NZX rejects Milford demands on Xero

The regulatory arm of the stock exchange has rejected a demand from Milford Asset Management that Xero’s delisting be subject to a shareholder vote.

In a statement, NZX Regulation said it had approved the delisting without conditions.

“NZX Regulation applied its standard procedures to XRO’s application,” it said.

“Its decision is consistent with analogous precedent. The decision is also aligned with standard practice applied by the ASX.”

Xero’s move involves delisting from the NZX in February and consolidating its share trading on the Australian Securities Exchange.

Yesterday Milford issued a public demand for the NZX to require a shareholder vote on Xero’s delisting or require it to buy back stock at the pre-announcement price.

Milord said it had been “severely prejudiced” by Xero’s delisting decision because its Wholesale fund, whose mandate required NZX-listed company investments, would be forced to sell its Xero holdings.

In support of the decision, NZX Regulation said the software company’s shareholders’ rights would be substantially unchanged by the move because Xero would remain subject to domestic regulation under the Companies Act and the Financial Markets Conduct Act.

New Zealand shareholders would also be able to trade readily via the the ASX.

There had been several other companies whose delistings had been approved without condition, NZX said, citing the examples of:

• APN News & Media;
• OceanaGold;
• Pan Pacific Petroleum;
• Cleanaway Waste Management;
• Bathurst Resources;
• Cue Energy Resources; and
• GuocoLeisure. 

Responding to Milford’s letter Xero said it noted the contents of the letter.

Xero notes the public statements by fund manager Milford Asset Management calling for a shareholder vote on Xero’s decision to consolidate its listing on the ASX as announced on 9 November 2017.

“Xero’s corporate strategy should not be constrained by the mandate limitations of New Zealand-based funds that hold a relatively small position of Xero,” it said.

The delisting decision was made “after careful consideration of all options available to create an appropriate platform for the long-term growth of the company’s business. The decision is in the best interests of the company and all shareholders and has the full support of the Xero board.”

Xero said only a change of domicile would require a shareholder vote. 

“Xero is not changing domicile and has deliberately chosen to remain a New Zealand domiciled and headquartered company, which is in the long-term best interests of Xero shareholders and the New Zealand economy.”

Xero chief executive and co-founder Rod Drury said: “We are disappointed Milford is using a listed company like Xero to raise its broader concerns about New Zealand’s funds management industry and its own internal mandate issues, which could have a negative impact on companies who are considering listing in New Zealand.

“From when Xero was founded as startup in 2006 our decisions have delivered significant value and we have been clear in our strategy to continue to build a global growth platform supported by shareholders who are aligned to our long-term growth aspirations.”

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