DILIGENT CORP NEW ZEALAND - March 7, 2016 - Diligent Corporation (NZX: DIL) filed its preliminary proxy statement1 with the U.S. Securities and Exchange Commission (the "SEC") on March 4, 2016 (New York time) in connection with a special meeting of shareholders to be held regarding the merger between Diligent and entities affiliated with funds managed by Insight Venture Partners, LLC. Shareholders are advised that the record date for receiving a copy of the definitive proxy statement and voting at the special meeting has been set as the close of trading on March 11, 2016 (New Zealand time). If you are not a shareholder at such time you will not receive a copy of the definitive proxy statement when available or be eligible to vote at the special meeting. Diligent expects to hold the special meeting in April, 2016, with the date to be finalized by the Board of Directors at the time Diligent files its definitive proxy statement with the SEC.
The proxy statement was filed with the SEC in preliminary form in accordance with the requirements of the Securities Exchange Act of 1934 ("Exchange Act"), which requires Diligent to submit proxy statements for non-routine matters to the SEC at least 10 calendar days prior to the date definitive copies of such material are first sent or given to security holders. The preliminary proxy statement has been provided to NZX for its review and approval as required by the Listing Rules of the NZX Main Board. NZX has not approved the preliminary proxy statement filed with the SEC and NZX's review may result in changes being made before the document is finalized and distributed to the Company's shareholders.
Diligent has prepared the Q&A below relating to questions commonly asked by New Zealand shareholders regarding the pending Merger.
Q&A for New Zealand Holders
No. The Takeovers Code only applies to companies incorporated in New Zealand and Diligent is incorporated in the State of Delaware (U.S.) and based in New York.
Do the NZX Rules apply to the transaction?Yes. The NZX Main Board Listing Rules (NZX Rules) in relation to takeovers for non-code companies apply to Diligent. Many of the NZX Rules do not apply to a merger under U.S. law, which does not involve a
1 A proxy statement is a disclosure document filed under U.S. securities laws. It is filed with the U.S. Securities and Exchange Commission in connection with the company's special meeting and the request for shareholder votes on the shareholder resolutions presented in the disclosure document.
1
restricted transfer of shares. On February 12, 2016 (New Zealand time), Diligent obtained a waiver from NZX for certain of the NZX Rules that would apply to the transaction due to the terms of the merger agreement and voting agreements negotiated. The reasons for these waivers are set out in NZX Regulation's decision which is available on NZX's website. The Company will also be seeking the necessary approvals from shareholders under the NZX Rules. Further details in this regard will be provided in a notice of special meeting after it is approved by NZX and the SEC for sending to shareholders.
Why is the approval threshold a simple majority and not 90%?The deal is structured as a merger, which is the U.S. version of an amalgamation in New Zealand. Under Delaware law the threshold for approval is a majority of all outstanding shares entitled to vote, regardless of whether they are voted. This means that if a shareholder abstains from voting, they are effectively voting against the Merger. Therefore, if shareholders are in favour of the Merger, it is imperative that they vote in favour of it in person or by proxy. Further, details of how shareholders can vote will be provided in Diligent's definitive proxy statement.
In the U.S. a merger is a common method by which a takeover may be conducted. Given the premium, we expect that a significant number of shareholders will support the deal and we hope that the threshold will be met.
Is there an exchange rate risk to shareholders outside the United States?Yes. Insight's offer is denominated in U.S. dollars. Merger consideration payable to shareholders who receive payment in New Zealand dollars pursuant to the procedures described below will be converted at the spot exchange rate following the closing date of the Merger. Non-U.S. shareholders who receive U.S. dollar merger consideration, but decide later to convert their proceeds into another currency, will be subject to the applicable exchange rate in effect at the time of the conversion, which may be more or less favourable than the rate at the time of the Merger.
Yes. If you are a non-U.S. shareholder and have previously provided New Zealand dollar bank account details to Link Market Services, you will be deemed to have elected to receive your merger consideration in New Zealand dollars pursuant to your prior arrangements with Link Market Services. No foreign exchange conversion fee will apply as the exchange costs will be reflected in the applicable exchange rate.
If you have not previously provided your New Zealand dollar bank account details to Link Market Services and wish to receive your merger consideration in New Zealand dollars, you will be able to do so prior to the special meeting by completing a bank account details form, which will be enclosed with the notice of special meeting. No foreign exchange conversion fee will apply as the exchange costs will be reflected in the applicable exchange rate.
If you have not previously provided New Zealand dollar bank account details to Link Market Services, and you do not elect to receive New Zealand dollars, by completing and returning the bank account details form to be enclosed with the notice of special meeting prior to the special meeting, you will receive U.S. dollars as merger consideration regardless of your country of residence. The merger consideration will not be paid by U.S. dollar cheque and will be held until such time as you provide a bank account. Any
subsequent conversion of such U.S. dollar payment will be subject to the applicable exchange rate at the time of the conversion, which may be more or less favourable than the rate at the time of the Merger.
Below are examples of how foreign exchange rate fluctuation could affect the amount of New Zealand dollars you receive:
No. of shares | U.S. dollar merger consideration | N.Z. dollar to U.S. dollar exchange rate | N.Z. dollar equivalent |
1,000 | US$4,900 | 0.64 | NZ$7,656.25 |
1,000 | US$4,900 | 0.67 | NZ$7,313.43 |
1,000 | US$4,900 | 0.70 | NZ$7,000.00 |
No. The merger consideration will only be payable in U.S. dollars or, for those shareholders that have, prior to the special meeting, elected to receive the merger consideration in New Zealand dollars, converted into New Zealand dollars. You will be paid in U.S. dollars to your nominated foreign bank account to be provided on the bank account details form. The payment will be subject to the applicable exchange rate at the time of the conversion into the foreign currency account on the terms provided by your bank.
For shareholders receiving New Zealand dollars, the exchange rate is expected to be determined following the special shareholders' meeting. Shareholders will be informed of the exchange rate on the individual payment advice sent to them and Diligent will disclose the exchange rate on its website.
Yes. If you have previously provided Link Market Services with New Zealand dollar bank account information, you can elect to receive U.S. dollars, provided that you hold a Foreign Currency Account denominated in U.S. dollars. An election form will be sent to shareholders with the notice of special meeting, which must be completed and returned prior to the special meeting.
If you elect to receive U.S. dollars, you will be responsible for any foreign exchange conversion and processing fees in converting the U.S. dollars you receive into another currency in the future.
U.S. dollar merger consideration will be held in trust for you until (i) it is claimed by you by providing your bank account details, (ii) it is remitted to the surviving company under the merger agreement at which point you will be a general creditor of the surviving company or (iii) until it is surrendered as unclaimed
money to the government. When claimed, the payment will be subject to the applicable exchange rate at the time of the conversion into another currency. The exchange rate at that time may be more or less favourable than the rate at the time of the Merger.
Diligent's New Zealand tax resident shareholders ("N.Z. Holders") need to consider the New Zealand foreign investment fund (referred to as "FIF") taxation rules for New Zealand tax purposes. The FIF rules generally apply where an N.Z. Holder holds shares in one or more companies that are not New Zealand tax residents (each a "foreign company"), unless the N.Z. Holder is a natural person or a trustee and the aggregate cost of the foreign company shares held by that N.Z. Holder is NZ$50,000 or less. N.Z. Holders holding foreign company shares costing NZ$50,000 or less can, however, elect voluntarily to apply the FIF rules. Diligent is a foreign company for the purposes of the FIF taxation rules and when the NZ$50,000 test is applied both the N.Z. Holder's Diligent shares and their other foreign company shares will be taken into account.
Where an N.Z. Holder is required (or elects) to apply the FIF rules, all of the New Zealand tax it pays with respect to its investment in each foreign company will be calculated under special rules that annually attribute part of the foreign company's deemed income to the N.Z. Holder each year the N.Z. Holder has shares in the foreign company. Any realised gains the N.Z. holder receives from the foreign company (including on the cancellation of a foreign company's shares) or from selling the foreign company's shares are not separately taxed.
Where an N.Z. Holder is not required to apply the FIF rules (and does not elect to apply the FIF rules voluntarily), they will only pay New Zealand tax on realised gains they obtain from their investment in the foreign company. These will include any dividend amounts the foreign company pays them. They will not be required to pay tax on any profit they realise from selling the foreign company's shares unless the foreign company shares were acquired with a dominant purpose of resale or as part of a share dealing business.
Given these rules, the amounts each N.Z. Holder receives in exchange for the cancellation of their Diligent shares in the Merger will have different New Zealand tax consequences depending on whether the N.Z. Holders apply FIF rules to their investments in foreign companies. Specifically:
If an N.Z. Holder applies the FIF rules to their foreign company investments any gains they receive when their shares are cancelled should not be separately taxable.
If an N.Z. Holder does not apply the FIF rules to their foreign company investments the full amount they receive for the cancellation of their shares in the Merger may be treated as a taxable dividend. If such N.Z. Holder sells its Diligent shares before the first merger occurs, none of the proceeds should be subject to New Zealand tax (unless the shares were acquired with the dominant purpose of disposal or as part of a share dealing business).
Because particular circumstances may differ, we recommend that you consult your own tax advisor to determine the New Zealand income tax consequences relating to the Merger in light of your own
Diligent Corporation issued this content on 07 March 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 06 March 2016 19:49:15 UTC
Original Document: http://s2.q4cdn.com/359627974/files/doc_news/2016/March/Company’s-Filing-of-Preliminary-Proxy-Statement-and-Q-A-for-New-Zealand-Holders.pdf
