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[2006] FCA 161
General information, not legal advice.
Federal Court of Australia
2006-02-24
Lindgren J
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Introduction 1 At the first court hearing on 24 February 2006 in respect of an application by the plaintiff, HWW Limited ('HWW'), under s 411 of the Corporations Act 2001 ('the Act'), I made orders under subs 411(1) of the Act for the holding of a meeting of the members of HWW on 30 March 2006. These are my reasons for the making of that order. 2 The proceeding relates to a proposed scheme of arrangement between HWW and the holders of all the ordinary shares issued in HWW ('the Scheme'). The objective of the Scheme is that the shareholders will be paid $0.3165 cash for each share held, and that Ninemsn Pty Ltd ('Ninemsn') will become the owner of all the shares. 3 It is also proposed that options held by Jennifer Wilson over unissued shares in HWW be cancelled in consideration of Ninemsn paying her $0.3165 for each option less the exercise price of the option. 4 If the Scheme proceeds, HWW will become a wholly owned subsidiary of Ninemsn, and there will be no outstanding options.
HWW and Ninemsn 5 According to an affidavit of Stephen Harry Wall, Director and Chairman of the Board of Directors of HWW, sworn on 23 February 2006, HWW was registered in New South Wales on 26 March 1986 as a proprietary company limited by shares. On 11 June 1999 it became a public company limited by shares. On 18 August 1999 it became listed on the Australian Stock Exchange ('the ASX'). 6 In addition to Mr Wall, HWW's Board of Directors comprises Paul Marshall, Tony Richard Shannon and John Richard Walsh. The business of HWW is described as 'content creation, aggregation, management, publishing, syndication and distribution'. 7 The issued capital of HWW as at 31 December 2005 comprised 45,540,000 fully paid ordinary shares of $1.00 each. 8 Ninemsn was incorporated on 2 April 1997 as a proprietary company limited by shares. It is a joint venture company of Microsoft Australia Holdings Pty Ltd and White Whale Pty Ltd (a company controlled by Publishing and Broadcasting Ltd).
Options 9 On 19 January 2005, options over unissued shares in HWW held by Paul Marshall, Chief Executive Officer and Director of HWW, were cancelled for nil consideration as they had been issued to him without shareholder approval in contravention of Chapter 10 of the Listing Rules of the ASX. HWW and Paul Marshall have entered into a deed of release under which Paul Marshall has agreed to release HWW from all claims in respect of the cancellation of his options and all rights arising under his executive option agreement with HWW, and from any obligation under his executive service agreement to issue options to him, in consideration of payment to him of $266,450 (subject to the Scheme's proceeding).
Commitment to implement the scheme 10 On 22 December 2005, HWW and Ninemsn jointly announced the proposed merger, through Ninemsn's acquiring all of the issued shares in HWW. 11 There is in evidence a 'Merger Implementation Agreement Amendment and Restatement Deed' dated 9 February 2006 between Ninemsn and HWW by which they commit themselves to implement the Scheme.
Verification of facts stated in the Scheme Booklet 12 I have read the Scheme Booklet which will be distributed to the HWW shareholders. The factual information contained in it has been verified by a 'due diligence' procedure (see section R, paras 41-49 of the first affidavit of Stephen Harry Wall sworn on 23 February 2006 and the affidavit of Mark Alan Britt sworn 23 February 2006).
Expert opinion 13 There is an affidavit of Scott Terence Griffin, sworn 22 February 2006, Director, Corporate Finance, of Grant Thornton Corporate (NSW) Pty Ltd and a partner in Grant Thornton Group Finance. Exhibited to his affidavit is his report dated 23 February 2006 which concludes that the Scheme is in the best interests of HWW shareholders. Mr Griffin notes, for example, that the Scheme consideration represents a premium of 26.6 percent on the share price of HWW on the ASX on the day before the announcement of the Scheme, and that if the Scheme is not approved, it is likely that the share price will fall below the Scheme consideration, given that that consideration incorporates a premium for 'control' of HWW.
Chairing of meeting 14 Stephen Harry Wall has consented to chair the meeting of shareholders and Paul Marshall has agreed to do so if Stephen Harry Wall should be unable to fulfil that function. Affidavit evidence of the kind just described is required by r 3.2 of the Federal Court (Corporations) Rules 2000.
15 There are in evidence three letters from ASIC dated 23 February 2006: · confirming that it had the opportunity to review the Scheme Booklet (see s 411(2) of the Act) and did not propose to appear at the first court hearing (it is ASIC's practice not to give a s 411(17)(b) 'clearance' until the second court hearing); and · allowing an explanatory statement to be sent, notwithstanding certain non-compliances with Schedule 8 to the Corporations Regulations.
ASX 16 The ASX has granted a waiver from Listing Rule 6.23.2 to the extent necessary to permit cancellation of the options issued to Jennifer Wilson for consideration without shareholder approval.
Shortening of time for publication of advertisement 17 I note that it is proposed that there be a slight shortening of the time for publication of the advertisement giving notice of the second court hearing, required by rule 3.4 of the Federal Court (Corporations) Rules 2000. The Scheme Booklet itself discloses on page 5 the proposed second court hearing date, so interested shareholders will be on notice of that date from the time they receive the Scheme Booklet. The advertisement of the date of the second court hearing will therefore be published in advance of the meeting.
Conclusion 18 In my opinion, the Scheme should be allowed to go forward to members for consideration at their meeting, and there should be orders as sought.
I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.