Amcor Ltd, in the matter of Amcor Ltd [2013] FCA 1183

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 2132 of 2013

IN THE MATTER OF AMCOR LTD BETWEEN: AMCOR LTD ACN 000 017 372

JUDGE: JAGOT J DATE: 1 NOVEMBER 2013 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This is an application under s 411(1) of the Corporations Act 2001 (Cth) for orders convening a meeting of the shareholders of Amcor Limited to vote on a proposed scheme of arrangement. The scheme relates to the separation of Amcor's Australasia and packaging distribution businesses, (Orora Business) by way of a de-merger of Orora Limited, a wholly owned subsidiary of Amcor, into a separately listed company on the Australian Stock Exchange. The proposed transaction, as set out in the evidence, involves the separation of Orora from Amcor with the result that there will be two ASX listed companies, Amcor and Orora. 2 Overall, the proposal involves shareholders of Amcor retaining their existing Amcor shares but receiving one share in Orora for every Amcor share they hold on the relevant scheme record date, which is expected to be 24 December 2013. This excludes ineligible overseas shareholders where it is proposed that their Orora shares will be transferred to an agent appointed by Amcor for sale on their behalf. The steps proposed in this de-merger are conventional. They involve, first, a reduction of the share capital of Amcor, which is also to be put to the vote on the proposed date, a dividend for an amount representing the difference between the fair value of Orora shares and the capital reduction amount, which is to be applied equally against each Amcor share, and then application of the amount of the capital reduction and the de-merger dividend as consideration for the transferred Amcor shareholders of the one Orora share for every Amcor share they hold. 3 Accordingly, leaving aside ineligible overseas shareholders, no amount of cash will be paid to Amcor shareholders as a result of either the capital reduction or the de-merger dividend. 4 As set out in the written submissions, the basic principle is that a meeting will not ordinarily be convened unless the scheme is of such a nature and cast in such terms that, assuming it receives the statutory majority at the proposed meeting, the court would be likely to approve the scheme on the hearing of the application for approval, if it be unopposed. In this case, I am satisfied that it is reasonable to suppose that sensible business people might consider the proposed arrangement to be in their best interests. 5 As set out in the evidence, the directors of Amcor have unanimously recommended a vote in favour of the scheme by their shareholders and they have also expressed the belief, based on expert material that is also in evidence, that the capital reduction which is proposed will not materially prejudice Amcor's abilities to pay its creditors. The application is supported by an expert report from Grant Samuel & Associates Pty Limited. Their overall conclusions are, first, that the potential benefits of the de-merger outweigh the potential cost, disadvantages and risks with the consequence that the proposed de-merger is in the best interests of Amcor shareholders. They also confirmed the opinion expressed by the directors that the capital reduction will not materially prejudice Amcor's ability to pay its existing creditors. 6 Apart from this, I am satisfied, in accordance with the written submissions, that the treatment of ineligible overseas shareholders, as well as the treatment of certain employees of Amcor who have rights and benefits pursuant to various incentive plans and retention share payment plans, do not result in the constitution of any separate class. The treatment of the ineligible shareholders, by which they keep their existing shares in Amcor and obtain the proceeds of the sale of their shares in Orora, does not constitute them as a class separate from other Amcor shareholders. 7 Also disclosed in the information to be provided to shareholders is the proposed treatment of employees subject to the incentives and retention share payment plans. The consequence, as explained, is that some senior managers will forfeit awards under the long term incentive plan but in consideration for this forfeit, there will be a pro rata deferred compensation payment. As explained in the scheme booklet, the one-off incentive payment will be in the form of a payment made by Amcor to senior managers in March 2015, conditional upon continued employment with Orora. Again, I accept that the treatment of these participants in Amcor's incentive plans does not create a separate class. 8 I should note, even at this stage, that I have been informed that if at the second court hearing approval is granted to the scheme, Amcor and Orora intend to rely upon this approval for the purposes of exemption under s 3(a)(10) of the US Securities Act 1933, in accordance with the implementation of the scheme and the issue of Orora shares in accordance with the scheme. 9 The only other matter I wish to note is that there has been placed into evidence before me a letter from the Australian Securities Investment Commission (ASIC) in the usual terms. That letter is dated 31 October 2013. It confirmed that ASIC has had notice of the hearing of the application, which has been adequate for it to examine the terms of the proposed scheme and that it does not propose to appear, and indeed ASIC has not appeared today. 10 In those circumstances, I am satisfied that I should make the orders sought. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.