Anzon Energy Limited, in the matter of Anzon Energy Limited [2008] FCA 1141

Federal Court of Australia|2008-08-05|Before: Lindgren J

THE COURT ORDERS THAT:

Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (the Act):

(a) Anzon Energy Limited ABN 43 097 972 364 (AEL) convene a meeting (Scheme Meeting) of the holders of ordinary shares in AEL, other than the holders of Excluded Shares in respect of those Excluded Shares (AEL 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 AEL and AEL 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 "1" in these proceedings (Scheme Booklet).

(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 AEL share they are registered as holding at 10am (AEST) on 2 September 2008.

(g) The explanatory statement in the Scheme Booklet for the Scheme be approved for distribution to AEL Shareholders.

(h) There be dispatched to each AEL Shareholder: (i) a covering letter; (ii) a document substantially in the form of the Scheme Booklet; (iii) a proxy form for the Scheme Meeting; and (iv) a reply paid (for use in Australia only) envelope addressed to Computershare Investor Services Pty Limited for the return of the proxy form, in the case of each AEL Shareholder who has a registered address in Australia, by prepaid post and, in the case of each AEL 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 AEL register of members.

(i) The time by which the AEL Shareholders must return their proxy forms for the Scheme Meeting be 10am (AEST) on 2 September 2008.

(j) AEL place an advertisement in The Australian newspaper, substantially in the form of "Annexure A" to these Orders, on or before 29 August 2008 and AEL shall otherwise be exempted from compliance with the requirement to publish such notice following the Scheme Meeting and prior to the second court hearing for approval of the Scheme pursuant to Rule 3.4(3)(a) of the Federal Court (Corporations) Rules 2000 (Cth).

(k) The proposed AIM announcement in the terms proposed and in the circumstances stated in paragraph 18 of the affidavit of Anthony James Strasser affirmed 28 July 2008 be approved.

Pursuant to section 1319 of the Corporations Act, AEL be exempted from compliance with the requirements of rule 2.15 of the Federal Court (Corporations) Rules 2000 save that regulation 5.6.13 of the Corporations Regulations 2001 shall apply to the AEL Scheme Meeting.

The plaintiff exercise the liberty to apply referred to in Order 5 if the plaintiff proposes to advise the AEL Shareholders of any material change in the estimated Merger Ratio (as defined in the Scheme Booklet).

The proceedings be stood over to 5 September 2008 at 10.15am before Justice Lindgren for the hearing of any application to approve the Scheme.

In these orders, an Excluded Share is a fully paid ordinary share in AEL held by Roc Oil Company Limited ABN 32 075 965 856 or its Related Bodies Corporate (as defined in section 50 of the Corporations Act). Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

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 (AEL).

TAKE NOTICE that at 10.15am on 5 September 2008 the Federal Court of Australia at Law Courts Building, Queens Square, Sydney, NSW, 2000 will hear an application by AEL seeking the approval of an arrangement between AEL and its members, if agreed to by resolution to be considered by the members of AEL at a meeting of such members to be held on 3 September 2008 at Corrs Chambers Westgarth, Level 32, Governor Phillip Tower, 1 Farrer Place, Sydney, New South Wales at 10.00am (AEST).

If you wish to oppose the approval of the arrangement, you must file and serve on AEL 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 AEL at its address for service at least 1 day before the date fixed for the hearing of the application.

The address for service on AEL is, c/o Corrs Chambers Westgarth, Level 32, Governor Phillip Tower, 1 Farrer Place, Sydney NSW 2000 (Reference: Stan Lewis).

Tony Strasser Company Secretary Anzon Energy Limited

NEW SOUTH WALES DISTRICT REGISTRY NSD 1170 of 2008

IN THE matter of Anzon ENERGY LIMITED (ABN 43 097 972 364)

Introduction 1 By its originating process, the plaintiff, Anzon Energy Limited (AEL) applies for an order under s 411(1) of the Corporations Act 2001 (Cth) (the Act) that AEL convene a meeting (Scheme Meeting) of the AEL Shareholders (see the definition below) for the purpose of their considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement between AEL and them (Scheme). AEL also seeks an order under s 411(1) of the Act approving the explanatory statement required by s 412(1)(a) of the Act to accompany the notices convening the Scheme Meeting. Those orders were sought at the first court hearing. 2 By its originating process, AEL also seeks an order, assuming that the Scheme Meeting is ordered to be held and the Scheme is agreed to at it, under s 411(4)(b) of the Act that the Scheme be approved. AEL also seeks related orders. 3 On 30 July 2008 I made orders for the convening of the Scheme Meeting and approving the explanatory statement. These reasons are my reasons for doing so.

Outline of the Scheme 4 AEL is a public company admitted to the Alternative Investment Market (AIM) of the London Stock Exchange. AEL's business is that of developing oil and gas opportunities on a global basis. Its principal asset is its 53.1% shareholding in Anzon Australia Limited (Anzon Australia). 5 Under the proposed Scheme: (a) Holders of ordinary shares in AEL, other than Excluded Shares (see below) (AEL Shareholders) will transfer their shares to Roc Oil Company Limited (ROC) or a wholly owned subsidiary of ROC. (b) The consideration for the transfer (based on estimates current at the date of the hearing on 30 June 2008) will be the issue to the AEL Shareholders other than Ineligible Foreign Shareholders (see below) of approximately 1.33 ROC shares for every AEL share transferred (Scheme Consideration). The Scheme Consideration varies in accordance with a formula. (c) The Scheme Consideration provides a premium to the recent historical trading price of AEL shares. As at 13 June 2008, the value of the Scheme Consideration was estimated to be $2.69 (₤1.30) per AEL share (based on the closing price of ROC shares on 13 June 2008 of $2.02). On the basis just mentioned, the value of the Scheme Consideration would represent a premium of 103% over the closing price of AEL shares on the last trading day on which AEL shares traded prior to the initial approach date of 27 August 2007, and a premium of 46% over the volume weighted average price (VWAP) of AEL shares for the three month period prior to the announcement of the proposed Scheme. (d) The new ROC shares to be issued will rank equally with ROC shares already on issue; (e) The Scheme will result in an acquisition of AEL by ROC and will result in AEL's becoming a wholly owned subsidiary of ROC; (f) AEL will be removed from the official list of the AIM. 6 An "Excluded Share" means a share held by ROC or its related bodies corporate as defined in s 50 of the Act.

Merger Implementation Deed 7 On 16 June 2008 AEL and ROC entered into a Merger Implementation Deed for the implementation of the proposed Scheme (MID). I discuss aspects of the MID below.

Additional features of the proposed Scheme 8 Under the proposed Scheme ROC will not issue any new ROC shares to an Ineligible Foreign Shareholder. The new ROC shares that would have been issued to Ineligible Foreign Shareholders but for their having that status, will be issued to a sale agent (Sale Facility Agent) who will sell them on the Australian Stock Exchange (ASX), and ROC must procure the Sale Facility Agent to pay to each Ineligible Foreign Shareholder that shareholder's proportion of the net proceeds received (after deduction of any applicable brokerage, taxes and charges). 9 Each AEL Shareholder is deemed to give a warranty to AEL and ROC that that shareholder's AEL shares will, on the date of transfer, be fully paid and free from encumbrances and that the AEL Shareholder has full power and capacity to sell and transfer them.

Deed Poll 10 In accordance with the MID, ROC will execute a deed poll in favour of AEL Shareholders immediately following the making of the order for AEL to convene the Scheme Meeting.

Anzon Australia Takeover 11 ROC has announced its intention of making an off-market takeover offer for all of the shares in Anzon Australia (Anzon Australia Takeover Offer). However, implementation of the Scheme is not dependent on the outcome of the Anzon Australia Takeover Offer.

Recommendation of the directors of AEL 12 The AEL directors have expressed their belief and recommendation that the Scheme offers AEL Shareholders significant benefits and is in their best interests. The AEL directors unanimously recommend that the Scheme be agreed to by the AEL Shareholders in the absence of a superior proposal. Each AEL director who holds AEL shares intends to vote in favour of agreeing to the Scheme in respect of their AEL shares in the absence of a superior proposal.

Options 13 There are 8,050,000 AEL options on issue held by AEL executives and employees. It is proposed that ROC and each AEL optionholder enter into an agreement pursuant to which, subject to the Scheme's becoming effective, ROC will purchase all of that optionholder's AEL options in exchange for new ROC shares (Option Purchase Deed). Nothing in the Option Purchase Deed prevents an optionholder from exercising his or her options prior to the date of the Scheme Meeting.

AEL Convertible Notes and RAK Unsecured Notes 14 AEL has outstanding debt obligations of ₤20 million in the form of convertible notes that have been issued to RAK Petroleum PCL (RAK)]] and ₤20 million in the form of unsecured notes which have also been issued to RAK. It is a condition of the proposed Scheme that before the "Conditions Date" (being 8am on the day of the date of the second court hearing): (a) all of the AEL convertible notes are redeemed, cancelled or converted; or (b) the holder of AEL Convertible Notes has entered into an agreement to redeem, cancel or convert them on or after the day on which the Scheme becomes effective; and (c) the RAK unsecured notes are redeemed or the holder of them has entered into an agreement to redeem them on or after the day on which the Scheme becomes effective. The status of the conditions in relation to the AEL convertible notes and RAK unsecured notes is discussed in the Scheme Booklet.

Independent Expert's Report 15 Deloitte Corporate Finance (Deloitte) is an independent expert appointed by AEL to assess the proposed Scheme. Deloitte has prepared a report which is contained in the Scheme Booklet. Deloitte has concluded that the Scheme is fair and reasonable and is in the best interests of the AEL Shareholders. In summary, Deloitte has concluded that the estimated fair market value of an AEL share is in the range of $2.10 to $2.60, and the estimated fair market value of the Scheme Consideration offered by ROC is in the range of $2.20 to $2.55 per AEL share. 16 It will be noted that the high end of the estimated fair market value of an AEL share is above the high end of the estimated fair market value of the Scheme Consideration. The Independent Expert's Report addresses this point. It states: The consideration offered by ROC under the Proposed Scheme is within the range of our estimate of the fair market value of an Anzon Energy share. ASIC Regulatory Guide 111.10 provides that 'an offer is fair if the value of the offer price or consideration is equal to or greater than the value of the securities the subject of the offer'. ASIC Regulatory Guide 111.62 provides that 'an expert should usually give a range of values; for the securities the subject of the offer. In relation to the Proposed Scheme, we consider that, if the value of the consideration offered is within the range for an Anzon Energy share, the offer is fair. It is therefore our opinion that that Proposed Scheme is fair. (emphasis in original)

Tax implications for the AEL Shareholders 17 The Scheme Booklet contains a general outline of the Australian income tax, goods and services tax and stamp duty implications for Australian AEL Shareholders who hold their AEL shares on capital account and dispose of them to ROC pursuant to the Scheme. The Scheme Booklet does not contain a discussion of the income tax implications of the Scheme for AEL Shareholders who are not residents of Australia for income tax purposes.

No performance risk 18 Clause 4.2 of the proposed Scheme provides that the transfer of the AEL shares is subject to the provision by ROC of the Scheme Consideration in the manner contemplated by cl 5 of the Scheme. As a result there is no possibility of title to the AEL shares held by the AEL Shareholders passing to ROC with an outstanding obligation on ROC to provide the Scheme Consideration to AEL Shareholders (other than Ineligible Foreign Shareholders).

Disadvantages and risks 19 Disadvantages and risks associated with the Scheme are disclosed and discussed in the Scheme Booklet.

Exclusivity 20 Clause 9 of the MID contains exclusivity provisions. Prominence is given to them in the Scheme Booklet. Andrew Alexander Young, the Managing Director and Chief Executive Officer of AEL, has provided affidavit evidence to the effect that the directors of AEL have considered these provisions and believed them to be appropriate. In my view, these provisions should not stand in the way of the Court's ordering that a meeting of the AEL Shareholders be convened in order for them to consider the proposed Scheme.

Break fee 21 Clause 10 of the MID provides for payment of a break fee of $2.7 million should certain events occur. A break fee in that sum is payable not only by AEL but also by ROC, that is to say, it is a "reciprocal" break fee. In addition, it should be noted that the break fee is only payable "for cause" and that it is not a "naked no vote break fee": cf Re Bolnisi Gold NL (No 2) (2007) 243 ALR 545 at [9]ff. The amount of the break fee is less than 1% of the Scheme Consideration: see Takeovers Panel's Guidance Note 7: Lock Up Devices. 22 Mr Young's affidavit addresses the break fee. He states that the directors of AEL have considered the break fee provision and believe it to be appropriate. Having regard to the amount of the break fee as being less than the 1% level mentioned, the reciprocal break fee payable by ROC, the fact that the break fee is only payable for cause, and Mr Young's affidavit evidence, it is a very clear case in which the break fee provision should not stand in the way of the making of the orders sought by AEL.

Ineligible Foreign Shareholders 23 The expression "Ineligible Foreign Shareholder" means a AEL Shareholder who is (or is acting on behalf of) a citizen or resident of a jurisdiction other than Australia and its external territories or New Zealand, except where AEL and ROC are reasonably satisfied that the issue of ROC shares to the AEL Shareholder is not prohibited, not unduly onerous and not unduly impracticable in that foreign jurisdiction, and that it is lawful for that AEL Shareholder to participate in the Scheme by the law of the relevant place. Ineligible Foreign Shareholders will not be able to receive ROC shares as part of the Scheme Consideration. The ROC shares that would otherwise be issued to them will be sold through a sale facility to be implemented by the Sale Facility Agent appointed by ROC to administer the sale facility. Each Ineligible Foreign Shareholder will receive the same price per ROC share based on pro rata distribution of the pooled proceeds of sale. 24 Disclosure as to the criteria for being an Ineligible Foreign Shareholder and the fact that such a person will not receive the Scheme Consideration in the form of scrip is contained in sections 5.9 and 16.1 of the Scheme Booklet. 25 According to the share registry of AEL, as at 25 July 2008 there were 75 Ineligible Foreign Shareholders and the total number of AEL shares held by them was 17,900,226, which represented approximately 17.12% of the total number of AEL shares on issue on that date. 26 The Ineligible Foreign Shareholders are not treated as constituting a separate class: see Re Hills Motorway Ltd (2002) 43 ACSR 101 at [12]; Re CSR Ltd (2003) 45 ACSR 34 at [5]; Re SFE Corporation Ltd (2006) 59 ACSR 82 at [8].

Announcement of further financial results by ROC and AEL 27 AEL and ROC announced their ASX quarterly report for the quarter ended 30 June 2008 on 31 July 2008, the day after the first court hearing. AEL and ROC expect to announce their half year financial results to 30 June 2008 by 29 August 2008. This financial information represents an update of the financial information for AEL and ROC respectively contained in the Scheme Booklet. 28 Once those financial results are known, Deloitte will be instructed to have regard to them and to confirm its opinion that the proposed Scheme is fair and reasonable, and therefore in the best interests of the AEL Shareholders. That confirmation will be announced to the AIM in advance of the Scheme Meeting. 29 Disclosure of this matter is contained in the Scheme Booklet. 30 Included in the orders made on 30 July 2008 was an order in respect to this issue. In the event that Deloitte does not provide the confirmation, AEL must bring the matter to the Court's attention prior to the holding of the Scheme Meeting.

Conclusion 31 It was for the above reasons that I considered that the AEL Shareholders should have the opportunity of considering and agreeing to the proposed Scheme and made the orders sought for the convening of the Scheme Meeting. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Counsel for the Plaintiff: Mr T F Bathurst QC

Solicitors for the Plaintiff: Corrs Chambers Wesgarth

Counsel for ROC Oil Company Limited: Mr M Oakes SC

Solicitors for ROC Oil Company Limited: Allens Arthur Robinson

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