Acacia Resources Ltd v Delta Gold NL [1999] VSC 369

Acacia Resources Ltd v Delta Gold NL [1999] VSC 369 - VSC 1999 case summary — Zoe

[9]

In any event, on 14 September 1999 Delta registered the Part A Statement and form of offer with the Australian Securities & Investments Commission ("the Commission"). Acacia received the Part A Statement and offer on 15 September 1999. On 20 September 1999 Acacia through its solicitors informed the solicitors for Delta of the concerns of Acacia with respect to alleged material deficiencies in the Part A Statement. Furthermore, Acacia informed Delta that it considered a shareholder of Acacia could not make an informed assessment of the value of Delta shares offered as consideration for acceptance of the takeover offer or determine the effect of the takeover offer upon a shareholder of Acacia who decided to retain his or her shares. Correspondence was exchanged and on 22 September 1999 Delta rejected the concerns of Acacia but advised that it intended sending out additional information together with a further deed entered into between Delta and Placer to Acacia shareholders. The additional information was to include information in relation to a new deed made between Placer and Delta on 22 September 1999, (hereafter referred to as the "September Placer deed"); the fact of the proposed acquisition of Delta of the 50% interest of North Limited in Kanowna Belle; if negotiations were completed prior to Delta's offers being sent to Acacia shareholders; the commitment of Delta not to waive the minimum acceptance condition in its takeover offer at level of acceptances less than 50.1% of Acacia's issued shares and; finally, information concerning the voting regimes contained in the Granny Smith joint venture agreement. Delta informed Acacia that it intended to dispatch the Part A Statement and offer in its original form to Acacia shareholders on 30 September 1999. Acacia complained to Delta about this proposed course and Delta maintained its position to not make any further disclosure to Acacia shareholders or to withhold the issue of the Part A Statement and the offer. Specifically, despite a request from Acacia, Delta refused to incorporate the supplementary information just outlined to Acacia shareholders in a new Part A Statement. As a result, Acacia instituted these proceedings.

[19]

In addition to the affidavit of Mr Le Page, Acacia filed two affidavits sworn by Mr Wayne Lonergan who was a financial adviser in relation to share investments including valuations of public and private companies and, in particular gold mining companies. Similar to Mr Le Page, Mr Lonergan expressed a number of criticisms with respect to the actual value of the offer by Delta to the shareholders of Acacia. He also expressed his concerns with respect to the dilution of share capital, his reservations with respect to benefits alleged by Delta to Acacia shareholders, concerns with respect to hedging and the asserted economics of the relevant minds, the impact of the Kanowna Belle interest, complaints in relation to the amortisation of good will in the statement and offer and, in particular, the alleged failure of the Part A Statement to include forecast profit and loss accounts up until 30 June 2000 only rather than for future years. Mr Lonergan expressed the opinion that in view of the significant size of the acquisition, that is, an increase in size of 117% and the fact that it was a scrip for scrip offer with no cash component the information he described as necessary would be relevant to Acacia shareholders in determining whether to accept the offer or not. In addition, Mr Lonergan expressed the view that due to the existence of significant forward sales, future revenues could be predicted with a substantial degree of confidence. He considered that costs could be predicted, also, with reasonable accuracy. Ultimately, Mr Lonergan expressed the view that forecasts for a longer period could and should be provided. As events transpired during the course of the hearing such forecasts were shown to have been prepared by Delta but not disclosed in the Part A Statement. Again the evidence of Mr Lonergan was challenged on the basis of his expertise. Similarly to the position of Mr Le Page there was no expert evidence in any form submitted by Delta to rebut the evidence of Mr Lonergan. For the same reasons expressed in relation to the evidence of Mr Le Page, I consider it appropriate for the court to accept the evidence of Mr Lonergan for the purposes of determining whether Acacia has an arguable case.

[22]

The additional material consisted of a document entitled "chairman's letter and other information in relation to Delta's offer to acquire all of your ordinary shares in Acacia Resources Limited". For convenience I will hereafter refer to this document as "the chairman's letter". The document was approximately 23 pages in length and consisted of a letter from the chairman of Delta dated 30 September 1999, a description of reasons why Acacia shareholders should accept the offer of Delta, a revised profile of the merged entity of Delta and Acacia description of production and cash costs, a summary of the offer, a description of the acquisition of North's 50% interest in Kanowna Belle, additional financial information, additional forecasts of earnings and cash flow but only up to the period ending 30 June 2000, description of proposed tax reforms, description of arrangements with Placer and the setting out of the actual deed with Placer. In the short time available to it Acacia prepared a comprehensive comparison of the Part A Statement with the chairman's letter. The comparison ran to some pages in length but gave rise to the following conclusive assertions on behalf of Acacia: the consolidated balance sheets for Delta, Acacia and the merged entity are incorrect because they did not take into account the Kanowna Belle acquisition; the assertion that the gearing of the merged entity would be 12% was a "gross" understatement in the context of the Kanowna Belle acquisition; projections and forecasts for the merged entity were incorrect in light of the Kanowna Belle acquisition; the projected share of production of Delta from various mines was incorrect in light of the acquisition of Kanowna Belle; the total gold production, average cash costs and weighted average total production costs were incorrect in light of the Kanowna Belle acquisition; various tables contained in the chairman's letter intended to be substituted for tables in the Part A Statement were incorrect in light of the Kanowna Belle acquisition; discrepancies between the description in the Part A Statement as to the description of terms of the Placer agreement and the actual terms of the Placer deed; various discrepancies in tables and footnotes; that the description of reserves and resources of the merged entity were not updated to allow for the Kanowna Belle acquisition; misstatement as to the cost effectiveness of the Kanowna Belle in view of the increased costs of underground mining; the lack of indication as to whether purported cash savings were one off or projected to be continuous; the implication that the full share price increase between the announcement date and 27 September 1999 was attributable to the offer without appropriate allowance for the impact of the increase in the gold price; alleged misstatement as to forecast hedge pricing; and alleged uncertainty as to voting rights.

[38]

1. Firstly, "Materiality is a question for the court although evidence may be tendered to enable the court to understand why certain matters are material or why they are not ... It is a question of mixed fact and law and it depends on the facts and is to be determined on a case by case basis". 2. Secondly, "The underlying policy is the desirability of ensuring that the acquisition of shares in companies takes place in an efficient, competitive and informed market". 3. Thirdly, "The framework of the takeover legislation assumes that criticism of the commercial desirability of the offer will be dealt with in the offeree's Part B Statement". 4. Fourthly, "The disclosure of speculation is not required and indeed is to be avoided". 5. Fifthly, "There is a distinction between information which might be useful and relevant for a shareholder in the offeree company and information which is in fact known to the offeror at the date of the Part A Statement". 6. Sixthly, and I interpolate most relevantly, "The object is to put shareholders in possession of the information required to enable them to make an informed and critical assessment of the offer and an informed decision whether to accept it". 7. Seventhly, "Consideration of a Part A Statement involves a question as to whether full and sufficient information has been given to enable the offeree to make a judgment concerning how valuable the acquisition will be to the offeror and thus of making an informed assessment ... ". 8. Eighthly, "The court when asked to restrain the making of an offer needs to be astute to see that the breech of the Law relied upon is real and of substance". 9. The ninth guideline is stated as being that s.739 whilst empowering the court to require an offeror to send an additional document with a Part A Statement may "clarify or amplify statements" in the Part A but is not one to amend the Part A. 10. The tenth guideline is stated as being that "Materiality of information, where there is a complex proposal, involves difficult questions of commercial judgment and matters of degree ... It is necessary to bear in mind that the Statement should illuminate the issues rather than confuse them". 11. The eleventh guideline is that, the Part A Statement must be read fairly, in its entirety, and not selectively.

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Judgment (52 paragraphs)

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Cases Cited (6)