NZXR waiver from LR 5.2

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







10 June 2020

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Waiver from Listing Rule 5.2.1
Decision
1. Subject to the conditions set out in paragraph 2 below, and on the basis that the information
provided by AFT is complete and accurate in all material respects, NZX Regulation (
NZXR
)
grants AFT a waiver from NZX Listing Rule (
Rule
) 5.2.1, to the extent that this Rule would
otherwise require AFT to obtain the approval of shareholders to enter into the Underwriting
Agreement.
2. The waiver in paragraph 1 above is provided on the conditions that:
a. the Independent Directors of AFT certify to NZXR that:
i. the terms of the Underwriting Agreement have been entered into, and negotiated,
on an arm’s length and commercial basis;

ii. AFT was not unduly influenced to enter into the Underwriting Agreement by the
Sellers; and

iii. the entry into, and performance, of the Underwriting Agreement is in the best
interests of AFT.

b. The Directors associated with CRG and AF Trust have not, and will not, be involved in
AFT board negotiations or resolution(s) to approve the Underwriting Agreement.

c. The waiver, its conditions and implications will be disclosed in AFT’s next annual
report.

3. The information on which this decision is based is set out in Appendix One to this decision.
This waiver will not apply if that information is not or ceases to be full and accurate in all
material respects.
4. The Rule to which this decision relates is set out in Appendix Two to this decision.
5. Capitalised terms which have not been defined in this decision have the meanings given to
them in the Rules.
Reasons
6. In coming to the decision to provide the waiver set out in paragraph 1 above, NZXR has
considered that:
a. The policy of Rule 5.2.1 is to ensure that a Related Party does not exercise undue
influence or use personal connections to reach a favourable outcome for, or a transfer
of value to, the Related Party in respect of a transaction and that shareholders are
given an opportunity to review transactions where the board may have been subject to
actual or perceived influence from a Related Party.
b. AFT submits, and NZXR has no reason not to accept, that these circumstances are not
applicable because:
i. the Underwriting Agreement will be on market-standard terms, and negotiated
with the Underwriters on an arms’ length and commercial basis;

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ii. the Sellers will be giving customary representations and warranties regarding their
shares in the Underwriting Agreement, and will pay their proportional share of the
cost of the underwrite;
iii. the price that the Sellers receive for their existing shares under the Initial Offer will
be the same price as is received by AFT for the new shares under the Initial Offer,
and will be an arm’s length, market price agreed as between AFT, the Sellers and
the Underwriters, being the underwritten price or such greater clearing price under
the bookbuild (
Initial Offer Price
);
iv. AFT’s Independent Directors, none of whom are associated with the Sellers, will
be required to approve the launch of the Offer. A subcommittee of any two of
those Independent Directors will be required to approve on behalf of AFT the
Initial Offer Price;
v. the Sellers’ participation in the Offer will be fully disclosed to AFT’s shareholders;
vi. there will not be any feature of AFT’s participation in the Offer or the Underwriting
Agreement that will be unduly influenced by the fact that Related Parties of AFT
are involved in the Offer or party to the Underwriting Agreement; and
vii. the Initial Offer is in the best interests of AFT and AFT shareholders who are not
associated with the Sellers because the Initial Offer will:
i. increase AFT’s free float;
ii. provide greater liquidity for investors;
iii. allow for an increased participation by retail and institutional investors
(including an expected broadening of the AFT shareholder base through
the introduction of new investors); and
iv. allow AFT to access new capital to allow it to repay debt, which will
reduce its borrowing costs.
Confidentiality
7. AFT has requested that this decision be kept confidential until AFT releases an
announcement relating to the Offer.
8. In accordance with Rule 9.7.2, NZXR grants AFT’s request.

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Appendix One
1. AFT Pharmaceuticals Limited (
AFT
) is a Listed Issuer with ordinary shares quoted on the
NZX Main Board.
2. AFT is considering undertaking a capital raising that would comprise an offer of
approximately $10 million new ordinary shares in AFT to selected investors (the
Placement
).
3. Alongside the Placement:
a. CRG
1
is proposing to offer all of the 16,067,045 existing shares held by them (being
15.99% of the shares currently on issue in AFT) (
CRG Sell Down
); and
b. Hartley Atkinson and Colin McKay as trustees of the Atkinson Family Trust (
AF Trust,

and together with CRG, the
Sellers
) are proposing to offer $3.5 million of existing
shares held by them (
AF Trust Sell Down
),
to selected investors. Although initiated independently, it is proposed that the Placement be
conducted contemporaneously with the CRG Sell Down and AF Trust Sell Down, such that
they will be presented as a single placement and offered to eligible investors under one
bookbuild (the Placement, CRG Sell Down and AF Trust Sell Down together, the
Initial
Offer
).
4. Following the Initial Offer, AFT proposes to undertake a share purchase place (
SPP
)
offering up to $2 million new shares to AFT’s existing shareholders (the Initial Offer and the
SPP together being the
Offer
).
5. The Initial Offer will be underwritten by Forsyth Barr Group Limited and Bell Potter Securities
Limited (together the
Underwriters
) and undertaken at a price agreed to between AFT, the
Sellers and the Underwriters (being the underwritten price or such greater clearing price
under the bookbuild).
6. AFT has an Average Market Capitalisation (
AMC
) of approximately $470 million. An
issuance of approximately $10 million new shares in AFT under the Placement would
constitute approximately 2.14% of the current AMC of AFT. The aggregate proceeds from
the issue of new shares and the sale of existing shares under the Initial Offer will be greater
than 10% of AFT’s AMC.
7. Each of the Sellers is a Related Party of AFT, for the following reasons:
a. In the case of CRG:
i. CRG is the holder of a Relevant Interest in more than 10% of the shares in AFT
currently on issue; and
ii. CRG is an Associated Person of Nathan Hukill, a Director of AFT who is also a
managing partner of CR Group L.P., the manager of CRG.

1
For the purposes of this decision, Capital Royalty Partners II – Parallel Fund B (Cayman) L.P., Capital Royalty Partners II – Parallel Fund A L.P.,
Capital Royalty Partners II L.P., Capital Royalty Partners II (Cayman) L.P. are referred to collectively as “CRG”.

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b. In the case of AF Trust:
i. AF Trust is the holder of a Relevant Interest in more than 10% of the shares in AFT
currently on issue;
ii. Hartley Atkinson, one of the two trustees of the AF Trust, is a Director of AFT; and
iii. Marree Atkinson, the wife of Hartley Atkinson, is a Director of AFT.
8. Each of AFT, CRG and AF Trust will provide certain indemnities to the Underwriters in the
placement and sell down agreement to be entered into between the Underwriters, AFT and
the Sellers (the
Underwriting Agreement
) in the event that the Underwriters incur losses in
connection with the Underwriting Agreement.
9. In accordance with the Underwriting Agreement, AFT would be exposed to liability above
10% of its AMC in the unlikely event that the Underwriters incur a loss of an amount greater
than 10% of AFT’s AMC as a result of the Underwriters involvement in the Initial Offer.
10. The Offer constitutes a Material Transaction as defined in the Rules as it involves AFT
entering into an Underwriting Agreement which could expose AFT to liability above 10% of
its AMC.
11. The Sellers, as sellers of shares under the Initial Offer, are parties to the Underwriting
Agreement, together with AFT and the Underwriters. Therefore, the Sellers as Related
Parties are direct parties to the Material Transaction, triggering the shareholder approval
requirements of Rule 5.2.1.
12. AFT sought a waiver from Rule 5.2.1 to the extent that that Rule would otherwise require
AFT to obtain shareholder approval to enter into the Underwriting Agreement.

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Appendix Two


Rule 5.2.1 Transactions with Related Parties

Rule 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 Material
Transaction,

unless that Material Transaction is approved by an Ordinary Resolution (such
resolution being subject to the voting restrictions in Rule 6.3) or conditional on
such approval.