DDH1 Limited, in the matter of DDH1 Limited (No 2) [2023] FCA 1046

Judgment (3 paragraphs)

[1]

The orders of the Court made on 16 August 2023 in this proceeding (August Orders) be supplemented or varied, as applicable, in accordance with these orders.
Pursuant to s 411(1) and s 1319 of the Corporations Act 2001 (Cth), the supplementary explanatory statement in a form substantially equivalent to the form that is annexure GD-35 to the sixth affidavit of Georgia Kaye Jennifer Denny (sworn and filed in this proceeding on 5 September 2023) is approved for distribution to holders of fully paid ordinary shares (Shares) in the capital of the plaintiff (Shareholders), subject to: (a) the correction of any minor typographical errors or grammatical errors and final typesetting and formatting; (b) any minor amendments required or approved by the Australian Securities and Investments Commission (ASIC) for registration under s 412(6) of the Corporations Act; (c) correction or update of any relevant date references; and (d) any other amendments approved by the Court, (Supplementary Scheme Booklet)
Pursuant to s 1319 of the Corporations Act, subject to registration of the Supplementary Scheme Booklet with ASIC pursuant to s 412(6), the plaintiff dispatch on or before 7 September 2023 a document substantially in the form of the Supplementary Scheme Booklet to those Shareholders who appear on the register of members of the plaintiff as at 5.00 pm (AWST) on 4 September 2023 by sending: (a) in the case of each Shareholder who has nominated an email address for the purpose of receiving shareholder communications (Email Shareholder): (i) an email, substantially in the form of Annexure A, to the nominated email address, with such email to contain website links accessible by the Email Shareholder which enables the Email Shareholder to access and download the Supplementary Scheme Booklet; (b) in the case of each other Shareholder who has expressly elected to receive shareholder communications by post (Postal Shareholder), using the methods of service set out at order 4 below: (i) a copy of the Supplementary Scheme Booklet; (c) in the case of each other Shareholder who is not an Email Shareholder or Postal Shareholder, using the methods of service set out in order 4 below: (i) a letter, substantially in the form of Annexure A, with such letter to contain the address of a website which enables those Shareholders to access and download the Supplementary Scheme Booklet, and a phone number by which those Shareholders may request to be sent print copies of the Supplementary Scheme Booklet.

An officer of the Registry provide an electronic copy of the submissions filed on 1 September 2023 upon request by any person. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. ANNEXURE A DDH1 Limited (DDH1) refers to the proposed acquisition of DDH1 Limited by Perenti Limited (Perenti), by way of scheme of arrangement. As outlined in DDH1's ASX announcement on 18 August 2023 and the Scheme Booklet (at Important Notices, sections 1.6(c), 4.8 and 11.6(c)), DDH1 has prepared a Supplementary Scheme Booklet which has been approved for dispatch to Shareholders by the Federal Court of Australia. DDH1 Shareholders should read the Supplementary Scheme Booklet and the Scheme Booklet, in their entirety, and carefully consider the additional information provided before deciding whether or not to vote in favour of the Scheme at the Scheme Meeting. Supplementary Scheme Booklet A copy of the Supplementary Scheme Booklet containing information about the Scheme can be viewed and downloaded at: • https://www.asx.com.au/markets/company/ddh • https://www.ddh1.com.au/investors If you require a physical copy of the Supplementary Scheme Booklet (or the Scheme Booklet), please contact the DDH1 Shareholder Information Line on 1300 158 729 (for callers within Australia) or +61 2 9066 4058 (for callers outside of Australia) between 8.30 am and 6.00 pm (AEST) Monday to Friday (excluding public holidays) The Scheme Booklet and Supplementary Scheme Booklet contain important information about the Scheme Meeting to be held on Monday, 18 September 2023 at 1:00pm (AWST), including details about how to attend the meeting in person or electronically, how to vote, lodge or change proxy forms. Further information If you have any questions about the Scheme Booklet or Supplementary Scheme Booklet, you should contact the DDH1 Shareholder Information Line on 1300 158 729 (for callers within Australia) or +61 2 9066 4058 (for callers outside of Australia) between 8.30 am and 6.00 pm (AEST) Monday to Friday (excluding public holidays).

COLVIN J: 1 A scheme of arrangement has been proposed in respect of DDH1 Limited. The scheme, if approved and implemented, will result in all of the shares in DDH1 being transferred to Perenti Limited. Orders have been made to approve the convening of a meeting of the members of DDH1 to consider whether to approve the scheme: DDH1 Limited, in the matter of DDH1 Limited [2023] FCA 982 (First Hearing Decision). At the time those orders were made it was contemplated that, once the annual financial reports for each of DDH1 and Perenti had been published and any dividends declared, DDH1 would seek approval for the distribution to shareholders in DDH1 of a supplementary explanatory statement. Those events have occurred and DDH1 now seeks orders for the distribution of a proposed supplementary explanatory statement to shareholders in DDH1. 2 The Court has power to authorise the despatch of further explanatory material in respect of a meeting to be convened in accordance with orders made under s 411 of the Corporations Act 2001 (Cth): Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited (No 2) [2015] FCA 410 at [10] (McKerracher J). In determining whether it is appropriate for further explanatory material to be despatched, the Court exercises a supervisory jurisdiction. Its approach to that question is informed by the same considerations that pertain when considering the explanatory information to be despatched with a notice of meeting to consider a scheme: see First Hearing Decision at [5], [17]-[22]. 3 There is evidence that a verification process had been undertaken as to the matters addressed in the further explanatory material. ASIC has been notified and does not seek to appear to oppose the despatch of the material. The Court has been informed that the script used by the firm engaged in shareholder communications would be updated to refer to the further explanatory material. As I indicated in the First Hearing Decision, evidence as to what has occurred in relation to shareholder communications will be expected to be led at any hearing to approve the scheme. 4 The application for orders to authorise the despatch of the further explanatory material was supported by written submissions which I accept save for the following three matters. 5 Firstly, the submissions disclosed that some of the financial results announcements since the orders convening the meeting to consider the scheme had not expressly directed shareholders in DDH1 to the scheme booklet (including the explanatory statement). Whilst expressing regret that this had occurred, it was submitted that the publication of supplementary disclosure in the form of updated explanatory information would address this matter. Whether there is any significance as to these events is a matter for submissions at any hearing to approve the scheme if the requisite majorities are achieved at a meeting of DDH1. I have already expressed my view as to the appropriate course to be followed in relation to communications that have occurred with members: First Hearing Decision at [21]-[22], [50]-[51]. 6 Secondly, an issue arose as to the manner in which illustrative calculations ought to be presented in the supplementary information in circumstances where, relative to the time when the proposed scheme was announced, the price of Perenti shares had fallen. The issue arose because the standard consideration to be paid under the scheme, if approved, will comprise cash and shares in Perenti. Further, the formula for the final calculation of that consideration depends, amongst other things, upon the volume weighted average price (VWAP) of Perenti shares over a defined five day period. These matters were explained in the First Hearing Decision at [30]-[32]. Whereas the five day VWAP had been $1.252 prior to the announcement of the proposed scheme (up to and including 23 June 2023), the five day VWAP prior to 25 August 2023 was $1.0339. 7 The illustrative calculations were proposed to be included at three points for the VWAP ($1.000, $1.150 and $1.300). However, as at the time of the hearing, the highest of those illustrative calculations was outside of the likely range due to the fall in the price of Perenti shares. 8 In those circumstances, in the course of submissions for DDH1, it was accepted that the highest of the range of illustrative calculations (based upon different VWAP values) as included in the original information despatched to shareholders should be removed from the further explanatory material. It was submitted that the illustrative calculations based upon the values of $1.000 and $1.150 were appropriate because on the information available at the time of the hearing to approve the distribution of the supplementary explanatory statement the price of Perenti shares had increased to a degree and calculations based upon those two points were relevantly illustrative. The same approach has been adopted in the independent expert's report and the investigating accountant's report to be provided as part of the supplementary explanatory statement. 9 Thirdly, since the despatch of the explanatory statement considered at the time of the First Hearing Decision, the terms upon which Mr Van Dyk, the managing director and chief executive officer of DDH1 would be employed as the head of a division of Perenti if the scheme was approved and implemented have been negotiated to the point where a near final draft has been prepared. The information that had been provided in the explanatory statement that had been despatched was to the effect that Mr Van Dyk would be employed on terms that were consistent with his existing arrangements with DDH1. The terms to be included in the proposed further explanatory material were confirmed to reflect the terms of the near final draft and to be the same terms as Mr Van Dyk's current arrangements with DDH1. It was accepted that it would be appropriate to include a reference to the existing terms of employment as disclosed in the information that had been despatched pursuant to the earlier orders. 10 Subject to those matters, I accept that it is appropriate to order the despatch of the further explanatory material and will make orders substantially in the terms proposed. As requested, I will include in those orders provision for evidence as to the despatch of materials for the meeting of members of DDH1 which is to be advanced at any hearing to approve the scheme to be provided on information and belief. In the present case, I am satisfied that such an approach is appropriate. 11 Finally, I will direct that any person may obtain a copy of the submissions referred to in these reasons upon request to the Registry. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.

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