By Originating Process filed on 9 October 2019, the Plaintiff, Bellamy's Australia Limited ("Bellamy's"), sought orders under ss 411(4)(b) and 411(6) of the Corporations Act 2001 (Cth) approving a proposed scheme of arrangement with the holders of scheme shares (as defined) in Bellamy's. On 30 October 2019, I made orders convening a meeting of the scheme shareholders under s 411(1) of the Act in relation to the proposed scheme of arrangement and approving a scheme booklet to be distributed to scheme shareholders in connection with the scheme, for the reasons set out in my earlier judgment delivered on 28 November 2019 ([2019] NSWSC 1671).
As I noted in my earlier judgment, the proposed scheme provides for Wise Journey Pty Ltd, an indirect wholly-owned subsidiary of China Mengniu Dairy Company Limited ("Mengniu") to acquire all of the scheme shares (as defined) in Bellamy's for cash consideration. If that scheme is approved and becomes effective, shareholders in Bellamy's will receive a total of A$13.25 cash per share in respect of scheme shares, comprising A$12.65 per scheme share paid under the scheme and a fully franked special dividend of A$0.60 per Bellamy's share to be paid by Bellamy's. The proposed scheme was subject to a number of conditions precedent set out in cl 3.1 of the scheme implementation deed, including a requirement as to Foreign Investment Review Board ("FIRB") approval.
At a meeting of scheme shareholders on 5 December 2019 convened pursuant to those orders, the scheme was approved by 99.23% of votes cast and 82.88% of scheme shareholders present in person or by proxy.
At the second Court hearing on 9 December 2019, Bellamy's sought orders under s 411(4) of the Corporations Act approving the proposed scheme. No shareholder in Bellamy's or other person appeared to object to the scheme. I made the orders sought on that date and these are my reasons for doing so. I have drawn on the helpful submissions of Mr Jackman, who appears for Bellamy's, in this judgment.
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Affidavit evidence read at the second Court hearing
At the second Court hearing on 9 December 2019, Bellamy's read the affidavit dated 5 December 2019 of Ms Emma Palmer, who is a client services manager at Link DigiCom Pty Ltd, which referred to the dispatch of communications to shareholders in connection with the scheme meeting, including the scheme booklet and proxy form. Bellamy's also read Ms Palmer's further affidavit dated 9 December 2019 which made a minor correction to her earlier affidavit as to the number of shareholders who had a registered address outside of Australia.
Bellamy's also read an affidavit dated 5 December 2019 of Mr Jim Kompogiorgas, who is a client relationship manager with Link Market Services Limited ("Link"), which referred to the manner in which Bellamy's share register is maintained and the steps taken by Link to arrange for the dispatch of communications in connection with the scheme to shareholders, register attendees at the scheme meeting and assist with polling of shareholders at that meeting and report on polling results. Mr Kompogiorgas also addressed the dispatch of the scheme booklet and proxy form, the receipt and recording of proxy votes, the proxy forms received in respect of the scheme meeting, and the conduct of and voting at the scheme meeting. A declaration of poll exhibited to his affidavit recorded the fact that 82.88% of shareholders by number and votes representing 99.23% of the votes cast at the scheme meeting were in favour of the scheme.
Bellamy's also read the affidavit dated 5 December 2019 of Mr John Ho, who is a non-executive director and chairman of Bellamy's, which referred to his attendance at and his acting as chairman of the scheme meeting and to the matters addressed at that meeting, and also set out the number and percentage of shareholders voting for and against the scheme resolution. Mr Ho noted that the scheme resolution was passed by a majority in number of scheme shareholders present and voting on the scheme resolution, in person or by proxy, and by more than 75% of votes cast on the scheme resolution.
By his affidavit dated 6 December 2019, Mr Wai Cheong Kwok, who is the financial controller and company secretary of Mengniu and a director of Vision Clear Limited ("Vision Clear"), a subsidiary of Mengniu, referred to the treatment of excluded shares under the scheme and confirmed that none of Bellamy's shares which are registered in the name of custodians and held on behalf of Mengniu and Vision Clear were voted at the scheme meeting. An affidavit dated 6 December 2019 of Mr Danny Hunt, who is a relationship manager at Orient Capital Pty Ltd addressed inquiries made to confirm the shares held on behalf of Mengniu and Vision Clear and to confirm that proxies submitted by three custodians did not relate to shares held on behalf of Mengniu or Vision Clear.
An affidavit dated 9 December 2019 of Mr Guy Alexander, a partner at the firm of solicitors acting for Bellamy's in respect of the proposed scheme, addressed the registration of the scheme booklet with the Australian Securities and Investments Commission, the advertisement of the second Court hearing and the fact that Bellamy's received no notice that any shareholder would appear to oppose the scheme, and the confirmation received by Bellamy's and announced to the Australian Securities Exchange that FIRB had confirmed that the Commonwealth had no objection to the scheme. Bellamy's also tendered (Ex P1) executed certificates in relation to the satisfaction of conditions precedent in respect of the scheme.
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Whether the Court should approve the proposed scheme under s 411(4)(b) of the Corporations Act
Section 411(4) of the Act provides that an arrangement is binding on scheme shareholders and Bellamy's if, at a meeting of scheme shareholders, it is passed by a majority of scheme shareholders present and voting (in person or by proxy) and by 75% of votes cast and it is approved by order of the Court. Section 411(6) of the Act provides that the Court may grant approval subject to such alterations or conditions as it thinks just. On the statutory conditions being met, the Court has a supervisory discretion: Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 at 247; Re Seven Network Ltd (No 3) (2010) 77 ACSR 701 at [35]-[39]; Re Signature Capital Investments Limited (No 2) [2016] FCA 385; Re Medical Australia Ltd (No 2) [2017] FCA 1429.
Mr Jackman also points out that, in deciding whether to give final approval to a scheme of arrangement, the Court will typically wish to be satisfied that the orders of the Court convening a meeting of members were complied with; the meeting of members so convened has approved the scheme with the requisite majority; all other statutory requirements have been satisfied; the scheme is fair and reasonable so that an intelligent and honest man or woman who was a member of the relevant class, properly informed and acting alone, might approve it; the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion; and there was full and fair disclosure to members of all information material to the decision whether to vote for or against the applicable scheme: Re Solution 6 Holdings Ltd (2004) 50 ACSR 113 at [18]-[24]; Re Permanent Trustee Co Limited (2002) 43 ACSR 601 at [8]-[10]; Re Central Pacific Minerals NL [2002] FCA 239.
As Mr Jackman points out, the affidavit evidence to which I have referred above establishes compliance with the Court's orders, subject to one matter. The first of those matters is that the initial dispatch of the scheme materials was sent to scheme shareholders recorded on Bellamy's share register as at 7.00pm on 25 October 2019, rather than to scheme shareholders recorded on that share register of Bellamy's as at 7.00pm on 30 October 2019, as provided by the Court's orders made on 30 October 2019. That oversight was identified on 18 November 2019 and, on 19 November 2019, Link identified six scheme shareholders who had come onto Bellamy's share register in the intervening period, and the scheme materials were dispatched to these six scheme shareholders by 20 November 2019. I am satisfied that matter is not material to whether the scheme should now be approved.
I am satisfied that the resolutions giving effect to the scheme were passed by the requisite majorities at the scheme meeting. The affidavit evidence to which I have referred above establishes that the excluded shares were not voted at the scheme meeting, either by proxy or in person. Bellamy's has led evidence that ASIC has no objection to the scheme for the purposes of s 411(17)(b) of the Corporations Act.
I am also satisfied that an intelligent and honest man or woman who was a shareholder in Bellamy's, properly informed and acting alone, might approve the scheme, as the requisite majority of shareholders by number and percentage have done. Bellamy's notified the Court of several matters warranting the Court's attention at the first scheme meeting; I addressed those matters in my earlier judgment; and I held that they did not prevent convening the scheme meeting. For the same reasons, none of those matters would warrant a refusal to approve the scheme at this hearing.
Bellamy's also sought, and I made, orders amending the definitions of "Excluded Share" and "Excluded Shareholder" and the description of the counterparties to the scheme in the scheme, under s 411(6) of the Act. The proposed amendment specifies the identity of the custodians holding and the number of shares that are held on behalf of entities within the Mengniu group, which are "Excluded Shares", in a more precise way. That amendment will identify the Bellamy's shares that are not subject to the scheme and the holders of Bellamy's shares that are not bound by the scheme, and clarify the position in relation to the custodians which are the registered holders of Bellamy's shares on behalf of Mengniu and Vision Clear which will not participate in the scheme, and shares held for other members who will participate in the scheme: Re Prime Infrastructure Holdings Limited [2010] NSWSC 1337 at [6]-[8]; Re Talent2 International Limited (No 2) [2012] FCA 926 at [16]-[17]; Re Billabong International Limited (No 2) [2018] FCA 496 at [29]. Those amendments do not alter the substance or effect of the scheme and is within the scope of that statutory amendment power and properly made.
I am also satisfied that, as the scheme will not involve a modification of any rights of shareholders or of creditors or of persons dealing with Bellamy's, there is no need to require compliance with s 411(11) of the Act. I therefore also made the exemption order sought under s 411(12) of the Act.
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Orders
For these reasons, I made the orders sought by Bellamy's at the second Court hearing on 9 December 2019.
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Decision last updated: 23 December 2019