Excel Coal Limited, In the matter of Excel Coal Limited [2006] FCA 1240

(First court hearing) 1 On 30 August 2006, I made an order under s 411(1) of the Corporations Act 2001 (Cth) ('the Act'), that the plaintiff, Excel Coal Limited ('Excel'), convene a meeting of its members to consider a scheme of arrangement ('the Scheme'), and associated orders. The following are the reasons why I made those orders. 2 The Scheme is a perfectly straightforward 'acquisition' or 'transfer' scheme under Pt 5.1 of the Act. Under the Scheme, if implemented, all of the members of Excel will receive $8.50 cash per share, leaving Peabody Pacific Pty Limited, a subsidiary of Peabody Energy Corporation ('Peabody Energy'), as the holder of their shares. The total Scheme consideration is approximately $1.8 billion. 3 The principal affidavit in support of the application was that of Anthony James Haggarty, the Managing Director of Excel. Mr Haggarty has been a director of Excel since 11 November 2002. Excel is a coal mining company with various coal mine assets, including mines in New South Wales, Queensland and Venezuela. Excel was incorporated in New South Wales in 1984, and was listed on the Australian Stock Exchange in May 2004. Excel has 214,977,360 fully paid ordinary shares on issue. 4 On 6 July 2006, Excel and Peabody Energy entered into a 'Merger Implementation Agreement' under which they agreed to implement the Scheme. 5 It is proposed that the meeting of the shareholders in Excel take place on Wednesday, 4 October 2006. I read the Scheme Booklet that is to be sent to shareholders. Excel intended, on or about Tuesday 5 September 2006, to dispatch the Scheme Booklet by prepaid ordinary post to, or to serve the Scheme Booklet personally on, each member appearing on the register at the date of dispatch, and whose address for notices is within Australia. Excel intended to airmail the Scheme Booklet to those members whose address for notices is outside Australia. As well, by ordinary prepaid post, members were to be sent proxy forms for the Scheme meeting, and reply-paid pre-addressed envelopes. 6 Excel established a 'Due Diligence Committee' for the purposes of ensuring that the Scheme Booklet complied with all applicable legal requirements, assisting with the drafting of the Scheme Booklet, and conducting an appropriate 'due diligenceand verification process' in relation to the Scheme Booklet. 7 There was evidence of the due diligence process that was followed, in the form of certificates by Mr Haggarty and by the other three Executive Directors of Excel, Mr Andrew Plummer, Mr Allan Davies and Mr Chris Ellis. 8 An affidavit of Mark John Pittorino of Deloitte Corporate Finance sworn on 29 August 2006 attached his report which was to the effect that the Scheme was in the best interests of shareholders in Excel. I need not summarise that report, although it is noteworthy that the sum Scheme consideration of $8.50 per share offered to members of Excel under the Scheme, may be compared with the estimated fair market value of an Excel share that ranges between $7 and $7.60. 9 In his written submissions, Mr M B Oakes, senior counsel for Excel, referred to the 'performance risk issue' which has been raised in some cases, and pointed out that by virtue of clauses 4.2(a) and 5.3 of the Scheme, the amount of $8.50 per share is to be paid by or on behalf of Peabody Pacific, prior to the share transfer taking place. In addition, Excel is to set up a separate trust account into which the Scheme consideration will be paid, the monies in that separate trust account being held for the benefit of Excel's shareholders prior to payment to them. 10 In my view the proposed Scheme is a straightforward one which Excel shareholders should have the opportunity of considering. 11 Orders were made as sought. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.