Anzon Australia Limited, in the matter of Anzon Australia Limited [2008] FCA 309

Federal Court of Australia|2008-03-04|Before: Lindgren J

INTRODUCTION 1 On 4 March 2008 I made an order pursuant to s 411(1) of the Corporations Act 2001 (Cth) (the Act) on the application of the plaintiff (Anzon Australia) that Anzon Australia convene a meeting of its ordinary shareholders, other than the holders of Excluded Shares, for the purpose of their considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement between Anzon Australia and its shareholders (Scheme Meeting, Shareholders and Nexus Scheme respectively). An Excluded Share is a fully paid ordinary share in Anzon Australia held by Nexus Energy Limited (Nexus) or its Related Bodies Corporate as defined in s 50 of the Act. 2 I also made an order pursuant to s 411(1) of the Act approving the explanatory statement required by s 412(1)(a) of the Act to accompany the notice convening the Scheme Meeting for distribution to the Shareholders. 3 The following are the reasons why I made those orders. 4 Earlier, on 13 December 2007, I had made similar orders in connection with a then proposed scheme (ARC Scheme) by which ARC Energy Limited (ARC) was proposing to acquire the shares in Anzon Australia other than fully paid ordinary shares held by ARC or its Related Bodies Corporate as defined in s 50 of the Act: see Anzon Australia Limited, in the matter of Anzon Australia Limited [2007] FCA 2079 (earlier Reasons). What has happened is that Nexus has made a superior offer in the light of which the directors of Anzon Australia have withdrawn its support for the ARC Scheme in favour of supporting the Nexus Scheme.

Break Fee 6 As noted in the earlier Reasons at [25]-[28], the Merger Implementation Deed (MID) for the ARC Scheme provided in cl 10 for a break fee of $4 million. Since the directors of Anzon Australia have withdrawn their support for the ARC Scheme in favour of the Nexus Scheme, that amount has been paid to ARC. The new MID between Anzon Australia and Nexus provides in cl 10 for a break fee in an identical amount. As under the earlier MID, there are reciprocal break fees and Anzon Australia's liability to pay the break fee is not triggered simply by the Shareholders voting down the Scheme (a "naked no vote" break fee): cf Re Bolnisi Gold NL (No 2) [2007] FCA 2078. The amount of the break fee represents 0.63% of the total equity value of Anzon Australia, which is well below the Takeover Panel's 1% "guidance ceiling". The reasonableness and appropriateness of the break fee is supported by affidavit evidence of the kind to which I referred in Re APN News & Media Ltd (2007) 62 ACSR 400 at [55].

A possible takeover bid for the shares in Anzon Australia 7 In the earlier Reasons at [16] I noted a feature which applies equally in the present case. If the Nexus Scheme is not agreed to by the Shareholders, but a certain related scheme between Anzon Energy Limited (which holds approximately 53% of the shares in Anzon Australia) and its shareholders is approved by them and by the Court, Nexus must make a takeover bid under Ch 6 of the Act in respect of the ordinary shares in Anzon Australia. The consideration which Nexus would offer under the takeover bid would the same as the "All Shares Consideration Option" under the Nexus Scheme. There would be no cash consideration. However, the Shareholders would be offered the opportunity to participate in a sale facility under which the Nexus shares offered would be sold.

Independent Expert's Report 8 In relation to the earlier ARC proposal, Deloitte Corporate Finance Pty Ltd (Deloitte), an independent expert retained by the board of directors of Anzon Australia, assessed the then proposed ARC Scheme and concluded that the ARC Scheme was in the best interests of the shareholders in the absence of a superior proposal. Deloitte has performed a similar role in relation to the Nexus Scheme. In summary, Deloitte has assessed the fair market value of each share in Anzon Australia as lying between $1.40 and $1.60, and has estimated the value of the scheme consideration to be received (under the "default consideration", namely, a "Mixed Scheme Consideration Option") to be $1.75 per ordinary share in Anzon Australia. In its report in respect to the earlier proposed ARC Scheme, Deloitte had estimated the fair market of a share in Anzon Australia again to be between $1.40 and $1.60 and estimated the value of the scheme consideration to be received by the shareholders as being between $1.65 and $1.75 per ordinary share in Anzon Australia.

Announcement of further financial results by Nexus 9 Nexus intends to release its half year financial results to 31 December 2007 on 14 March 2008. This information will be an update of the financial information for Nexus contained in the Scheme Booklet. Deloitte will be asked whether the results released change its opinion that the Nexus Scheme is in the best interests of the Shareholders and, if they do not, an announcement will be made to the Australian Stock Exchange (ASX) to that effect. The orders that I made on 4 March 2008 provide for this.

Section 411(17) of the Act 10 The choice of a scheme rather than a takeover is not an indication that a purpose is to enable avoidance of the operation of any of the provisions of Ch 6 of the Act: see Re Hostworks Group Limited [2008] FCA 64 at [30]. 11 It has been suggested that, if a certain conditional special dividend of seven cents per ordinary share in Anzon Australia is not paid to the Shareholders because the related scheme involving Anzon Energy does not become effective, the Nexus Scheme will not observe the equality of opportunity principle in Ch 6 of the Act as embodied in the minimum bid price principle found in s 621(3) of the Act. 12 Under s 621(3), the consideration offered under a takeover bid must equal or exceed the maximum consideration that the bidder or an associate provided or agreed to provide during the four months prior to the date of the bid. 13 The minimum bid price principle does not directly apply to schemes of arrangement: see Re Ranger Minerals Ltd; Ex parte Ranger Minerals Ltd (2002) 42 ACSR 582 at [32], [36] and [40]. Possible comparable dates to the date of a takeover bid, that is, the date on which offers are first made under a takeover bid, are the date of despatch of the scheme booklet, or the date of the meeting of the shareholders. 14 In the present respect, I accept the submission made by Senior Counsel for Anzon Australia in the following paragraphs of his written submissions: 44. Nexus acquired shares in Anzon Australia over the period 21 August 2007 to 3 December 2007, at prices ranging from $1.16 to $1.82 per ordinary share in Anzon Australia. The average price paid by Nexus during this period was $1.72 per ordinary share in Anzon Australia. The disclosure in section 12.2 of the Scheme Booklet includes details of all acquisitions by Nexus during such period, including between 20 September and 6 November 2007 at prices in excess of $1.75 being the value of the Scheme Consideration, ignoring the Special Dividend. 45. All of the purchases by Nexus in excess of $1.75 per share occurred more than 4 months before the proposed date of posting of the Scheme Booklet (expected to occur on 11 March 2008). Further, all such purchases also occurred more than 4 months before the expected date of approval of the Scheme Booklet (assuming such an order is made on 4 March 2008), other than the acquisition by Nexus on 6 November 2007 of 1,368,264 shares at $1.789. 46. There are sound reasons for the parties to proceed with a merger by way of scheme rather than takeover (see affidavit of Michael Fowler, paras 13 and 14; and Andrew Young, para 26). It is submitted that for temporal reasons alone, no issue arises in this case concerning the equality principle. In any event, the Scheme Consideration, valued by Deloitte, exceeds the fair market value of Anzon Australia shares, and the Shareholders will be given the opportunity to vote on the matter after full disclosure. See sections 1.4(2), 2(Q&A) and 12.2, Scheme Booklet (Re Ranger Minerals Ltd (2002) 42 ACSR 582 at [44]). 47. ASIC has indicated, following representations by the solicitors for Nexus, that it does not intend to appear and makes submissions on this issue at the first court hearing, but reserves its right to do so at the second court hearing.

Conclusion 15 It was for the above reasons and the additional reasons set out in Senior Counsel's submissions to which I referred, that I was of the opinion that the Shareholders should have the opportunity of voting on the Nexus Scheme and that I ordered Anzon Australia to convene the Scheme Meeting. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate: Dated: 11 March 2008 Counsel for the plaintiff: Mr F Gleeson SC

Counsel for Nexus Energy Limited: Mr I M Jackman SC

Solicitor for Nexus Energy Limited: Baker & McKenzie

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