Aphrodite Gold Limited, in the matter of Aphrodite Gold Limited [2017] FCA 1346

SIOPIS J: 1 This is an application for the convening of a meeting of the members of the plaintiff company, Aphrodite Gold Limited (Aphrodite), under s 411(1) of the Corporations Act 2001 (Cth) to consider, and, if thought fit, to approve a proposed scheme of arrangement between the plaintiff and its members. Aphrodite is a gold exploration company whose shares are listed on the Australian Securities Exchange (ASX). 2 Under the proposed scheme of arrangement, the shares which are held by Aphrodite shareholders would be acquired by Spitfire Materials Limited (Spitfire), which is also a public company whose shares are listed on the ASX. Spitfire is a company which is engaged in mineral exploration, including gold exploration. The scheme would bring about, in effect, a merger between Aphrodite and Spitfire. 3 The scheme consideration is that Aphrodite shareholders would obtain one new fully paid ordinary share in Spitfire for every 2.8959 shares held in Aphrodite. The scheme consideration represents a premium on the Aphrodite share price at the date of the announcement of the proposed scheme. 4 There are also a number of options to acquire shares in Aphrodite, but those are being dealt with by a means outside of the scheme. 5 When a court considers whether to grant the relief sought under s 411(1), it has to be satisfied of a number of matters. 6 First, I am satisfied that the proposed scheme of arrangement qualifies as an arrangement within the meaning of that term under Pt 5.1 of the Corporations Act. 7 Secondly, I am satisfied that in compliance with s 411(2) of the Corporations Act, the Australian Securities and Investments Commission (ASIC) has had at least 14 days' notice of the hearing today and has also had reasonable opportunity to examine the proposed scheme and the proposed scheme booklet. 8 The evidence shows that the solicitors for Aphrodite have been in correspondence with ASIC for some time in relation to the content of the proposed scheme booklet and that as a consequence thereof, a number of amendments have been incorporated into the proposed scheme booklet. 9 In addition, Mr James Pearse of the firm of solicitors representing Aphrodite, has filed an affidavit today to which is attached a letter from ASIC dated 10 November 2017. In that letter, ASIC has advised that it had received at least 14 days' notice of this hearing and that it has had a reasonable opportunity to consider the proposed scheme booklet. ASIC also stated that it did not propose to appear today to make submissions in opposition to the making of the orders proposed, but reserves its position in relation to the second hearing. 10 Thirdly, I am satisfied that there has been compliance with the relevant provisions of the Corporations Act and the Corporations Regulations 1994 (Cth). There is annexed to Aphrodite's outline of submissions a detailed checklist which has described each of the relevant provisions of the Corporations Act and the Corporations Regulations and which has identified the parts of the affidavit evidence which demonstrate that there has been compliance with that provision. Further, I am satisfied that the content of the proposed scheme booklet contains sufficient information about the scheme as to provide Aphrodite's shareholders with an informed basis upon which to determine whether to vote for or against the scheme. There is affidavit evidence from Mr Roger Mitchell, non-executive director of Aphrodite, and Mr Russell Hardwick, company secretary of Spitfire, to the effect that exercises have been undertaken to ensure that the statements which are contained in the scheme booklet are correct. 11 Counsel for Aphrodite has also taken me to a number of provisions in the merger implementation agreement. 12 There are provisions in the merger implementation agreement which provide for the payment of a break fee. I am satisfied that that amount of break fee falls within the ambit of the Takeovers Panel Guidance Note 7: Lock-up devices, and is otherwise not objectionable. 13 There are also exclusivity provisions in the merger implementation agreement. I note that in relation to the exclusivity provisions that there is an appropriate fiduciary carve-out. I also observe that there is evidence that the break fee and exclusivity provisions were negotiated at arm's length with each of the two parties having been represented by firms of solicitors in the negotiation of those provisions. 14 I am also satisfied that the terms of the break fee and exclusivity provisions have been sufficiently described in the proposed scheme booklet, such that the shareholders will be sufficiently apprised of the terms of those provisions. 15 As to the performance risk, there is attached to the affidavit of Mr Pearse, dated 10 November 2017, a deed poll which has been executed by Spitfire. So I am satisfied that performance risk has been dealt with. 16 I might say that there is also an expert report in the proposed scheme booklet which opines that the scheme is fair and reasonable, and in the absence of any other offer, in the best interests of the Aphrodite shareholders. I would also observe that counsel for Aphrodite took me to some parts of the expert report which deal with the way in which the experts have approached the question of the valuation of the shares in Aphrodite. I am satisfied that this issue has been properly explained in the expert report. Otherwise, the question of whether the scheme is fair and reasonable is a matter which is to be considered at the second hearing. 17 On the basis of the matters to which my attention has been drawn, there is no matter which causes the Court to believe that if the requisite majorities were obtained at the meeting that the Court would not approve the scheme. 18 Accordingly, I am content to make orders in terms of the minute of proposed orders subject to the amendment which I raised with counsel in relation to para 7 of the minute. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.