Gilbert + Tobin advised the consortium of private equity investors that acquired New Zealand-based outdoor clothing and equipment company Kathmandu on the tax implications of the transaction.
The consortium, which included Goldman Sachs JBWere’s Hauraki Equity No. 2 fund and Quadrant Private Equity, paid NZ$275 ($233) million for the company. New Zealand firm Chapman Tripp acted for Kathmandu on the transaction, but also advised the purchaser, under a system of Chinese walls.
Mark Goldsmith, lead partner for the G+T team, said the transaction was essentially the acquisition of a New Zealand company by another New Zealand company, which owned a mixture of Australian and New Zealand assets. The fact that some of the acquired company’s assets, and some of the investors were Australian, created Australian corporate work and a number of Australian tax issues to be addressed.
Goldsmith said the issues were consistent with normal acquisition structuring, but there was added complexity from the cross border nature of the deal, and the need to integrate the New Zealand and Australian tax advisory roles.
The combination of Australian and New Zealand investors was interesting, Goldsmith said, because of the triangulation tax issues created. “That is the ability for franking credits and imputation credits to flow through, from foreign entities back to Australian resident investors,” he said.
“There were some changes to the law made probably about 12 or 18 months ago to remove the impact of double tax where you have for instance an Australian investor investing in a New Zealand company that owns an Australian company.
“What effectively happened before the changes was that the franking credits derived from the Australian tax paid on the Australian operations were lost and the Australian investors couldn’t get the benefit of them. Those laws have now changed so it was interesting to see the application of those laws in a practical situation.”