Clough Limited, in the matter of Clough Limited [2013] FCA 1149

A meeting ("Scheme Meeting") of holders of fully paid ordinary shares in the capital of the Plaintiff other than Excluded Shareholders (as that term is defined in the scheme of arrangement) ("Shareholders") be convened, to be held in Perth, Western Australia on or about 15 November 2013 or such other date as the Court may approve for the purpose of considering and, if thought fit, approving, with or without modifications, the scheme of arrangement ("Scheme") between the Plaintiff and its Shareholders, as set out in annexure "RVR-21" of the affidavit of Mr Rajiv Virendra Ratneser, sworn 3 October 2013.
The explanatory statement in relation to the Scheme, as required by section 412(1)(a) of the Corporations Act 2001 (Cth) ("Act") and set out in the scheme booklet which forms annexure "RVR-31" to the supplementary affidavit of Rajiv Virendra Ratneser sworn on 10 October 2013 (the "Scheme Booklet"), is approved.
Subject to these orders, the Scheme Meeting is to be: (i) convened, held and conducted in accordance with the provisions of Part 2G.2 of the Act that apply to members of a company and the provisions of the Plaintiff's constitution that are not inconsistent therewith and that apply to meetings of members; (ii) convened, held and conducted pursuant to section 1319 of the Act, on the basis that Corporations Regulations 2001 (Cth) 5.6.12 and 5.6.14 to 5.6.36A do not apply to the meeting; and (iii) convened using the notice of meeting in the form or to the effect of the notice contained in Annexure E of the Scheme Booklet.
Mr Keith Spence or, failing him, Mr David Crawford is to act as chairperson of the Scheme Meeting ("Chairperson") and report the result of the Scheme Meeting to this Court.

REASONS FOR JUDGMENT 1 This is an application for orders under s 411(1) of the Corporations Act 2001 (Cth) for the convening of a meeting of the members of Clough Limited (Clough) for the purposes of considering and, if thought fit, approving the entry into a scheme of arrangement. 2 Murray & Roberts Limited (Murray & Roberts), a company incorporated in South Africa, is the majority shareholder in Clough. It owns 61.63% of the share capital of Clough. Under the proposed scheme of arrangement, a wholly owned subsidiary of Murray & Roberts will acquire the remainder 38.37% of the share capital, with the consequence that Clough will become a subsidiary of Murray & Roberts. 3 It is proposed that members will receive a total of $1.46 for each of their shares in Clough. That sum is made up of two components, namely, a payment of $1.32 by way of the scheme consideration, and a special dividend of 14 cents. It is hoped that the dividend will be fully franked. However, if it transpires that the dividend payable is less than 14 cents, the scheme consideration will be enhanced so as to result in a total sum payable of $1.46. 4 Clough will provide a loan to Murray & Roberts. The proceeds of that loan will be used in part for the payment of the scheme consideration. This raises issues in relation to Clough providing financial assistance in respect of the purchase of its own shares and providing a financial benefit to a related party. The affidavit evidence shows that it is proposed to hold a general meeting of shareholders of Clough on the same day as, and immediately before, the proposed meeting for the approval of the scheme. The purpose of this meeting is to obtain the approval of the shareholders of Clough to the making of the loan under s 208 and s 260A of the Corporations Act. The loan to Murray & Roberts is conditional upon the scheme being approved. 5 There are also 16,385,978 unlisted options and 3,347,287 performance rights on issue. The issues arising from this circumstance have been disclosed in the explanatory memorandum and are being dealt with outside of the scheme. It is proposed that the unlisted options will be cancelled and Clough will pay the optionholders the amount of $1.46, less the exercise price of the options. There is no need for the holding of a meeting of optionholders. 6 Insofar as the performance rights on issue are concerned, it is proposed that the rights will be cancelled on the payment of $1.46, or that the vesting date of the rights will be abridged, and shares will be issued to the holders of the rights. 7 When the Court is asked to consider at the first hearing, whether to approve the convening of a meeting to consider a scheme of arrangement under s 411(1) of the Corporations Act, the Court has regard to a number of well-known criteria. These criteria have all been addressed in Mr Warnick's very helpful submissions. 8 I am satisfied that there is only one class of shareholders and that, therefore, there is only the need for one meeting. 9 There is evidence before me that the explanatory memorandum has been forwarded to the Australian Securities and Investments Commission (ASIC) for comment, and that there have been discussions between the proponent of the scheme and ASIC, and that amendments proposed by ASIC have been incorporated into the explanatory memorandum. 10 I am also satisfied that the explanatory memorandum provides a proper disclosure of the essential elements of the scheme and other relevant circumstances. 11 The evidence also shows that ASIC has been given an opportunity to attend at this hearing, but has written to the proponent of the scheme saying that at this stage it does not intend to appear to make submissions. That is not an unusual position for ASIC to take. 12 Another matter of which the Court should also be satisfied is that if the members of Clough approve the scheme at the meeting by the requisite statutory majorities, there is nothing which would preclude the scheme from being approved by the Court at the second hearing. 13 The submissions to which I have referred, have drawn attention to the "no shop", "no talk" and "no due diligence" provisions in the scheme implementation agreement. These provisions are properly disclosed in the explanatory memorandum. I note, in particular, that the operation of these provisions is subject to the usual fiduciary carve-out. I do not foresee that the presence of these provisions in the scheme implementation agreement would constitute an obstacle to the approval of the scheme at the second hearing if the requisite statutory majorities are obtained. 14 Likewise, the question of the performance risk is dealt with by way of a deed poll, and also by way of the obligation to transfer, prior to the scheme implementation date, the funds to pay the scheme consideration into a trust account for the benefit of the Clough shareholders. 15 I have also seen the expert opinion from Grant Samuel & Associates Pty Limited, which has indicated that the scheme consideration is, in the absence of any better offer, fair and reasonable. Accordingly, I do not see the fairness or reasonableness of the scheme as being an issue at the second hearing which may preclude the approval of the scheme. 16 I am also content to make an order abridging the time for advertising the notice of the second hearing from five days to four days. 17 In the circumstances, I am satisfied that the requirements for the making of the orders have been met. 18 I will make the orders in chambers later today so that the scheme of arrangement is identified in the orders by reference to an annexure to Mr Ratneser's affidavit, rather than in the manner currently provided for in the minute of proposed orders. Otherwise, the orders I will make will be in accordance with the minute of proposed orders. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.

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