transaction (or a specific waiver has
been obtained);

(b) IFT notifies NZXR, prior to entry into any Transaction in reliance on the waiver,
that it is intending to enter into the Transaction and that IFT is not otherwise
required to obtain approval of its shareholders for the Transaction or a specific
waiver has been obtained;

(c) if IFT enters into any Transaction in reliance on the waiver it will announce to the
market that the Transaction was entered into in reliance on the waiver and the
reasons why reliance on the waiver was required;

(d) all Non-Interested Directors of IFT certify to NZXR, at or around the time of
announcing the Transaction, that:

i. the Transaction has been entered into and negotiated on an arm's length
commercial basis;

ii. in their opinion, entry into the Transaction is fair and reasonable to, and in
the best interests of, IFT and its shareholders who are not related to, or
Associated Persons of, MCO (or any MCO-related Entity) or the Co-
Investor(s); and

iii. none of MCO, or the Director(s) of IFT who are Associated Persons of
MCO (or any MCO-related Entity) or the Co-Investor(s), have unduly
influenced the promotion of, or decision to enter into, the Transaction, or

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voted on any resolution to approve the Transaction;

(e) IFT may only enter into a Transaction in reliance on the waiver where any fees
payable by IFT to MCO or any MCO-related Entity in connection with the
Transaction are:

i. fees payable in accordance with existing management agreements with
MCO or any MCO-related Entities; or

ii. any fee arrangements otherwise permitted or not prohibited by the Rules
(due to a transaction specific waiver, shareholder approval or otherwise);

(f) IFT and the Co-Investor(s) will each make their investment or divestment:
i. on the same or materially alike terms and at the same price for the interests
acquired or disposed of, or for a price that has the same economic effect
(in each case proportionate to the interests acquired or disposed of); or

ii. to the extent that the terms or price do not meet these conditions, the Non-
Interested Directors shall certify that in their opinion the differences in the
terms or the price (as applicable) are fair and reasonable to, and in the
best interests of, IFT and its shareholders who are not related to, or
Associated Persons of, MCO (or any MCO-related Entity) or the Co-
Investor; and

(g) the waiver, its conditions and its implications are disclosed in IFT’s annual reports
from when the waiver is announced to market, and any Transaction entered into
in reliance on this waiver is disclosed in IFT’s next annual report following the
Transaction being entered into.

Reasons
7. In coming to the decision to provide the waiver set out in paragraph 5 above, NZXR has
considered that:

a. rule 5.2.1 seeks to regulate transactions where there is, or there may be a perception
of, the potential for undue influence by a Related Party on an Issuer’s decision to enter
into a Material Transaction or agree to its terms. NZXR may waive the requirement to
obtain approval of a Material Transaction if it is satisfied that the personal connections
with, or involvement or personal interest of any Related Party are immaterial or plainly
unlikely to influence the promotion of, or the decision to enter into, the Material
Transaction or its terms and conditions. The granting of this waiver will not offend the
policy behind Rule 5.2.1;

b. IFT has submitted, and NZXR has no reason not to accept, that a Co-Investor is
unlikely to influence entry into or the terms of a Transaction, as:

i. entry into, and the terms of, any Transaction is to be negotiated on an arm’s length
commercial basis;

ii. IFT and the Co-Investor(s) will each make their investment or divestment under
the Transaction on terms pursuant to the condition at paragraph 6(f); and

iii. decisions to enter into any Transaction which has the benefit of waiver relief will
be made by IFT’s Non-Interested Directors and the MCO-related Directors, or their
alternates, will not vote on the decision by IFT to enter into the Transaction;

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c. IFT has submitted, and NZXR has no reason not to accept, that it is often not practical
to seek shareholder approval for a Transaction with Co-Investors. IFT has further
submitted that individual waiver applications or seeking shareholder approval creates
transaction risk and that a standing waiver for Co-Investor relationships will increase
the efficiency with which IFT can transact while the interests of shareholders can be
protected with conditions outlined in the waiver;

d. the certifications that will be provided by IFT’s Non-Interested Directors as a condition
of the waiver provide comfort that any Transaction will be negotiated, and entered into,
on an arm’s length commercial basis and that the MCO-related Directors have not
exercised any undue influence over the board of IFT in its decision in respect of the
Transaction;

e. NZXR has granted numerous transaction specific waivers in the past that are of the
same or similar scope as this waiver; and

f. while standing waivers are generally uncommon, the conditions to this waiver ensure
that IFT provides NZXR with advanced notice of any Transaction.

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Appendix One

1. IFT is a Listed Issuer with Financial Products Quoted on the NZX Main Board and the NZX
Debt Market.

2. IFT receives investment management and advisory services from Morrison & Co Infrastructure
Management Limited, a MCO-related Entity. For the purposes of this decision:

a. MCO means H.R.L Morrison & Co Group LP;

b. Related Entity has the meaning given to “related company” in section 2(3) of the
Companies Act 1993, except that “company” shall mean a company or other body
corporate wherever incorporated; and

c. MCO-related Entity means a Related Entity of MCO.

3. IFT’s Board has always included one or more Directors associated with MCO (MCO-related
Directors). Currently there is one MCO-related Director, namely Marko Bogoievski. MCO
itself is also technically a Senior Manager of IFT
1
and IFT has other Senior Managers who are
associated with MCO (each an MCO-related Senior Manager). Due to the relationship
described at paragraph 2, it is expected that the IFT Board will continue to include MCO-
related Directors and IFT will continue to have MCO-related Senior Managers. IFT’s Board
composition is subject to:

a. potential MCO-related Directors being nominated for appointment;

b. Shareholders approving the appointment; and

c. the Independent Director requirements in the Rules.

4. IFT often invests through a consortium, with one or more co-investors that are also managed
or advised by an MCO-related Entity (Co-Investor).

5. For the purposes of Rule 5.2.1, IFT and a Co-Investor may be Related Parties
because:

a. IFT and the Co-Investor each receive investment management and advisory services
from MCO-related Entities;

b. MCO-related Entities are members of the MCO group and may be staffed by the same
personnel and share common directors;

c. an MCO-related Director or MCO-related Senior Manager is a Related Party of IFT;

d. an MCO-related Director or MCO-related Senior Manager could also be an Associated
Person of the Co-Investor, as the MCO-related Director or MCO-related Senior
Manager may be (for example):

i. able, directly or indirectly, to exert a substantial degree of influence over
the activities of the Co-Investor (paragraph (a) of the Associated Person
definition);

1
“Senior Manager” can include an entity under the definitions of “Senior Manager” and “Person” in the Listing
Rules and Financial Markets Conduct Act 2013.

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ii. a Director or Senior Manager of the Co-Investor (paragraph (e) of the
Associated Person definition);

iii. acting jointly or in concert with the Co-Investor (paragraph (f) of the
Associated Person definition),

as a consequence of the investment management arrangements between MCO and
the Co-Investor;

e. If an MCO-related Director or MCO-related Senior Manager is an Associated Person
of a Co-Investor, then IFT and that Co-Investor will be Related Parties as the Co-
Investor will be an Associated Person of a Director or Senior Manager of IFT (being
any MCO-related Director or MCO-related Senior Manager) in accordance with
paragraph (c) of the Related Party definition.

6. A co-investment transaction, or a divestment of such an investment by IFT and the Co-
Investor(s), may be a Material Transaction, as defined in the Rules and as amended by
IFT’s constitution, for the purposes of Rule 5.2.1 (Transaction).

7. IFT’s constitution, lowers the threshold for a Material Transaction for the purpose of
Rule 5.2.1:

a. for the purposes of paragraphs (a) – (d) of the Material Transaction definition in the
Rules, to 5% of the Average Market Capitalisation of IFT; and

b. for the purposes of paragraph (e) of the Material Transaction definition in the Rules,
0.5% of the Average Market Capitalisation of IFT.

8. This waiver provides relief for the relationship between IFT and any Co-Investor where in
entering any Transaction, the relationship would be limited to:

a. a Related Party relationship between IFT and the Co-Investor arising solely due to
management of the Co-Investor by MCO or any MCO-related Entity;

b. in relation to the Transaction, any advice being provided by MCO or any MCO-related
Entity would be under the terms of IFT’s and the Co-Investor’s own investment
management agreements (in the case of IFT, existing prior to the Transaction), or as
otherwise permitted or not prohibited by the Rules;

c. any fees to be received by MCO or any MCO-related Entity in respect of the
Transaction will be in accordance with existing agreements or as otherwise permitted
or not prohibited by the Rules. The fees may include performance fees if the
performance of the investment is successful and exceeds thresholds specified in those
agreements; and

d. outside each of those agreements, neither any consortium nor joint venture will be
charged for advice from MCO-related Entities in relation to the Transaction unless
otherwise permitted or not prohibited by the Rules.

9. IFT has submitted that any investment or divestment under a Transaction will either:

a. be on the same or materially alike terms and at the same price for the interests
acquired or disposed of, or for a price that has the same economic effect (in each case
proportionate to the interests acquired or disposed of); or

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b. to the extent that the terms or price are not those specified in paragraph 9(a), the
differences in the terms or the price (as applicable) will be fair and reasonable to, and
in the best interests of, IFT and its shareholders who are not related to, or Associated
Persons of, MCO (or any MCO-related Entity) or the Co-Investor(s).

10. An MCO-related Director may participate in Board discussions about any Transaction, but will
not vote on any resolution to enter into a Transaction. Only those IFT Directors who are not
interested in the Transaction (Non-Interested Directors) would vote on entry into any
Transaction.

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Appendix Two

Definition of Associated Person
Associated Person a person (A) is associated with, or an Associated
Person of, another person (B) if:
(a) A is able, directly or indirectly, to exert a
substantial degree of influence over the
activities of B (or vice versa),
(b) B is a body corporate and A has the power,
directly or indirectly, to exercise, or control the
exercise of, more than 50% of the Votes
attaching to the Financial Products of B (or vice
versa),
(c) A and B are Relatives or Related Bodies
Corporate,
(d) A and B are partners to whom the Partnership
Act 1908 applies,
(e) A is a director or Senior Manager of B (or vice
versa), or
(f) A and B are acting jointly or in concert,
except that:
(g) A is not an Associated Person of B merely
because:
i. A acts as a professional or business adviser
to B, without a personal financial interest in
the outcome of that advice,
ii. A’s ordinary business includes dealing in
Financial Products on behalf of others and A
is acting in accordance with the specific
instructions of B,
iii. A acts as a proxy or representative of B for
the purposes of a meeting of holders of
Financial Products, or
iv. there is another person with which A and B
are both associated,

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(h) persons will not be Associated Persons if NZX
makes a Ruling that they are not Associated
Persons.
Definition of Related Party
Related Party means a person who, at the time of a Material
Transaction, or at any time within the previous six
months, was:
(a) a Director or Senior Manager of the Issuer or
any of its Subsidiaries,
(b) the holder of a Relevant Interest in 10% or more
of a Class of Equity Securities of the Issuer
carrying Votes,
(c) an Associated Person of the Issuer or any of the
persons referred to in (a) or (b), except where
the person becomes an Associated Person as a
consequence of the Material Transaction, or
(d) a person in respect of whom there are
arrangements which are intended to result in
that person becoming, or expected to become, a
person described in (a), (b), or (c) other than as
a consequence of the Material Transaction,
but a person is not a Related Party of an Issuer if:
(e) the only reason why that person would
otherwise be a Related Party of the Issuer is
that a Director or Senior Manager of the Issuer
is also a Director of that person, so long as:
(i) the proportion of Directors of the Issuer
who are also Directors of that person is
one third or less, and
(ii) no Director or Senior Manager of the
Issuer has a material direct or indirect
economic interest in that person, other
than receiving reasonable Director’s fees
or executive remuneration, or

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(f) that person is a Subsidiary or incorporated joint
venture of, or unincorporated joint venture
participant with, the Issuer and:
(i) no Related Party of the Issuer has or
intends to obtain, other than through the
Issuer itself, a material direct or indirect
economic interest in that Subsidiary or
joint venture other than receiving
reasonable Director’s fees or executive
remuneration, and
(ii) the Issuer has at least 50% of the Votes in
or is entitled to at least 50% of the
dividends declared or paid by the
Subsidiary or incorporated joint venture or
is entitled to at least one half of the income
or profits, and the assets, of the
unincorporated joint venture (if and when
distributed).
5.2 Transactions with Related Parties
5.2.1 An Issuer must not enter into a Material Transaction if a Related Party is, or is likely to
become:
(a) a direct party to the Material Transaction, or
(b) a beneficiary of a guarantee or other transaction which is a Material Transaction,
unless that Material Transaction is approved by an Ordinary Resolution (such resolution
being subject to the voting restrictions in Rule Error! Reference source not found.) or
conditional on such approval.