Coates Hire Limited (ACN 073 603 586) No 2, in the matter of Coates Hire Limited (ACN 073 603 586) [2007] FCA 2105

Coates Hire Limited (ACN 073 603 586) No 2, in the matter of Coates Hire Limited (ACN 073 603 586) [2007] FCA 2105 - FCA 2007 case summary — Zoe

1.1 Definitions The following definitions apply unless the context requires otherwise. ASIC means the Australian Securities and Investments Commission. ASX means ASX Limited (ABN 98 008 624 691) or, as the context requires, the financial market operated by it. ASX Listing Rules means the official listing rules of ASX. Bidco means Ned Group Holdings Pty Limited (ACN 126 739 240). Business Day has the meaning given in the ASX Listing Rules. CHESS means the clearing house electronic sub-register system of share transfers operated by ASX Settlement and Transfer Corporation Pty Limited (ACN 008 504 532). Coates Shareholder means a person who is recorded in the Register as the holder of Coates Shares. Coates Shares means fully paid ordinary shares in the capital of Coates. Corporations Act means the Corporations Act 2001 (Cth). Court means a court of competent jurisdiction under the Corporations Act. Covenantor means Ned Operations Pty Limited(ACN 126 069 341). Deed Poll means the Deed Poll executed by Bidco and the Covenantor on 9 November 2007 in favour of Scheme Participants. End Date means 29 February 2008, or such later date as Coates and Bidco may agree in writing. Effectivemeans the coming into effect, pursuant to section 411(10) of the Corporations Act, of the order of the Court made under section 411(4)(b) in relation to the Scheme. Effective Date means the date on which the Scheme becomes Effective. Guarantor means CAP Orange Holding B.V. of 8 Queensway, 2 Pacific Place, Hong Kong. Implementation Agreement means the Scheme Implementation Agreement dated 2 October 2007 between Coates, Bidco, the Covenantor and the Guarantor relating to the implementation of the Scheme. Implementation Date means the fifth Business Day following the Record Date. Record Datemeans 5.00pm on 2 January 2008, or such other date as notified by Coates to the ASX. Register means the register of members of Coates. Scheme means the scheme of arrangement under Part 5.1 of the Corporations Act between Coates and the Coates Shareholders as set out in this document, subject to any alterations or conditions made or required by the Court under section 411(6) of the Corporations Act. Scheme Consideration means $6.06 cash for each Coates Share held by a Scheme Participant as at the Record Date. Scheme Participant means a person who is a Coates Shareholder as at the Record Date (other than Bidco to the extent that it holds Coates Shares). Second Court Datemeans the first day on which the application made to the Court for an order pursuant to section 411(4)(b) of the Corporations Act approving the Scheme is heard or, if the application is adjourned for any reason, the first day on which the adjourned application is heard. Special Dividend means a fully franked cash dividend of $0.53 for each Coates Share held by a Scheme Participant as at the Special Dividend Record Date. Special Dividend Record Date means 5.00pm on 2 January 2008, or such other date as notified by Coates to the ASX.

[70]

REASONS FOR JUDGMENT 1 On 9 November 2007 the Court made orders that the plaintiff, Coates Hire Limited (the Company), convene a meeting of its members for the purpose of considering a proposed scheme of arrangement involving the disposition of all of the issued shares in the capital of the Company. 2 The meeting was convened and held on 17 December 2007. The meeting was convened in accordance with the directions given by the Court, subject to several matters to which I shall refer. At the meeting the resolution that was put to the members was passed. 94.86% of the votes were cast in favour of the motion, and 5.14% were cast against. The votes in favour represented 89.21% of shareholders who voted. Accordingly, the resolution in favour of the Scheme of Arrangement has been passed by the requisite majority referred to in s 411(4) of the Corporations Act 2001 (Cth) (the Act). 3 Order 9 made on 9 November 2007 required documents to be sent to the Company's shareholders, as recorded in the register of members on 9 November 2007. A mailing list was initially prepared as at the close of business on 7 November. However, a secondary mailing process was carried out to ensure that any person who acquired shares after that date, but before 4 December 2007, received the relevant materials. 4 Secondly, certain individuals who held shares pursuant to the Company's Employee Share Plan, as well as ordinary shares, did not receive proxy forms with the other scheme documents. That omission was rectified within 24 hours or so. 5 In relation to the Coates Hire Performance Share Plan, the Company has passed a resolution whereby vesting conditions under the plan were released on 17 December 2007. Accordingly, any unvested shares will vest automatically without any need to lodge a notice of withdrawal, as was referred to in section 6.3(a) of the Scheme Booklet. 6 Finally, the materials that were sent to shareholders included covering letters from the chairman of the Company. Where the Court orders that a document in a particular form be sent to shareholders, the documents should not be accompanied by any further document that has not itself been approved by the Court. If it is proposed that other documents, such as covering letters, be sent, a draft of those other documents should be put before the Court at the time of the application for the order that the meeting be convened. The other documents can then be incorporated into the Court's order. 7 The materials sent to shareholders included letters that had not been brought to the attention of the Court prior to the making of the orders on 9 November 2007. I am satisfied that the failure to put those matters before the Court was not intentional and was the result of an oversight. The letters in question are now in evidence. I am satisfied that there is nothing untoward in the contents of those letters that would interfere with the exercise by the Court of its discretion to approve the scheme. 8 On 7 December 2007 the Company informed Australian Securities Exchange Limited of an expected improvement in its comparable operating earnings for the financial year. In an announcement on 29 August 2007 the directors gave some guidance as to the expected financial result for the current year. At that time it was expected that there would be an improvement of some 15% over the comparable operating earnings for the year ended 30 June 2007. In the announcement on 7 December 2007 the directors indicated that it is expected that there will be an improvement of some 20% over the previous year's comparable operating earnings, although it was pointed out that, at that time, only one third of the financial year had elapsed. 9 The scheme booklet contained a report from Mr Craig Edwards of Lonergan Edwards & Associates Limited, in which Mr Edwards gave his opinion that the scheme was fair and reasonable and in the best interests of the shareholders of the Company. Mr Edwards has confirmed that the matters referred to in the announcement do not cause him to alter his opinion that the acquisition of shares in the Company pursuant to the scheme is fair and reasonable and in the best interests of the shareholders, absent any superior proposal. 10 In addition to an affidavit of Mr Edwards of 13 December 2007 I have had regard to affidavits of Raghuram Murphy of 17 December 2007, Rebecca Louise Houguet-Boole of 13 December 2007, Michael Sydney Radziowsky of 19 December 2007, David Simon Karpin of 18 December 2007, Malcolm Stephens of 19 December 2007, Curtis Lyle Buser of 17 December 2007, Raymond John Romano of 19 December 2007, Vincent Leonardo De Santis of 19 December 2007, Stephen Sherwood Donnelley of 19 December 2007. 11 I am satisfied from that evidence that the scheme meeting was advertised in accordance with the orders that were made, and that today's hearing has been advertised in accordance with the orders that were made. Those affidavits also establish that the meeting was conducted in accordance with the directions that I gave. The affidavits also establish to my satisfaction that arrangements are in place for the provision of funding to enable the total consideration to be paid to shareholders. The scheme provides a mechanism whereby beneficial ownership will not pass until the consideration is provided. That mechanism is dealt with in a Deed Poll of 9 December 2007, executed by Ned Group Holdings Pty Limited, and Ned Operations Pty Limited. The Deed Poll is expressed to be executed in favour of each holder of fully paid shares in the capital of the Company. 12 The Scheme Implementation Agreement and the scheme itself are expressed to be subject to certain conditions precedent. I have evidence in the form of certificates on behalf of the relevant parties that all conditions other than the approval of the Court have been, or will be, satisfied. 13 I am satisfied from the terms of a letter from Australian Securities and Investments Commission (the Commission) to the Company's solicitors that there is no impediment by s 411(17) of the Act to the Court approving the scheme. By that letter the Commission says that it has no objection to the Scheme of Arrangement on the basis that it is satisfied that the Scheme has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Act. 14 I am also satisfied that it is appropriate to order, pursuant to s 411(12) of the Act, that the Company need not comply with s 411(11) of the Act. In all of the circumstances I consider that it is appropriate for the Court to make an order approving the Scheme. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

At a glance

Court

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Before

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Judgment (71 paragraphs)

Legislation Cited (1)