CORPORATIONS - scheme of arrangement - demerger - application for order that company convene meeting of members
Source
Original judgment source is linked above.
Catchwords
CORPORATIONS - scheme of arrangement - demerger - application for order that company convene meeting of members
Judgment (17 paragraphs)
[1]
Pursuant to subsection 411(1) of the Corporations Act 2001 (Cth) (Corporations Act):
(a) the Plaintiff, Alchemia Limited (ACN 071 666 334) (Alchemia), convene a meeting (Scheme Meeting) of the holders of ordinary shares in Alchemia (Shareholders) for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement proposed to be made between Alchemia and its Shareholders (Scheme), being the scheme substantially in the form of the draft contained in the scheme booklet containing the explanatory statement in relation to the Scheme, being Exhibit "1" in these proceedings (Scheme Booklet);
(b) the Scheme Meeting be held at 10.00 am (Brisbane time) on 5 October 2012 at the Brisbane Convention and Exhibition Centre, Cnr Merivale and Glenelg Streets, South Bank, Brisbane, Queensland;
(c) the Chairperson of the Scheme Meeting be Melvyn Bridges and in his absence Nerolie Withnall;
(d) the Chairperson appointed to the Scheme Meeting has the power to adjourn the Scheme Meeting in his/her absolute discretion;
(e) all voting at the Scheme Meeting be by poll as declared by the Chairperson;
(f) the explanatory statement in the Scheme Booklet for the Scheme be approved for distribution to Alchemia Shareholders;
(g) there be dispatched to each Alchemia Shareholder:
(i) a document substantially in the form of the Scheme Booklet;
(ii) a proxy form substantially in the form of the document at tab 15 of Exhibit PS1;
(iii) an election form substantially in the form of the document at tab 16 of Exhibit PS1; and
(iv) a reply paid (for use in Australia only) envelope addressed to Link Market Services Limited for the return of the proxy form and election form,
in the case of each Alchemia Shareholder who has a registered address in Australia, by prepaid post and, in the case of each Alchemia Shareholder who has a registered address outside Australia, by prepaid airmail or air courier, in each case addressed to the relevant address set out in the Alchemia register of members;
(h) Alchemia place an advertisement in The Australian newspaper, substantially in the form of "Annexure A" to these Orders, on or before 4 October 2012 and Alchemia shall otherwise be exempted from compliance with the requirement to publish such notice following the Scheme Meeting and prior to the second court hearing for approval of the Scheme pursuant to Rule 3.4(3)(a) of the Federal Court (Corporations) Rules 2000 (Cth).
Pursuant to section 1319 of the Corporations Act, Alchemia be exempted from compliance with the requirements of rule 2.15 of the Federal Court (Corporations) Rules 2000 save that regulation 5.6.13 of the Corporations Regulations 2001 shall apply to the Scheme Meeting.
The proceedings be stood over to 10.15 am on 9 October 2012 before Justice Yates for the hearing of any application to approve the Scheme.
Leave be granted to Alchemia pursuant to Federal Court Rule 8.21(1)(c) to amend its originating process by changing its Australian Company Number from 056 601 417 to 071 666 334.
Liberty to restore to the list.
These orders to be entered forthwith.
Annexure A
Alchemia Limited ACN 071 666 334
Notice of hearing to approve compromise or arrangement
TO all the creditors and members of Alchemia Limited ACN 071 666 334 (Alchemia).
TAKE NOTICE that at [10.15am] on 9 October 2012 the Federal Court of Australia at Level 17, Law Courts Building, Queens Square, Sydney, New South Wales 2000 will hear an application by Alchemia seeking the approval of an arrangement between Alchemia and its members, if agreed to by resolution to be considered by the members of Alchemia at a meeting of such members to be held on 5 October 2012 at the Brisbane Convention and Exhibition Centre, Cnr Merivale and Glenelg Streets, South Bank, Brisbane, Queensland at 10.00am (Brisbane time).
If you wish to oppose the approval of the arrangement, you must file and serve on Alchemia a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on Alchemia at its address for service at least one day before the date fixed for the hearing of the application.
The address for service on Alchemia is, c/o Corrs Chambers Westgarth, Level 36, 1 Farrer Place, Sydney, New South Wales (Reference: Stan Lewis).
Dr Melvyn Bridges
Chairman
Alchemia Limited
Note: Settlement and entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
[2]
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 1132 of 2012
IN THE MATTER OF ALCHEMIA LIMITED (ACN 071 666 334)
[3]
JUDGE: YATES J
DATE: 24 AUGUST 2012
PLACE: SYDNEY
[4]
REASONS FOR JUDGMENT
1 On 24 August 2012 I made orders pursuant to s 411(1) of the Corporations Act 2001 (Cth) (the Act) providing for the convening of a meeting of the holders of ordinary shares in the plaintiff, Alchemia Limited (Alchemia), for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement proposed to be made between Alchemia and its shareholders.
2 These are my reasons for making those orders.
[5]
Background
3 Alchemia is a diversified biotechnology company that is listed on the ASX. It has on issue 280,617,096 ordinary shares and 3,463,000 unlisted options to acquire ordinary shares.
4 Alchemia has the following businesses:
(a) a business which sells Fondaparinux in the United States of America. Fondaparinux is a late stage generic drug that is approved for the treatment of deep vein thrombosis (DVT), pulmonary embolism and the prophylaxis of DVT in orthopaedic and abdominal surgery. This business is expected to generate cash-flow in the first half of the financial year ending 30 June 2013 (the Fondaparinux business);
(b) a drug development business, which is currently cash-consuming, that is focussed on the use of certain technology that is designed to improve existing drugs that are used to treat and manage cancer (the oncology business); and
(c) a drug discovery business, which is also cash-consuming, that is focussed on the exploitation of certain small molecule drug discovery technology (referred to as the VAST technology) (the drug discovery business).
5 The present corporate structure in relation to these businesses is as follows. Alchemia owns all the shares issued by Audeo Oncology Inc (AO). AO is a Delaware corporation and is thus domiciled in the United States of America. AO, in turn, owns all the shares issued by Alchemia Oncology Pty Ltd (Alchemia Oncology). Alchemia Oncology conducts the oncology business. AO also owns all the shares in Audeo Discovery Pty Ltd (Audeo Discovery). Audeo Discovery is a licensee (from Alchemia) of the VAST technology.
6 In essence the proposed demerger will effect the separation of AO from Alchemia. It is proposed that, subject to the receipt of regulatory approvals, AO will be listed on the NASDAQ and the ASX. AO will hold the oncology business indirectly through Alchemia Oncology and Audeo Discovery will continue to hold its licence of the VAST technology. AO will be responsible for funding the development and commercialisation of that technology. The Fondaparinux business will remain with Alchemia.
7 That separation will be effected by Alchemia. Alchemia shareholders will continue to hold their shares in Alchemia. However, in the case of Eligible Shareholders, Alchemia will transfer its shares in AO to either (a) those Eligible Shareholders who elect to receive those shares or (b) CHESS Depository Nominees Pty Limited (CDN) in the case of those Eligible Shareholders who elect to receive Audeo Oncology CDIs (CHESS depository interests) as such consideration. Each Audeo Oncology CDI represents an interest in a fully paid share in the common stock of AO and will allow the holder effectively to trade AO shares on the ASX. In the case of Ineligible Foreign Shareholders (to whom further reference will be made below), Alchemia will transfer its shares in AO to a Sales Facility Agent to be sold, with the proceeds to be remitted to those shareholders. In each case, the Alchemia shareholders will be entitled to one AO share or Audeo Oncology CDI for every 37 Alchemia shares held by them on the Record Date. In the end result, Alchemia will not own any shares in AO following implementation of the demerger.
8 The oncology business is currently in need of funds to complete a recently commenced Phase III clinical trial of a drug for use in the treatment of metastatic colorectal cancer. The demerger will not proceed if, by 31 December 2012, AO cannot raise funds (not exceeding USD60 million) that will be sufficient for this purpose and to cover its associated working capital requirements. It is proposed that these funds be raised through a fully underwritten initial public offering in the United States of America (the IPO). I will refer to this further below.
9 The stated principal objective for proposing the demerger is to distribute cash flow generated from the Fondaparinux business to Alchemia shareholders as soon as possible while at the same time positioning the oncology business for future growth with a company (ie AO) domiciled in the largest market for the products of that business, giving that business greater access to clinicians, regulators, a deeper pool of skilled personnel, potential partners and local capital markets. Ultimately it is hoped that the demerger will maximise the value of the present shareholders' interests in all businesses.
[6]
Relevant events and transactions
10 It is necessary to refer to some additional events and transactions, some of which are prospective, in order to understand the setting in which the proposed demerger will be implemented.
11 In November and December 2011 Alchemia issued and sold shares in a private placement for total net proceeds of approximately $16.1 million. Under the terms of the placement the investors were given rights by which Alchemia was required to procure that Alchemia Oncology issue options to the investors entitling them to purchase shares in that company. This was contingent upon consummation of an initial public offering by Alchemia Oncology on an internationally recognised stock exchange by 31 December 2012. It is now proposed that AO be the listed entity. On 28 June 2012 AO entered into an Intra-Group Transfer Agreement with Alchemia pursuant to which AO has agreed to issue Audeo Oncology Warrants to the investors on the basis that the investors accept those warrants in satisfaction of Alchemia's obligation (or Alchemia Oncology's obligation, if any) to issue options to them. Those warrants will entitle the holders to purchase shares in AO's common stock, subject to AO's listing on NASDAQ on or before 31 December 2012. As at 17 August 2012, the total number of investors who also held Alchemia shares was 52, representing 50.02% of Alchemia shareholders holding 140,372,209 shares. The exercise price will be a 30% premium to AO's 60 day volume weighted average price after it commences trading on NASDAQ (adjusted for exchange rate differences between the Australian dollar and the US dollar).
12 Alchemia options have been issued to approximately 20 employees of, and consultants to, the Alchemia Group under the Alchemia Option Plan. These options confer no right to participate in the proposed demerger unless they are exercised. Alchemia is seeking the agreement of the optionholders who wish to participate in the demerger to exercise their options before the holding of the proposed scheme meeting. Upon the implementation of the demerger the Alchemia Option Plan will continue to operate, with directors, employees and consultants remaining eligible to be invited to participate.
13 Prior to the proposed demerger AO intends to grant pre-IPO options to some of its executives and employees as an incentive to work towards the future success of the company.
14 There is a question as to whether the existence of these groups creates different classes requiring the convening of separate meetings to consider the proposed scheme of arrangement. I will return to consider that question.
15 On 22 August 2012 Alchemia and AO entered into a Demerger Implementation Agreement. This agreement sets out the steps required to be taken by each of Alchemia and AO to give effect to the demerger, particularly in relation to the three key elements to which I will refer below. They have also entered into a Demerger Deed, which deals with certain commercial, legal and transitional issues arising in connection with the legal separation of AO from Alchemia, and a Transition Services Agreement under which AO will provide Alchemia with certain services following the demerger.
[7]
The key elements of the proposed demerger
16 The proposed demerger has three key elements:
(a) a reduction of Alchemia's share capital;
(b) a demerger dividend (if any); and
(c) the scheme of arrangement.
17 The first two elements concern the consideration for the AO shares to be transferred to Alchemia shareholders or CDN (in the case of Eligible Shareholders), or to the Sales Facility Agent (in the case of Ineligible Foreign Shareholders) for sale.
18 The reduction of Alchemia's share capital involves an understanding of two concepts.
19 The first concept is the Audeo Oncology Book Value. This is defined as the sum of $54,442,340. For accounting and tax purposes Alchemia can only distribute an amount up to this sum as a capital reduction.
20 The second concept is the Market Value. This is defined as the amount of the Audeo Fundraising and IPO Share Price (ie the price at which AO shares are issued under the IPO) multiplied by the number of AO shares issued under the scheme of arrangement. The price at which the AO shares will be issued under the IPO is not yet known and will not be known until marketing of the IPO has been completed and an underwriting agreement has been signed. AO will not commence marketing the IPO until the scheme of arrangement is approved by shareholders and the Court.
21 If the Market Value is equal to or greater than the Audeo Oncology Book Value then the amount of the capital reduction will be the Audeo Oncology Book Value (ie $54,442,340). If the Market Value is less than the Audeo Oncology Book Value then the amount of the capital reduction will be the Market Value.
22 The capital reduction will not be undertaken unless the scheme of arrangement becomes effective and the IPO completes (ie when an underwriting agreement with AO is executed for an amount not exceeding USD60 million and the underwritten amount is received by AO in cleared funds). The capital reduction will be applied equally across all of the Alchemia shares. The capital reduction entitlement will not be paid in cash. Rather, it will be applied on behalf of shareholders as part payment for the AO shares or Audeo Oncology CDIs.
23 If the Market Value is greater than the Audeo Oncology Book Value, then the difference will be distributed to shareholders as a demerger dividend. This dividend will not be paid in cash but will also be applied on behalf of shareholders as part payment for the AO shares or Audeo Oncology CDIs.
24 If the scheme of arrangement becomes effective by the making of an order under s 411(4)(b) of the Act, and the Condition Subsequent is satisfied by 31 December 2012 (a matter to which I shall return), then, under the scheme of arrangement, Alchemia will reduce its share capital and pay the demerger dividend, if any. It will then apply those amounts as consideration for the transfer of the AO shares, as discussed above. In the case of Eligible Shareholders, Alchemia will execute share transfers in favour of the scheme shareholders electing to receive AO shares or in favour of CDN in the case of shareholders electing to receive Audeo Oncology CDIs. In the case of Ineligible Foreign Shareholders, the AO shares or Audeo Oncology CDIs will be transferred to the Sales Facility Agent for sale. Alchemia will procure AO to register the transfers and to issue the Audeo Oncology CDIs. AO will then cease to be a subsidiary of Alchemia.
25 The scheme of arrangement is conditional upon the satisfaction or waiver of a number of conditions precedent. Apart from shareholders' approval and court approval, these include, for example, shareholders' approval of the reduction in capital that is necessary to provide the consideration for the transfer of the AO shares. It is not necessary for me to detail the various conditions. It can be seen, however, that the proposed demerger will involve a two-step process: a reduction in capital (with a possible declaration of dividend) followed by a transfer of shares and, where applicable, the issue of Audeo Oncology CDIs. In the case of Ineligible Foreign Shareholders a further step will be involved: the sale of the AO shares or Audeo Oncology CDIs.
26 It is convenient at this stage to consider the Condition Subsequent to the scheme taking effect and to the position of Ineligible Foreign Shareholders.
[8]
The Condition Subsequent
27 The scheme of arrangement will not be implemented unless the Condition Subsequent is satisfied by the End Date (31 December 2012). The Condition Subsequent refers to the IPO and means that, by 31 December 2012, an underwriting agreement is to be executed by AO for an amount not exceeding USD60 million and that the underwritten amount is to be received by AO in cleared funds. If this is not done the scheme will not take effect, but terminate.
28 The IPO will result in some dilution of the interest of Alchemia shareholders in AO and the oncology business. The exact dilution is not known at the present time. However, Alchemia will not consent to the IPO fundraising proceeding if the interests of Alchemia shareholders in AO under the scheme would be diluted such that new investors would hold more than one third of the shares in AO immediately after the IPO.
29 Ordinarily schemes qualify for approval only after all conditions are satisfied: Re Westfield Holdings Ltd (2004) 49 ACSR 741 at [9]-[11]. However, the presence of a term providing for the scheme to terminate after court approval is permissible. In Re NRMA Ltd (2000) 33 ACSR 595 at [61]-[62] and in Appendix A to the reasons (particularly at 646-648), Santow J discussed where this might be permissible.
30 In the present case the plaintiff submits as follows:
In Re NRMA Ltd at 647, Santow J distinguished the use of a condition subsequent to bring about termination of a scheme, from a scheme containing machinery which could lead to variation of its terms (such as a variation approved by resolution of directors of the scheme company, or dependent upon Counsel's opinion that the variation does not adversely affect the rights of shareholders). The latter was impermissible as it would involve a new decision-making process with the possibility of different results in different eventualities, none of which had been disclosed or voted on by shareholders. See eg, Re Homemaker Retail Management Ltd (2001) 40 ACSR 116 at 120-1 [17]-[19] per Barrett J (concerning an impermissible variation provision in the scheme under consideration, set out at [10]). It is submitted that the condition subsequent in this Scheme, namely that the Audeo fundraising and IPO completes by 31 December 2012, satisfies the requirements referred to in Re NRMA Ltd of being clear, certain and self-executing. In particular:
(a) the present Scheme has a long stop date, whereby the Scheme will terminate if the condition subsequent is not fulfilled by the specified date;
(b) in such event, the status quo will be restored in that Alchemia shareholders will retain their shares in Alchemia and the Oncology business will remain within Alchemia;
(c) the condition subsequent is given prominent disclosure in the Scheme Booklet (page 5, Chairman's letter and pages 12-13), and shareholders are informed of the aspects of the Audeo fundraising and IPO which remain uncertain (including the price at which Audeo Oncology shares may be issued), and the range of dilution is that new investors will hold no more than one third of Audeo Oncology immediately after the completion of the Audeo Fundraising and IPO.
31 I accept that submission.
[9]
Ineligible Foreign Shareholders
32 Under the scheme an Ineligible Foreign Shareholder is an Alchemia shareholder who is not an Eligible Shareholder. An Eligible Shareholder is an Alchemia shareholder whose address is shown in the Alchemia Share Register on the Scheme Record Date as being in one of certain identified countries, including any other jurisdiction in which Alchemia reasonably believes that the implementation of the scheme and the transfer of AO shares or the issue of Audeo Oncology CDIs in that jurisdiction is not prohibited, not unduly onerous and not impracticable. This is subject to the proviso that Alchemia may determine that a shareholder is not an Eligible Shareholder if it determines as at the Scheme Record Date that the requirements of any exemption from applicable regulatory requirements in a relevant jurisdiction is not or is no longer available for that shareholder.
33 If the scheme is implemented Ineligible Foreign Shareholders will keep their existing Alchemia shares but, as I have noted above, the AO shares or Audeo Oncology CDIs to which they would have been entitled will be transferred to a Sales Facility Agent for sale, with the net proceeds of sale remitted to them.
34 As at 17 August 2012 there were eight Ineligible Foreign Shareholders holding 111,492 Alchemia shares. This represents 0.04% of the Alchemia shareholders. The Ineligible Foreign Shareholders are in Hungary, Indonesia, Japan, Malaysia, Papua New Guinea, Thailand and South Africa.
35 I am satisfied that the different treatment of Ineligible Foreign Shareholders does not entail the consequence that these shareholders constitute a separate class of members for the purpose of convening a meeting under s 411(1) of the Act: see the discussion in Re Hills Motorway Ltd (2002) 43 ACSR 101 at [9]-[13]; see also Aston Resources Limited, in the matter of Aston Resources Limited [2012] FCA 229 at [32]-[33]; NRMA at [79]; Re Opes Prime Stockbroking Ltd (No 2) (2009) 179 FCR 20 at [64].
36 It is convenient here to also record that the receipt by Ineligible Foreign Shareholders of cash rather than shares or CDIs does not mean that Alchemia's reduction in capital would be a selective one as opposed to an equal one: s 256B(2) of the Act; see also Re ETRADE Australia Ltd (1999) 30 ACSR 516 at 517. Thus the reduction can be approved by an ordinary resolution of members: s 256C(1).
[10]
Different classes of members?
37 Apart from the position of Ineligible Foreign Shareholders, I have also mentioned the position of those who will be issued with Audeo Oncology Warrants (in lieu of options in Alchemia Oncology) arising from the fundraising carried out in November and December 2011; the position of employees and consultants who have been issued options in Alchemia under the Alchemia Option Plan; and the position of employees of AO to whom it is proposed to offer pre-IPO options as an incentive to work towards the future success of that company.
38 I am satisfied that these circumstances do not give rise to the existence of separate classes for the purpose of convening a meeting under s 411(1) of the Act: see the case references in [35] above. I do note, however, that Alchemia proposes to tag all votes cast at the proposed scheme meeting by shareholders to whom it is proposed that Audeo Oncology Warrants will be issued, so that the effect of that voting can be considered at the time that the Court's approval to the scheme is sought.
[11]
The share issue mandate resolution
39 The ASX Listing Rules relevantly require the prior approval of shareholders for an issue of securities if the securities, when aggregated with all other issues during the previous 12 months, exceed 15% of the number of securities on issue at the commencement of that 12 month period. In addition, the Listing Rules also permit an eligible entity to seek shareholder approval to issue equity securities up to 10% of its issued capital over and above the 15% placement capacity under the Listing Rules (a share issue mandate). Thus an eligible entity has the capacity to issue up to 25% (in aggregate) of its issued share capital in any 12 month period.
40 It is expected that AO will be an eligible entity upon being admitted to the official list of the ASX. The ability to issue securities under the share issue mandate is subject to shareholder approval by way of special resolution at an annual general meeting. The ASX has granted a waiver to allow AO to seek that approval at the proposed general meeting to deal with the reduction in capital. If approved, the share issue mandate will provide AO with flexibility to issue an additional 10% of its equity securities then on issue to raise funds, as and when required, to pursue its strategy of seeking to develop and commercialise anti-cancer treatments in the United States of America and in other major markets worldwide. This strategy is discussed in the Scheme Booklet.
41 On the basis that Alchemia is currently the sole shareholder of AO, but that Alchemia shareholders will become holders of AO shares or Audeo Oncology CDIs upon implementation of the demerger, the directors are of the view that it is appropriate that Alchemia shareholders consider and, if thought fit, approve a share mandate resolution.
[12]
Independent expert's report
42 BDO Corporate Finance (QLD) Ltd (BDO) has been engaged to provide an independent expert's report to Alchemia shareholders in relation to the proposed demerger. In order to assess whether the proposed demerger is in the best interests of Alchemia shareholders, BDO weighed the advantages of the proposed demerger against its disadvantages. This involved the assessment of a number of quantitative and qualitative factors identified by BDO along with relevant valuation considerations.
43 As to the last-mentioned matter, BDO expressed the view that a consideration of valuation was less relevant in relation to the proposed demerger than it might be in a control transaction. Nevertheless, they considered the possible value implications of the proposed demerger on Alchemia shareholders. They did this by analysing the effect that the issue of the Audeo Oncology Warrants will have on Alchemia shareholders in terms of the potential dilution of their ownership interest in AO and the potential dilution of value in AO shares transferred to them under the proposed demerger. Three different valuation scenarios were considered. As a result of that analysis BDO estimated that the issue of the warrants may result in a reduction in value of the AO shares or Audeo Oncology CDIs to which Alchemia shareholders are entitled of between 2.25% and 7.89%, and have a potential ownership dilution impact of between 2.47% and 4.32%. However, balanced against this, are the advantages of the proposed demerger which would increase the probability of AO receiving a value uplift following the proposed demerger that would be sufficient to offset the dilution that might arise.
44 Having considered the advantages and disadvantages of the proposed demerger, along with the valuation considerations, BDO expressed the view that the advantages of the proposed demerger outweigh the disadvantages and that the proposed demerger is in the best interests of Alchemia shareholders.
45 BDO were also called upon to assess whether the capital reduction would materially prejudice Alchemia's ability to pay its creditors. After considering various factors identified in their report, BDO expressed the view that the capital reduction will not materially prejudice Alchemia's ability to pay its creditors.
[13]
The position of the directors
46 The directors of Alchemia unanimously recommend that Alchemia shareholders vote in favour of the scheme at the proposed meeting.
47 The directors of Alchemia also believe that the proposed demerger, and in particular the proposed reduction in capital, will not materially prejudice Alchemia's ability to pay its creditors.
[14]
The position of ASIC
48 Section 411(2)(a) of the Act requires the Australian Securities & Investments Commission (ASIC) to be given at least 14 days notice of the hearing of an application under s 411(1) of the Act unless ASIC or the Court permits a shorter period. The requisite period of notice has been satisfied in the present case.
49 Section 411(2)(b) of the Act requires the Court to be satisfied that ASIC has also had a reasonable opportunity to examine the terms of the scheme of arrangement and the draft explanatory statement, and to make submissions to the Court in relation to the scheme and the draft explanatory statement. ASIC is of the view that it has had a reasonable opportunity to examine the terms of the scheme of arrangement and the draft explanatory statement.
[15]
Deed poll
50 The obligations of AO under the scheme are supported by a Deed Poll given by AO in favour of Alchemia shareholders.
[16]
Proposed exemption under s 3(a)(10) of the US Securities Act 1933
51 The plaintiff has indicated that, if the Court ultimately approves the scheme, both it and AO intend to rely on that approval to seek exemption under s 3(a)(10) of the US Securities Act 1933. One of the conditions of the exemption to be sought is that the Court must be advised, before any hearing at which the scheme is approved, that reliance will be placed on the Court's approval for the purpose of seeking the relevant exemption. This matter is dealt with in the plaintiff's written submissions advanced in support of the convening of the scheme meeting. Those submissions have been marked for identification as MFI 2. The matter was also raised in the course of oral submissions.
[17]
Consideration
52 I am satisfied that Alchemia is a Pt 5.1 body and that the scheme of arrangement is an "arrangement" for the purposes of s 411(1) of the Act: see Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at [39]; Re MIA Group Ltd (2004) 50 ACSR 29 at [2]-[9]; Re Sino Gold Mining Ltd (2009) 74 ACSR 647 at [4].
53 I have been taken to the Scheme Booklet which incorporates the required explanatory statement. The disadvantages and risks associated with the scheme of arrangement, as well as its advantages, are disclosed and discussed - most prominently in a section entitled "Overview of the Demerger" which contains a series of questions and answers as well as references to other parts of the Scheme Booklet to enable a more detailed study of the scheme to be undertaken for those wishing to do so.
54 The Scheme Booklet appears to sufficiently and adequately disclose the various matters to which I have referred above. I note in particular that the fact that the implementation of the scheme is conditional upon AO undertaking successful fundraising by means of the IPO by 31 December 2012 is made clear. This includes a disclosure of the reasons why the price at which the AO shares are to be offered under the IPO is not presently known and that the IPO will dilute the shareholders' interests in AO. The same section makes clear that, although the exact dilution is not presently known, Alchemia will not consent to AO proceeding with the IPO if investors in that fundraising were to hold more than a third of AO immediately after the IPO.
55 The Court will not ordinarily summon a meeting of members unless the scheme of arrangement that is proposed is of such a nature and cast in such terms that, if it receives the statutory majority at the meeting, the Court would be likely to approve it on the hearing of an application that is unopposed. The question is whether it is reasonable to suppose that sensible business people might consider the arrangement proposed to be of benefit to members: Centrebet International Limited, in the matter of Centrebet International Limited [2011] FCA 870 at [29]; FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72; Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [8]-[10].
56 I am satisfied that the proposed scheme of arrangement is of that nature and that it is appropriate in all the circumstances that the orders, as sought, be made.
I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.