12.1 MAIN TERMS OF OFFER
The issuers of the Shares for the purposes of the Securities Act are Orion Health Group Limited and McCrae Limited. The registered office of Orion Health is set out in the Directory.
The Offer
The securities being offered under this Offer are fully paid ordinary shares in Orion Health, which rank equally with each other and all existing Shares. The Shares are described in more detail in Section 10 Offer Details.
The Offer Shares comprise both new Shares and existing Shares. The Offer Shares will be offered to Retail Investors and Institutional Investors at the Price to be determined by Orion Health following the bookbuild process described below.
The Offer is made on the terms, and is subject to the conditions, set out in this Prospectus and the Investment Statement.
The maximum number of new Shares being offered by Orion Health under the Offer is 34.9 million, based on $150 million worth of Offer Shares and a Price of $4.30 (being the bottom of the Indicative Price Range) and the maximum number of existing Shares being offered by Offeror under the Offer is 1.2 million, based on $5 million worth of Offer Shares and a Price of $4.30 (being the bottom of the Indicative Price Range).
Pricing of the Offer
The price to be paid for the Offer Shares is the Price.
Orion Health has set an Indicative Price Range of $4.30 to $5.70 per Offer Share. However, Orion Health may set the Price within, above or below this range. The Price will be determined by Orion Health
following the bookbuild process described in Section 10.1 The Offer. The Price is expected to be announced and posted on the Orion Health Offer website www.orionhealthshares.co.nz and under Orion Health’s stock code ‘OHE’ on www.nzx.com on or about 7 November 2014.
12.2 NAME AND ADDRESS OF OFFEROR
McCrae Limited is the offeror of the existing Shares that are being offered under the Offer. Its registered office is set out in the Directory. The consideration received by Orion Health in respect of the original allotment of all the Offeror’s Shares was McCrae Limited’s shareholding of Healthlink International Limited and 100% of McCrae Limited’s shareholding of Orchestral Developments Limited, with the Offeror’s Offer Shares representing the relevant proportion of that value.
12.3 DETAILS OF INCORPORATION OF ISSUER
Orion Health (company number 1122629) was incorporated in New Zealand on 20 May 2001, under the Companies Act 1993. The public file relating to Orion Health and containing Orion Health’s incorporation documents is available for inspection on the Companies Office website at
12.4 PRINCIPAL SUBSIDIARIES OF ISSUER
As at the date of registration of this Prospectus, the principal subsidiaries of Orion Health, each of which are directly or indirectly 100% owned by Orion Health are:
New Zealand:
Orion Systems International Limited, Orchestral Developments Limited, Orion Health Asia Pacific Limited and Orion Health Limited.
International:
Orion Health Pty Ltd (Australia), Orion Health Inc. (United States) and Orion Health Limited (United Kingdom).
12.5 NAMES, ADDRESSES AND OTHER INFORMATION Names and addresses of Directors
Orion Health’s Directors, and the town, city or region in which their principal residence is based as at the date of registration of this Prospectus, are: Neil Cullimore (Auckland), Andrew Ferrier (Auckland), Roger France (Auckland), Lester Levy (Auckland), Ian McCrae (Auckland) and Paul Shearer (Auckland). The Directors can be contacted at Orion Health’s registered office as set out in the Directory.
Employee Directors
Ian McCrae is employed as the Chief Executive Officer of Orion Health.
Share Registrar
Orion Health’s share registrar is Link Market Services Limited. Its contact address is set out in the Directory.
Auditor
Orion Health’s auditor is PricewaterhouseCoopers. Its contact address is set out in the Directory.
Advisers
The names and addresses of the financial advisers, solicitors and other professional advisers to Orion Health who have been involved in the preparation of this Prospectus are set out in the Directory.
12.6 RESTRICTIONS ON DIRECTORS’ POWERS
The Constitution that Orion Health will have in place on Listing incorporates by reference the requirements of the NZX Listing Rules and the ASX Listing Rules and requires Orion Health to comply with the NZX Listing Rules and the ASX Listing Rules once it is listed on those exchanges. The Constitution has been adopted by Orion Health and will be effective subject to Listing occurring.
The principal restrictions on the powers of the Board imposed by the Constitution (including the requirements of the NZX Listing Rules and the ASX Listing Rules incorporated into the Constitution) are as follows:
Orion Health may not issue or acquire any equity securities except in accordance with the provisions of the Companies Act, the Constitution, the NZX Listing Rules and the ASX Listing Rules;
further, the Constitution provides that the Board cannot issue further equity securities unless the issue has been approved by an ordinary resolution of Shareholders or all Directors unanimously vote in favour of the resolution to issue the securities. Under the NZX Listing Rules, Orion Health may not issue further equity securities without shareholder approval by way of ordinary resolution. However, the NZX Listing Rules provide for a number of exceptions to the requirement for shareholder approval (including issues to employees up to 3% per annum and private placements up to 20% per annum). The effect of this provision in the Constitution is that the Board will only be able to utilise one of these exceptions if the Board unanimously agrees to do so;
Orion Health may not give financial assistance for the purpose of, or in connection with, the
acquisition of equity securities issued or to be issued by Orion Health, except in accordance with the provisions of the Companies Act, the Constitution, the NZX Listing Rules and the ASX Listing Rules; the Board may not cause Orion Health to enter into any transaction or series of linked or related
transactions to acquire, sell, lease, exchange or otherwise dispose of (otherwise than by way of charge) assets of Orion Health which would change the essential nature of the business of Orion Health or in respect of which the gross value is in excess of 50% of the average market capitalisation of Orion Health, without the prior approval of an ordinary resolution of Shareholders in accordance with the Constitution, the NZX Listing Rules and the ASX Listing Rules; and
the Board may not allow Orion Health to enter into certain material transactions if a related party of Orion Health is, or is likely to become, a direct or indirect party to the material transaction without the prior approval of an ordinary resolution of disinterested Shareholders in accordance with the
Constitution, the NZX Listing Rules and the ASX Listing Rules.
In addition, a Director may not vote on any matter in which he or she is interested, unless permitted by the Companies Act and the NZX Listing Rules, where he or she has complied with the relevant provisions and signed a certificate in respect of the matter.
The Companies Act contains a number of other provisions that could have the effect, in certain circumstances, of imposing restrictions on the powers of the Board. For example, Directors cannot allow Orion Health to:
enter into a major transaction (as that term is defined in the Companies Act) without the prior approval of a special resolution of Shareholders; and
take any action which affects the rights attaching to the Shares without the prior approval of a special resolution of each interest group (being a group of Shareholders with similar or identical rights).
These provisions apply to any company registered under the Companies Act.
12.7 SUBSTANTIAL EQUITY SECURITY HOLDERS OF ISSUER
The following table sets out the names of the ten largest registered holders of equity securities of Orion Health as at 24 October 2014 and the amounts of their respective holdings:
# Shareholder Number of Shares (%)
1 McCrae Limited 81,737,250 (58.59%)
3 G A Cumming 13,100,000 (9.39%)
4 TEA Custodians Limited 3,331,250 (2.38%)
5 Jacon Investments Limited 2,550,000 (1.83%)
6 Mark James Thomson, Deborah Mary Thomas and Stuart Alexander McCrae Perry
1,765,000 (1.26%)
7 Orion Health Corporate Trustee Limited 1,593,221 (1.14%)
8 Canz Capital Limited 1,537,500 (1.10%)
9 John Harold Dunn 1,292,520 (0.93%)
10 David John Clarke, Belinda Maria Clarke and Kevin Jaffe 1,214,640 (0.87%)
For the purposes of NZX Listing Rule 7.1.15, set out below are details of the persons who have relevant interests (as defined in the Securities Markets Act) in 5% or more of Orion Health’s ordinary shares as at the date of this Prospectus (based on the information provided to Orion Health by each relevant person).
Relevant interest holder Number of equity securities Nature of relevant interest
Consideration and other terms
McCrae Limited/ Ian Richard McCrae
81,737,250* Registered holder of Shares
As at 31 December 2008, McCrae Limited held 8,325,100 Shares (as disclosed by Orion Health’s share register). These included the following share issues:
o Shares issued to McCrae Limited (formerly Orion Investments Limited) on incorporation of Orion Health in March 2001.
o Shares issued to McCrae Limited in May 2001, in exchange for the acquisition by Orion Health of 54% of McCrae Limited’s shareholding of Healthlink International Limited. o Shares issued to McCrae Limited in
June 2001, in exchange for the acquisition by Orion Health of 100% of McCrae Limited’s shareholding of Orchestral Developments Limited.
73,676,025 Shares issued for nil consideration under share split in March 2013.
147,250 Beneficial ownership through LTI Scheme
$2.00 - $4.00 per Share funded by an interest free loan from Orion Health.
Pioneer Capital I Nominees Limited
13,370,900* Registered holder of Shares
412,110 Shares were acquired in November 2007.
211,942 Shares were acquired in January 2008.
226,074 Shares were acquired in June 2008.
188,716 Shares were acquired in January 2010.
8,898 Shares were acquired in October 2012.
9,429,660 Shares issued under share split in March 2013.
2,436,620 Shares were acquired in May 2014.
250,880 Shares were acquired in June 2014. G A Cumming 13,100,000* Registered holder of
Shares
1,256,000 Shares were acquired in November 2010 for $12.20 per share, in part satisfaction of a loan between a shareholder of Zeus Capital Limited (now in liquidation) and G A Cumming.
24,000 Shares were acquired in December 2011 for $18.00 per share.
11,520,000 Shares issued for nil consideration under share split in March 2013.
300,000 Shares were acquired in May 2014 for $4.00 per share, for total consideration of $1,200,000, as part of a private placement. *These numbers reflect impact of various share splits and intervening sales.
Pioneer Capital I Nominees Limited did not disclose the consideration and other terms and conditions of any transaction under which the beneficial owner(s) acquired and holds the securities disclosed above.
None of the persons specified above guarantees, or undertakes any liability in respect of, the Offer Shares or the Shares.
12.8 DESCRIPTION OF ACTIVITIES OF ISSUING GROUP
Orion Health and each of its associated subsidiaries comprise the “issuing group” for the purposes of the Securities Regulations. Each subsidiary in the issuing group serves a particular purpose.
In the five years preceding the date of this Prospectus, the activities of Orion Health has been primarily been the provision of licences, support and implementation of software solutions for the HCIT industry.
The principal assets of Orion Health are its intellectual property in its software products and solutions, which are described in detail in Section 6 About Orion Health. All the software and associated products are owned by Orion Health. Some of its assets are subject to obligations in favour of another person that modify or restrict Orion Health’s ability to deal with those assets, including in relation to security granted as part of its financing facilities with ASB Bank.
12.9 SUMMARY FINANCIAL STATEMENTS
Summary financial statements for Orion Health for the five consecutive financial years preceding FY2014 and for 1HFY2015 are set out in Section 8.3 Summary of Historical Financial Information.
12.10 PROSPECTS AND FORECASTS
A statement as to the trading prospects of Orion Health, together with any material information relevant to those prospects, are set out in Section 6 About Orion Health and Section 8 Financial Information.
Any special trade factors and risks that could materially affect the prospects of Orion Health and that are not likely to be known or anticipated by the general public are set out in Section 9 What are my Risks?.
12.11 PROVISIONS RELATING TO INITIAL FLOTATIONS AND MINIMUM SUBSCRIPTION
The plans of the Directors in respect of Orion Health during the 12 month period commencing on the date of this Prospectus are to:
carry out the Offer; and
implement its strategy as described in Section 6 About Orion Health, including in particular under “How we will utilise the IPO proceeds”.
The sources of finance required for these plans will be the proceeds from the issue of new Shares under the Offer, operating cash flows, working capital and, if required, other financial accommodation
considered prudent and appropriate by Orion Health during that year, including under the banking facilities described in Section 8.2.8 Balance Sheet overview.
Notwithstanding the plans of the Directors, the proceeds of the Offer that relate to the new Shares offered by Orion Health may be applied towards any other purpose.
For the purposes of section 37(2) of the Securities Act, the minimum amount that, in the opinion of the Directors, must be raised by the issue of the Offer Shares in order to provide the sums required to be provided in respect of:
the purchase price of any property to be purchased that is to be met in whole or in part out of the proceeds of the Offer;
any preliminary expenses or commission payable by Orion Health; working capital; and
the repayment of any money borrowed by Orion Health in respect of any of the above matters, is $50 million.
No prospective financial statements have been included with this Prospectus for FY2015, FY2016 or 1HFY2016 because, in the opinion of the Board, after due enquiry by them, prospective financial statements for those periods would be likely to deceive or mislead with regard to any particular that is material to the Offer, including because it is not practicable to formulate reasonable assumptions on which to base the statements.
The Board’s reasons for their opinion are set out in Section 8 Financial Information under “No prospective financial statements” and include because Recurring Revenues currently represent less than one third of operating revenue, the inherent uncertainty of the capture of customer contracts and their timing of execution and because the booking of revenues can fluctuate considerably. As a result, actual operating revenue could be materially different from that projected which would, in turn, materially alter Orion Health’s financial performance over that period from that shown in any prospective financial information.
12.12 ACQUISITION OF BUSINESS OR SUBSIDIARY Not applicable.
12.13 SECURITIES PAID UP OTHERWISE THAN IN CASH Other than:
a 10:1 share subdivision pursuant to a board resolution dated 31 March 2013 with the Shares issued for nil consideration;
82,182 Shares in total (also known as restricted stock awards, as described in Section 7.4 Employee Incentives) in FY2014 and FY2015 to the Trustee, to hold the Shares on behalf of various participants of the LTI Scheme, for nil cash consideration - in consideration for services rendered or to be
rendered by the participants and subject to certain vesting conditions;
418,017 restricted stock units in total (as described in Section 7.4 Employee Incentives and 12.14 Options to Subscribe for Securities of Issuing Group) in FY2014 and FY2015 to various participants of the LTI Scheme, for nil cash consideration - in consideration for services rendered or to be rendered by the participants and subject to certain vesting conditions;
62,000 Shares in total in FY2015 to various employees of Orion Health as part of the 2014 Orion Health CEO Share Awards for nil cash consideration - in consideration for, and in recognition of, each relevant employee’s outstanding service to Orion Health; and
22,000 Shares in total in December 2009 to all employees of Orion Health for nil cash consideration - in consideration for, and in recognition of, each employee’s service to Orion Health,
Orion Health has not allotted to any person any securities paid up otherwise than in cash within the five years preceding this Prospectus.
12.14 OPTIONS TO SUBSCRIBE FOR SECURITIES OF ISSUING GROUP
As at the date of this Prospectus, Orion Health has granted 415,350 restricted stock units to participants in the Orion Health LTI Scheme described in Section 7.4 Employee Incentives. A participant has the right to receive one Share for each restricted stock unit that vests in that participant. The restricted stock units are issued to the participants in consideration for the provision of personal services to Orion Health and are subject to certain vesting conditions. Unvested restricted stock units will expire, if the vesting conditions are not met or if the participant leaves employment with Orion Health before vesting. The participants are not required to pay any subscription monies for restricted stock units. All restricted stock units awards have been granted to Orion Health staff. No restricted stock units have been granted to any principal officers of the Issuers or any of their subsidiaries.
A summary of the restricted stock units granted to date is outlined in the table below:
Total number of restricted stock units issued to each participant
Number of unvested restricted stock units
Performance period Expiry date of unvested restricted stock units
250,000 250,000 1 September 2014 –
1 September 2023
The earlier of:
1 September 2023; and
the date that the participant ceases to be employed by Orion Health.
69,000 69,000 For 34,500 of the unvested restricted stock units – FY2015
For 34,500 of the unvested restricted stock units, the earlier of:
the date that the Board determines that Orion Health has failed to achieve the FY2015
performance hurdle in the performance period; and
the date that the participant ceases to be employed by Orion Health.
For 34,500 of the unvested restricted stock units - 18 months from the date that Orion Health determines the key business objective.
For 34,500 of the unvested restricted stock units, the earlier of:
the date being 18 months from the date that Orion Health determines the key business objective; and
the date the participant ceases to be employed by Orion Health.
64,217 64,217 FY2015 The earlier of:
the date that the Board determines that Orion Health has failed to achieve the FY2015
performance hurdle in the performance period; and
the date that the participant ceases to be employed by Orion Health.
16,750 16,750 FY2015 The earlier of:
the date that the Board determines that Orion Health has failed to achieve the FY2015
performance hurdle in the performance period; and
the date that the participant ceases to be employed by Orion Health.
5,333 5,333 FY2014 The date that the participant ceases to be employed by Orion Health.
4,020 4,020 FY2015 The earlier of:
the date that the Board determines that Orion Health has failed to achieve the FY2015
performance hurdle in the performance period; and
the date that the participant ceases to be employed by Orion Health.
4,020 4,020 FY2015 The earlier of:
the date that the Board determines that Orion Health has failed to achieve the FY2015
performance hurdle in the performance period; and
the date that the participant ceases to be employed by Orion Health.
2,010 2,010 FY2015 The earlier of:
the date that the Board determines that Orion Health has failed to achieve the FY2015
performance hurdle in the performance period; and
the date that the participant ceases to be employed by Orion Health.
12.15 APPOINTMENT AND REMOVAL OF DIRECTORS
On the Listing Date, Orion Health will be party to listing agreements with NZX (a registered exchange)