By Elise Hansen

Law360 (April 28, 2020, 3:01 PM EDT) -- New Zealand retirement community operator Metlifecare Ltd.said Tuesday it "rejects" an EQT unit's move to nix a NZ$1.5 billion ($900 million) takeover deal over COVID-19 losses, calling the termination "entirely invalid."

Metlifecare called the EQT unit's justification for pulling out of the deal "simply wrong" and said it is on track to proceed with a June 9 shareholder vote on the transaction. Asia Pacific Village Group Ltd., or APVG, which is owned by EQT Infrastructure IV fund, gave notice Monday that it had decided to terminate the agreement, the announcement said.

"The Metlifecare board has rejected the notice to terminate from APVG as entirely invalid and reiterates its belief, based on legal advice, that there is no lawful basis for APVG to terminate the [agreement]," the New Zealand-based company said.

Metlifecare owns and operates a portfolio of 25 retirement villages in New Zealand, according to its website. It inked the takeover deal with APVG in December after APVG agreed to pay NZ$7 apiece for Metlifecare's shares, a sweetened deal from its original offer of NZ$6.50, according to both companies' announcements at the time.

APVG said in early April that it wanted to pull out of the deal, citing "material adverse changes" caused by COVID-19. And the EQT unit on Monday said Metlifecare's net tangible assets had declined by more than NZ$200 million and that its underlying net profits would likely also drop more than 10% below previous projections for this year and the next two years.

"COVID-19 has materially adversely affected Metlifecare's property portfolio, the value and margins of future unit sales and resales and operating costs," APVG said Monday. "The financial impact exceeds the thresholds in the [material adverse change clause] by significant margins," the company said.

Metlifecare Chair Kim Ellis called that justification "simply wrong" in a statement.

"The fundamental assumptions that APVG uses to justify its notice to terminate are simply wrong," Ellis said. "There has been no breach of the material adverse change metrics ... and such breaches, if they were to occur, would be covered in either case by specific exceptions under the [agreement]."

A Metlifecare representative told Law360 that the company could either choose to cancel the contract and seek damages, or "continue with the contract and require the defaulting partly to perform its obligations." 

"Metlifecare is considering its options," the representative said.

Metlifecare's announcement said the company remains "strongly committed to the successful completion of the [deal] ... and remains on track to dispatch the scheme materials ahead of a shareholder meeting to vote on the scheme."

The company's largest shareholder has publicly supported the transaction and said that it will vote in favor if the measure is put before shareholders, the Metlifecare representative noted.

APVG isn't the first company to try to back out of a deal as a result of the pandemic. Medical device maker Alphatec said Monday it is terminating its nearly $122 million deal for imaging and software business EOS Imaging, and Victoria's Secret owner L Brands is battling would-be acquirer Sycamore Partners over the fate of their $525 million tie-up.

And a CorePower Yoga LLC franchisee sued the yoga studio chain in early April, alleging that it's trying to use the coronavirus-caused studio closures to back out of an agreement to buy 34 studios.

Metlifecare is represented by Stephen Hunter QC and New Zealand law firm Chapman Tripp.

Counsel information for EQT was not immediately available Tuesday.

--Additional reporting by Benjamin Horney and Rose Krebs. Editing by Stephen Berg.

Update: this story has been updated with additional comment from Metlifecare.

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