Anzon Energy Limited, in the matter of Anzon Energy Limited [2007] FCA 2080

Federal Court of Australia|2007-12-14|Before: Lindgren J

THE COURT ORDERS THAT:

Pursuant to subsection 411(1) of the Corporations Act 2001 (Cth) (Corporations Act): a) Anzon Energy Limited ABN 43 097 972 364 (Anzon Energy) convene a meeting (Scheme Meeting) of the holders of ordinary shares in Anzon Energy, other than the holders of Excluded Shares in respect of those Excluded Shares(Anzon Energy Shareholders), for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement proposed to be made between Anzon Energy and Anzon Energy Shareholders (Scheme), being the scheme substantially in the form of the draft contained in section 19 of the scheme booklet containing the explanatory statement in relation to the Scheme, being Exhibit "A" in these proceedings (Scheme Booklet). b) The Scheme Meeting be held at 2 pm (Australian Eastern Standard Time) on 29 January 2008 at Bradfield Room 2, Harbourview Hotel, 17 Blue Street, North Sydney, NSW. c) The Chairperson of the Scheme Meeting be Michael Norman Arnett and in his absence Andrew Alexander Young. d) The Chairperson appointed to the Scheme Meeting has the power to adjourn the Scheme Meeting in his absolute discretion. e) All voting at the Scheme Meeting be by poll as declared by the Chairperson. f) At the Scheme Meeting, a person will be entitled to one vote for each Anzon Energy share they are registered as holding at 2 pm (Australian Eastern Standard Time) on 28 January 2008. g) The explanatory statement in the Scheme Booklet for the Scheme be approved for distribution to Anzon Energy Shareholders. h) On or before 21 December 2007, there be dispatched or personally served: i) a document substantially in the form of the Scheme Booklet; ii) a proxy form for the Scheme Meeting; iii) an election form for the scheme consideration; iv) a reply paid (for use in Australia only) envelope addressed to Computershare Investor Services Pty Limited for the return of the proxy form; and v) a reply paid (for use in Australia only) envelope addressed to Computershare Investor Services Pty Limited for the return of the election form, in the case of each Anzon Energy Shareholder who has a registered address in Australia, by prepaid post and, in the case of each Anzon Energy Shareholder who has a registered address outside Australia, by prepaid airmail or air courier, in each case addressed to the relevant address set out in the Anzon Energy register of members. i) The time by which the Anzon Energy Shareholders must return their proxy forms for the Scheme Meeting be 2 pm (Australian Eastern Standard Time) on 28 January 2008. j) Anzon Energy place an advertisement in The Australian newspaper, substantially in the form of "Annexure A" to these Orders, no later than 29 January 2008 and Anzon Energy shall otherwise be exempted from compliance with the requirement to publish such notice at least 5 days before the date fixed for hearing of the application pursuant to Rule 3.4(3)(b) of the Federal Court (Corporations) Rules 2000 (Cth).

Annexure A Anzon Energy Limited ABN 43 097 972 364 Notice of hearing to approve compromise or arrangement TO all the creditors and members of Anzon Energy Limited ABN 43 097 972 364 (Anzon Energy). TAKE NOTICE that at [insert time] on 1 February 2008 the Federal Court of Australia at Law Courts Building, Queens Square, Sydney, NSW, 2000 will hear an application by Anzon Energy seeking the approval of an arrangement between Anzon Energy and its members, if agreed to by resolution to be considered by the members of Anzon Energy at a meeting of such members to be held on 29 January 2008. If you wish to oppose the approval of the arrangement, you must file and serve on Anzon Energy a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on Anzon Energy at its address for service at least 1 day before the date fixed for the hearing of the application. The address for service on Anzon Energy is: Attention: Stan Lewis Corrs Chambers Westgarth Level 32 Governor Phillip Tower 1 Farrer Place Sydney NSW 2000

Name of person giving notice or of person's legal practitioner: Stan Lewis. IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 2393 OF 2007

IN THE MATTER OF ANZON ENERGY LIMITED (ABN 43 097 972 364) Between: ANZON ENERGY LIMITED (ABN 43 097 972 364)

INTRODUCTION 1 On 14 December 2007 I made orders pursuant to s 411(1) of the Corporations Act 2001 (Cth) (the Act) that the plaintiff (Anzon Energy) convene a meeting of its ordinary shareholders, other than 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 Energy and its shareholders (Scheme Meeting, Anzon Energy Shareholders and Anzon Energy Scheme respectively). An excluded share is a fully paid ordinary share in Anzon Energy held by ARC Energy Limited (ARC) 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 Anzon Energy Shareholders. 3 These are my reasons for the making of those orders.

THE SCHEME 4 Anzon Energy is a public company admitted to the Alternative Investment Market (AIM) of the London Stock Exchange (LSE). Anzon Energy was established for the purpose of developing oil and gas opportunities on a global basis. Anzon Energy's principal asset is its 53.1% shareholding in Anzon Australia Limited (Anzon Australia). 5 On 13 December 2007 I made orders for the convening of a meeting of the shareholders of Anzon Australia for the purpose of their considering and, if thought fit, agreeing to a scheme of arrangement (Anzon Australia Scheme), the result of which would be that ARC would acquire the shares in Anzon Australia: see In the matter of Anzon Australia Limited [2007] FCA 2079. 6 Under the presently proposed Anzon Energy Scheme: (a) The Anzon Energy Shareholders will transfer their shares to ARC; (b) The consideration proposed to be paid to the Anzon Energy Shareholders as at the record date (other than "Ineligible Foreign Shareholders" - see para 7) for the transfer of each of their shares (Scheme Consideration) will be equal to such number of ARC shares as equals the "Anzon Energy Merger Ratio". The "Anzon Energy Merger Ratio" is defined in the Scheme Booklet. The Scheme Consideration is estimated to be approximately 2.00 ARC shares per share in Anzon Energy. (c) The ARC shares which will constitute the Scheme Consideration will rank equally with all existing ARC shares on issue. (d) The result of the Anzon Energy Scheme will be that Anzon Energy will become a wholly owned subsidiary of ARC. (e) Following implementation of the Anzon Energy Scheme, Anzon Energy will be removed from the official list of the AIM. 7 An "Ineligible Foreign Shareholder" means, generally speaking, an Anzon Energy Shareholder who is a citizen or resident of a foreign jurisdiction whose laws would not permit such a person to take the issue of the ARC shares as consideration. More precisely, a citizen or resident of a foreign jurisdiction is not an Ineligible Foreign Shareholder if Anzon Energy and ARC are reasonably satisfied that the issue of the ARC shares to the Anzon Energy Shareholder who is a foreign resident is not prohibited, not unduly onerous and not unduly impracticable in the foreign jurisdiction in question.

MERGER IMPLEMENTATION DEED 8 On 24 October 2007, Anzon Energy and ARC entered into a Merger Implementation Deed (MID) in relation to the proposed Anzon Energy Scheme. The MID was amended by an Amendment and Restatement Deed executed on 12 December 2007.

DEEDS POLL 9 In accordance with the MID, ARC was to execute a Deed Poll in favour of the Anzon Energy Shareholders, immediately following the making of the orders for the convening of the Scheme Meeting. 10 ABN Amro Equities Australia Limited (ABN Amro) was also to execute a deed poll immediately following the making of those orders. Under the deed poll, ABN Amro was to covenant in favour of the Sale Facility Participants (see para 13) and the Ineligible Foreign Shareholders to perform its obligations.

THE ANZON ENERGY SCHEME AND THE ANZON AUSTRALIA SCHEME 11 The Anzon Australia Scheme and the Anzon Energy Scheme are not interconditional.

RRECOMMENDATION BY THE DIRECTORS OF ANZON ENEGY 12 The directors of Anzon Energy have unanimously recommended that the Anzon Energy Shareholders vote in favour of the Anzon Energy Scheme, in the absence of a superior proposal. Each director of Anzon Energy who holds shares in Anzon Energy intends to vote in favour of the Anzon Energy Scheme in respect of those shares, in the absence of a superior proposal.

SALE FACILITY 13 Anzon Energy Shareholders have the option to participate in a sale facility (Sale Facility). Pursuant to that Sale Facility, ABN Amro will sell the ARC shares to which the Anzon Energy Shareholders who participate in the Sale Facility (Sale Facility Participants) would otherwise be entitled as Scheme Consideration. The proceeds of the sale (less applicable selling costs, taxes and charges) will be remitted to the respective Sale Facility Participants. Each of the Sale Facility Participants will receive the same price per ARC share based on a pro rata distribution of the pooled proceeds of the sale. 14 The ARC shares that would otherwise be issued to Ineligible Foreign Shareholders will also be sold through the Sale Facility. The Ineligible Foreign Shareholders will receive the same price per ARC share as each Sale Facility Participant based on a pro rata distribution of the pooled proceeds of the sale.

OPTIONS 15 There are 8,050,000 Anzon Energy options on issue. The options are held by Anzon Energy executives and employees. It is proposed that ARC and each Anzon Energy option holder enter into an agreement pursuant to which ARC will purchase all of the options in exchange for new ARC shares, subject to the Anzon Energy Scheme becoming effective. The agreement will not prevent the Anzon Energy option holder from exercising the options prior to the holding of the Scheme Meeting.

ANZON ENERGY CONVERTIBLE NOTES AND RAK UNSECURED NOTES 16 It is a condition precedent to the implementation of the Anzon Energy Scheme that Anzon Energy has sufficient funds immediately available to repay at the implementation date all outstanding indebtedness (other than trade creditors) of Anzon Energy and its subsidiaries, other than Anzon Australia. In order that this condition be satisfied, Anzon Energy will need to repay, redeem or extinguish three outstanding debt instruments or categories of debt instrument, prior to the implementation date. These are: (a) Kings Road Convertible Notes in the amount of US$10 million, which have been issued to Kings Road Investments Ltd; (b) RAK Convertible Notes in the amount of £20 million, which have been issued to RAK Petroleum PCL (RAK); and (c) RAK Unsecured Notes in the amount of £20 million, which have also been issued to RAK. 17 The Scheme Booklet explains Anzon Energy's intention in relation to the Convertible Notes ((a) and (b) above) and the RAK Unsecured Notes ((c) above).

INDEPENDENT EXPERT'S REPORT 18 The board of directors of Anzon Energy appointed Deloitte Corporate Finance (Deloitte) as an independent expert to assess the Anzon Energy Scheme. Deloitte has prepared a report which is contained in the Scheme Booklet. Deloitte has concluded that the Anzon Energy Scheme is fair and reasonable and in the best interests of Anzon Energy Shareholders. In summary, Deloitte considered: (a) the estimated fair market value of an Anzon Energy share to be between £1.00 and £1.10; and (b) the estimated fair market value of the Scheme Consideration to be between £1.20 and £1.29 per Anzon Energy Share.

PERFORMANCE RISK 19 The shares held by Anzon Energy Shareholders will not be transferred to ARC unless and until ARC enters in the ARC register the names of all the Anzon Energy Shareholders entitled to receive the Scheme Consideration, other than, of course, Sale Facility Participants (in respect of those ARC shares sold or to be sold under the Sale Facility) and Ineligible Foreign Shareholders in respect of their entitlements. In those two cases, the name to be entered in the ARC register is that of ABN Amro. 20 As a result there is no possibility of the title to the shares held by Anzon Energy Shareholders passing to ARC with an outstanding obligation on the part of ARC to provide the Scheme Consideration, subject to the qualification mentioned in the case of Sale Facility Participants and Ineligible Foreign Shareholders. In respect of them, ABN Amro covenants in their favour in the relevant deed poll to perform its obligations.

EXCLUSIVITY AND BREAK FEE 21 The MID contains in cl 9 exclusivity provisions (sometimes called "no shop" and "no talk" provisions). A copy of the MID is included in the Scheme Booklet, and the text of the Scheme Booklet draws attention to the "No-shop and no-talk restrictions". 22 Clause 10 of the MID provides for the payment of a break fee of $2.5 million. The break fee is reciprocal: it is payable by Anzon Energy to ARC and by ARC to Anzon Energy in the respective circumstances identified in the MID. The break fee provision is also disclosed within the text of the Scheme Booklet. 23 The exclusivity provisions and break fee are addressed in an affidavit of Andrew Alexander Young, the managing director and chief executive officer of Anzon Energy. Mr Young provides evidence to the following effect: · The exclusivity provisions and break fee were agreed between Anzon Energy and ARC following arm's length commercial negotiations. Both parties were separately advised and represented in those negotiations by external legal advisers and external financial advisers with extensive experience of transactions of the present kind; · The directors of Anzon Energy also had regard to the Takeovers Panel's Guidance Note 7: Lock-up devices in the negotiations; · ARC required that exclusivity and break fee provisions be included, and the directors of Anzon Energy were satisfied that the final form of the provisions was acceptable; · Mr Young believes that neither the break fee nor the exclusivity provisions operate against the interests of the Anzon Energy Shareholders and, indeed, that it was in their interests that the directors of Anzon Energy agree to the inclusion of those provisions in the MID, in order to secure ARC's execution of the MID and ARC's agreement to implement the Anzon Energy Scheme; and · The amount of the break fee is below the 1% "cap" referred to in para 7.14 of the the Takeovers Panel's Guidance Note 7: Lock-up devices. 24 In my view, the presence of the exclusivity and break fee provisions in the MID should not stand in the way of the Anzon Energy Shareholders having the opportunity to consider the Anzon Energy Scheme: see Re APN News & Media Ltd (2007) 62 ACSR 400 at [25]-[55]; Re Investa Properties Ltd (2007) 25 ACLC 1186 at [31]-[35]; Re Bolnisi Gold NL [2007] FCA 1668 at [25]-[26].

DEEMED WARRANTY 25 The Anzon Energy Scheme provides for a deemed warranty by the Anzon Energy Shareholders that their shares in Anzon Energy will be free from encumbrances. Appropriate prominence is given to the deemed warranty in the Scheme Booklet. I have no difficulty with such a deemed warranty: see Re APN News & Media Ltd (2007) 62 ACSR 400 at [57]-[63].

CONCLUSION 26 For the above reasons, I made the orders for the convening of the Scheme Meeting and approved the explanatory statement to accompany the notices of that Scheme Meeting. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate: Dated: 27 December 2007 Counsel for the plaintiff: Mr T F Bathurst QC

Solicitor for the plaintiff Corrs Chambers Westgarth

Date of Hearing: 13, 14 December 2007

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