WAV/RULE: WFD: WFD - Application for Waiver from NZSX Listing Rule 9.2.1

11 May 2010 1:12 pm

WFD 11/05/2010 WAV/RULE

REL: 1312 HRS Wakefield Health Limited

WAV/RULE: WFD: WFD - Application for Waiver from NZSX Listing Rule 9.2.1

16 March 2010

NZX Regulation Decision Wakefield Health Limited Application for Waiver from NZSX Listing Rule 9.2.1

Background 1. Wakefield Health Limited ("WFD") is an NZSX Listed Issuer ("Issuer").

2. Norfolk Investments Limited ("Norfolk"), through its wholly owned subsidiary Norfolk Ventures Limited, has a 60% interest in Grace Hospital ("Grace").

3. WFD wishes to gain exposure to Grace by acquiring control of Norfolk and intends to do so by making a full cash takeover offer to acquire all of the ordinary shares in Norfolk ("Offer").

4. Assuming the Offer is fully accepted, the aggregate consideration will be $22.55 million.

5. Mr John Calder, a Director of WFD, is a trustee and beneficiary of the Ranolf Trust ("Ranolf")(the other trustees of Ranolf are Cushla Calder and GL Ingham Trustee Co Ltd). Together the trustees of Ranolf hold 487,459 ordinary shares in Norfolk, representing 7.64% of Norfolk's ordinary shares on issue.

6. In anticipation of the Offer, WFD has entered into letters of agreement with a number of Norfolk's shareholders under which, subject to the satisfaction of certain conditions, they have committed to accept the Offer ("Acceptance Commitment"). Included in the shareholders that WFD has obtained such an Acceptance Commitment from is Ranolf.

7. As Ranolf is deemed to be an Associated Person of Mr Calder under NZSX Listing Rule ("Rule") 1.8.3(b), and Mr Calder is a Director of WFD, Ranolf is a Related Party of WFD.

8. WFD's Average Market Capitalisation is approximately NZ$99,705,950. As such, the Offer will constitute a Material Transaction under Rule 9.2.2(a).

9. Rule 9.2.1 restricts an Issuer entering into a Material Transaction if a Related Party is, or is likely to become, a direct or indirect party to the Material Transaction, or to at least one of a related series of offers of which the Material Transaction forms part.

10. Accordingly, as WFD will seek to acquire shares under the Offer from Ranolf, and has obtained an Acceptance Commitment from Ranolf in respect of this, on the same terms as are being offered to other Norfolk shareholders, Rule 9.2.1 requires WFD to obtain prior shareholder approval of the Offer.

Application

11. WFD has approached NZX Regulation ("NZXR") seeking a waiver from the requirement of Rule 9.2.1 to obtain shareholder approval for the Offer, to the extent that Ranolf will be one of the shareholders to whom the Offer is made, and from whom WFD has obtained an Acceptance Commitment. In support of its application, WFD submits that:

(a) The purpose of Rule 9.2.1 is to prevent a person from obtaining favourable consideration from a transaction with an Issuer because of that person's relationship with the Issuer.

(b) Policy Grounds In this case: (i) Mr Calder has not participated in discussions around, or voted on, any WFD board decision in respect of the Offer. Accordingly, Mr Calder has not exercised any influence (let alone undue influence) in respect of WFD's decision to proceed with the Offer. (ii) Under rule 20 of the Takeovers Code, WFD is required to make an Offer to all Norfolk's shareholders on the same terms. This means that Ranolf will receive the same consideration per share as every other Norfolk shareholder that accepts the Offer. Accordingly, there is no value transfer from WFD to Ranolf under, or in connection with, the Offer. (iii) Neither Ranolf, nor Mr Calder, will be paid any fee or receive any payment in connection with the Offer (other than the consideration for the Ranolf shares). No payment will be made to Ranolf in consideration for its entering into the Acceptance Commitment.

(c) No Material Influence (i) Footnote 1 to Rule 9.2.1 states that NZX may grant a waiver from the Rule if it is satisfied that the personal connections with, or involvement or personal interest of, the Related Party are immaterial or plainly unlikely to have influenced the promotion of the proposal or its terms and conditions. (ii) As noted above, Mr Calder has abstained from board decisions, and has not participated in board discussion, in respect of the Offer. In addition, Ranolf is not a material shareholder in Norfolk, holding only 7.64% of Norfolk's issued share capital. Further, WFD advises that the purpose of the Offer is to gain exposure to Grace, and not to deliver any economic benefit to Ranolf. It should be noted that Norfolk's business (or more particularly, the operation of Grace in which Norfolk has a 60% interest) is entirely consistent with the business conducted by WFD and the reasons for the proposal are well articulated in the market release made by WFD on 10 March 2010. Accordingly, WFD submits that the criteria set out in Footnote 1 are satisfied in these circumstances.

(c) Materiality The price to be paid by WFD for the Norfolk shares to be acquired from Ranolf Trust will be well below the Material Transaction threshold. Therefore, on a stand-alone basis, the acquisition of those shares would not offend Rule 9.2.1.

(d) Commercial Practicality (i) WFD considers that it is not practical, and may be commercially prejudicial, for it to be required to seek shareholder approval in light of the fact that competing bidders for Norfolk may emerge now that the Offer has been made public. This would cost WFD the initiative in any competitive process. Notably, one other party has already expressed an interest in making an offer to acquire Norfolk's interest in Grace directly. There are commercial reasons for WFD electing not to structure its proposal as the purchase of the partnership interest. While, economically, an offer so structured would deliver the same outcome to WFD, it would not give rise to any related party

issues under the Rules. It is submitted that WFD ought not be prejudiced by this election. (ii) These timing issues are exacerbated by the requirement for WFD to obtain any necessary shareholder approvals prior to making the Offer (as the Takeovers Code prohibits WFD from making the bid conditional on such approvals being obtained).

(e) Shareholder Protection (i) The NZX Policy Statement Policy on applications for waivers in Associated Party offers (dated 31 March 1993, Restated September 2005) states: "Any waiver application from NZSX ... Listing Rule 9.2 ... needs to provide adequate reasons why NZX should grant the waiver. For example, NZX will usually require comfort, including disinterested Director certification, that the Material Transaction was for fair value and the decision to enter the Material Transaction was made independently without undue influence by the Associated Persons." (ii) WFD believes that the conditions that it has proposed address these concerns, as they provide for certification by non-associated directors, and reserve the decision to proceed with the Offer to the directors with no interest in the Offer. As such, WFD submits that the proposed conditions to the waiver (as accepted by NZXR below) establish appropriate and sufficient shareholder protections that are consistent with the policy grounds for the Related Party offer Rules.

(f) Precedent (i) WFD understands that NZXR's policy on waivers from Rule 9.2 is encompassed in the Policy Statement referred to in section (e) above. (ii) While WFD is not aware of any waivers being granted by NZXR in respect of circumstances the same as set out in this application, NZXR granted the ING Property Trust a waiver on 1 December 2005 to allow it to acquire units in the IMP Medical Properties Trust held by certain of its substantial security holders pursuant to an Offer made in accordance with the Rules. Accordingly, there is some indirect precedent for the current waiver.

(g) Effect on Shareholders (i) The granting of a waiver from Rule 9.2 will have no adverse effects for WFD shareholders. To the contrary, it will enable WFD to avoid the costs and delays associated with obtaining an appraisal report and convening a shareholders meeting in circumstances where, but for the Related Party relationship, no report or meeting would be required.

(ii) To support this, the directors of WFD are prepared to certify that the Offer is to be made at fair value, is fair and reasonable to the non-associated shareholders, and represents an important element in WFD's growth strategy that would have been pursued on the same terms irrespective of Mr. Calder's position.

Rules

12. Rule 9.2.1 provides: 9.2.1 An Issuer shall not enter into a Material Transaction if a Related Party is, or is likely to become: (a) a direct or indirect party to the Material Transaction, or to at least one of a related series of Offers of which the Material Transaction forms part; or (b) in the case of a guarantee or other Offers of the nature referred to in paragraph (d) of the definition of Material Transaction, a direct or indirect beneficiary of such guarantee or other Offer; unless that Material Transaction is approved by Ordinary Resolution of the Issuer.

13. Rule 9.2.2 provides: For the purposes of Rule 9.2.1, "Material Transaction" means a Offer, or a related series of Offers, whereby an Issuer: (a) purchases or otherwise acquires, gains, leases (as lessor or lessee) or sells or otherwise disposes of, assets having an aggregate Net Value in excess of 10% of the Average Market Capitalisation of the Issuer; or

14. Footnote 1 to Rule 9.2.1 provides:

NZX may waive the requirement to obtain the approval of a resolution for the purposes of Rule 9.2.1 if it is satisfied that the personal connections with, or involvement or personal interest of, a Related Party are immaterial or plainly unlikely to have influenced the promotion of the proposal to enter into the Offer or its terms and conditions.

Decision

15. On the basis that the information provided to NZXR is full and accurate in all material respects,NZXR grants WFD a waiver from the requirement to obtain shareholder approval of the Offer, on the following conditions: (a) The directors of WFD, other than Mr Calder, certify to NZXR that: (i) they are not Interested (in terms of NZSX Listing Rule 3.4.3) in the Offer; (ii) the entry into, and performance of, the Offer is fair and reasonable to WFD shareholders, other than shareholders Associated with Mr Calder, and is in the best interests of WFD; (iii) WFD will, from WFD's perspective, pay and receive (as the case may be) fair value under the Offer; (iv) the decision to proceed with the Offer was unanimously approved by the directors other than Mr Calder, and Mr Calder abstained from, and did not participate in, discussion in respect of board decisions to proceed with the Offer. (b) Mr Calder abstains from, and will not participate in, discussions in respect of, board decisions to proceed with, or relating to the terms of, the Offer.

Reasons

16. In coming to its decision to grant WFD a waiver from Rule 9.2.1, NZXR considered the following matters: (a) The policy behind Rule 9.2.1 is to regulate transactions in which a person may, by virtue of their relationship with the Issuer, gain favourable consideration or influence the proposal to enter into a transaction. (b) WFD wishes to gain exposure to Grace and, to do so, intends to acquire all of the shares in Norfolk from its existing shareholders, a minority holder (7.64%) of which is Ranolf. While Ranolf will be a party to the Offer, the acquisition of shares from Ranolf forms one component of the Offer, which will be made to all of Norfolk's shareholders on the same terms. (c) The aggregate acquisition of shares from Norfolk's shareholders, and disposition of cash under the Offer constitutes a Material Transaction. As the acquisition of shares from Ranolf does not constitute a Material Transaction in, and of, itself, WFD could obtain Ranolf's interest in Norfolk without obtaining shareholder approval should this occur in the absence of an Offer to all Norfolk shareholders. The fact that the acquisition of shares, and corresponding payment, is occurring as one component of the wider Offer does not increase, and arguably decreases, the likelihood that Ranolf may obtain favourable consideration under the Offer as a result of its relationship with WFD. (d) NZXR has been informed, and has no reason to believe otherwise, that Mr Calder has abstained from, and has not participated in discussions in respect of, the decision by WFD's board to make the Offer and NZXR will receive certification to this effect. (e) Accordingly, NZXR is satisfied that the policy behind Rule 9.2.1 is not offended by the proposed Offer, including Ranolf's participation, and will therefore not be impugned by the granting of this waiver.

Confidentiality

17. WFD has requested that this application, and any ensuing decision, remain confidential until the time WFD sends a takeover notice to Norfolk in accordance with the requirements of the Takeovers Code. NZXR grants this request, as it conforms with the policy contained in footnote 1 to Rule 1.11.2.

ENDS.

NZX Regulation Decision - Wakefield Health Limited Application for waiver from NZSX Listing Rule 9.2.1 End CA:00194758 For:WFD Type:WAV/RULE Time:2010-05-11:13:12:22

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