Solicitors:
Herbert Smith Freehills (Plaintiff)
Clayton Utz (Bidder)
File Number(s): 2022/82386
[2]
Nature of the application and background
The Plaintiff, Link Administration Holdings Ltd ("Link"), seeks orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) ("Act"), inter alia, to convene a postponed scheme meeting on a new date, and approve the distribution of a supplementary explanatory booklet to its shareholders in advance of the scheme meeting. These are my reasons for making those orders on 2 August 2022. I have drawn on the helpful submissions of Mr Jackman and Ms Ng who appear for Link in this matter.
By way of background, Link is an Australian public company, which is listed on the Australian Securities Exchange ("ASX") and provides technology enabled administration solutions for persons holding assets, including superannuation administration services, share registry services, fund administration and transfer agency services, stakeholder engagement services, communications services, and data and analytics services.
On 22 December 2021, Link announced to the ASX that it had entered into a Scheme Implementation Deed dated 22 December 2021 ("SID") with Dye & Durham Corporation ("Dye & Durham"), for the acquisition of all of the Link shares by way of scheme of arrangement. On 22 March 2022, Link and Dye & Durham entered into an amending deed to the SID, by which they agreed that the maximum amount of the BCM Net Sale Proceeds (as defined) if Link's BCM business (as defined) is sold would be $0.13 cash per Link share held on the Scheme Record Date (as defined), payable if that business was sold and the net proceeds from the sale were received by Link prior to, or up to 12 months after, the implementation of the scheme.
Under the initial scheme proposal, Link Acquisition Australia Pty Ltd ("D&D Acquirer"), which is a wholly owned subsidiary of Dye & Durham, would acquire all of the Link shares in exchange for payment of the Transaction Consideration (as defined) and Link would become an indirect wholly owned subsidiary of Dye & Durham. The implementation of the scheme was subject to various conditions precedent, including approval by Link shareholders and the Court and Regulatory Approvals (as defined). Under that initial scheme proposal, Link shareholders who held their Link shares on the relevant record dates could receive several amounts (together, "Transaction Consideration"), comprising the "Base Cash Consideration" which was a cash amount of $5.50 per Link share; a fully franked Interim Dividend of $0.03 cash per Link share held by them on the Interim Dividend Record Date (as defined, which was paid on 8 April 2022); and the BCM Net Sale Proceeds to which I referred above.
On 10 May 2022, I made orders that Link convene a meeting of holders of its ordinary shares on 13 July 2022 to consider the proposed scheme of arrangement, I approved an explanatory booklet to be dispatched to Link shareholder and I made orders as to the conduct of that meeting. I set out the reasons for making those orders in my judgment in Re Link Administration Holdings Ltd [2022] NSWSC 650.
On 16 June 2022, the Australian Competition and Consumer Commission ("ACCC") released a statement of issues in relation to the proposed acquisition of Link by Dye & Durham, which identified potential competition concerns with the transaction, where it would cause Dye & Durham to acquire a 42.77% interest in Pexa Group Ltd ("PEXA"), and potentially allow vertical integration of Dye & Durham's operations and PEXA.
Dye & Durham subsequently put further proposals to acquire all of the shares in Link for revised Base Scheme Consideration at lower prices, reducing the Base Scheme Consideration of $5.50 per Link Share to $4.30, $4.57, and $4.81, which are described in Ms Turner's affidavit to which I refer below. Link announced to ASX that its board was unable to recommend Dye & Durham's first and second revised proposals to acquire Link shares for $4.30 and $4.57 per Link share. On 4 July 2022, the scheme meeting was postponed, and I made orders vacating certain of the orders dated 10 May 2022.
On 21 July 2022, the Link board formed the view that it would be in the best interests of Link shareholders to accept Dye & Durham's third revised proposal to acquire all of Link's shares for a revised Base Scheme Consideration of $4.81 per Link share. The revised Base Scheme Consideration to be provided to Link shareholders under the revised scheme represents a decrease of 69 cents per Link share below the Base Scheme Consideration agreed in the originally proposed transaction. Other than the amendment to the Base Scheme Consideration, there are no other amendments to the transaction, and Link shareholders would continue to be entitled to receive any net sale proceeds from the sale of Link's BCM business up to a maximum of $0.13 cash per Link share if BCM was sold and proceeds were received by Link Group, prior to, or up to 12 months after the implementation of the revised scheme.
As I noted above, Link now seeks orders that it convene and hold a scheme meeting to consider the amended scheme of arrangement at the reduced price and approving a supplementary explanatory booklet for distribution to shareholders and ancillary orders.
[3]
Affidavit evidence
Link relies on the affidavit dated 1 August 2022, Ms Sarah Turner, who is the general counsel and company secretary of Link, which records the events that led to the development of the revised scheme, to which I have referred above. She also refers to the steps taken by Link to verify the supplementary explanatory booklet. That supplementary explanatory booklet was not verified by Dye & Durham, since no further information relating to Dye & Durham was included in it. Link also relies on the further affidavit dated 27 July 2022 of its chair and non-executive director, Mr Michael Carapiet, who confirms his consent to act as chair of the proposed scheme meeting. By his affidavit dated 27 July 2022, Mr Glen Boreham, an independent non-executive director of Link, consents to act as chair of the meeting if Mr Carapiet is unable or unwilling to do so.
By her affidavit dated 29 July 2022, Ms Ivana Sjarifudin, who is a senior client relationship manager at Link Market Services Ltd, outlines the manner in which supplementary information will be provided to Link shareholders in connection with the new scheme meeting.
By an affidavit dated 1 August 2022, Mr Tapan Parekh, who is a partner of Deloitte Australia and an authorised representative of Deloitte Corporate Finance Pty Ltd, had prepared an independent expert's report in respect of the scheme in its initial form, refers to the preparation of his supplementary independent expert's report and exhibits a copy of that report. That supplementary report notes the circumstances in which the proposed price for the scheme has been reduced, and concludes that revised proposed scheme is fair and reasonable to Link shareholders and is therefore in the best interests of those shareholders.
By his affidavit dated 1 August 2022, Mr Antony Damian, a partner in the firm of solicitors acting for Link in relation to the proposed scheme, refers to correspondence with the Australian Securities and Investments Commission ("ASIC") in respect of the supplementary explanatory booklet concerning the revised scheme. By letter dated 1 August 2022, ASIC advised that it considered it had had a reasonable opportunity to examine the terms of the revised scheme and the draft supplementary explanatory statement and that it did not propose to appear to make submissions or intervene to oppose the scheme at the hearing of this application. ASIC reserved its position in respect of s 411(17)(b) of the Act in accordance with its usual practice.
By a further affidavit dated 29 July 2022 and her opinion dated 25 July 2022, Ms Ora Wexler, who is a legal practitioner practising in Ontario, Canada, addressed the validity of execution and enforceability of documents relating to the revised scheme by Dye & Durham under the laws of Ontario.
[4]
The dispatch of the supplementary explanatory statement and the timing of the proposed meetings
Mr Jackman submits, and I accept, that, where the Court has ordered the convening of a scheme meeting and has approved an explanatory statement, its approval should be sought before additional explanatory material is despatched: Re Centro Retail Ltd [2011] NSWSC 1321 at [11]; Re Trust Company Ltd [2013] NSWSC 1946 at [6]-[8]; Re Investa Listed Funds Management Ltd [2016] NSWSC 344 at [4]; Re Investa Listed Funds Management Ltd [2016] NSWSC 369 at [1]; Re Prime Media Group Ltd [2019] NSWSC 1888 at [5]; see also Re ResApp Health Ltd [2022] NSWSC 1014. He submits that the matters relevant to whether the Court should make orders for the dissemination of supplementary materials include whether shareholders have been given sufficient information and time to consider and evaluate the supplementary information; whether the supplementary disclosure provides adequate disclosure of events that have led to the application; and whether the amended terms of the scheme are more favourable to members than the original terms reflected by the proposed scheme identified in the orders made at the first Court hearing: Re Centro Retail Ltd above at [12]; Re Investa Listed Funds Management Ltd [2016] NSWSC 369 at [10], [14]; Re Prime Media Group Ltd above at [6].
Mr Jackman points out that the proposed scheme meeting and special general meeting were previously scheduled to be held on 13 July 2022 and the postponed scheme meetings would now be held on 22 August 2022, as hybrid meetings. Link proposes to dispatch supplementary materials to shareholders including the supplementary explanatory booklet substantially in the form of Tab 1 of Ex SLT-2 to Ms Turner's affidavit; a hard copy proxy form ("New Proxy Form"), email broadcast ("Supplementary Email Broadcast") and a notice of access letter ("Supplementary Notice of Access Letter") substantially in the form of Tabs 1-3 respectively of Ex IS-2 to Ms Sjarifudin's affidavit. He notes that it is proposed that valid proxy forms which have already been submitted by Link shareholders will not remain valid, which is plainly appropriate given the decrease in the price now offered by Dye & Durham. Link shareholders who had already submitted a proxy form would need to lodge a New Proxy Form (which will accompany the supplementary explanatory booklet) online or by completing and returning a New Proxy Form in accordance with the instructions on the New Proxy Form in order to vote by proxy at the adjourned meeting.
Mr Jackman also points out that, if the Court approves the dispatch of the supplementary explanatory booklet to Link shareholders, it is proposed that, as soon as practicable thereafter, the supplementary explanatory booklet will be released to the ASX; the supplementary explanatory booklet will be sent (i) by email (by means of the Supplementary Email Broadcast) to Link shareholders who have elected to receive communications electronically; (ii) in hard-copy to Link shareholders who have elected to receive hard copy communications; and (iii) by a hard copy Supplementary Notice of Access Letter (as defined) to Link shareholders who have not made any election. The date for the receipt of proxy instructions by way of the New Proxy Forms would be 20 August 2022, so that Link shareholders would have 18 calendar days (or 13 business days) to consider the information, assuming the supplementary explanatory booklet is released to ASX on 2 August 2022. That approach meets the requirements of paragraph 60.96 of ASIC Regulatory Guide 60, which indicates that ASIC considers that it will generally be appropriate for scheme participants, including those voting by proxy, to be given at least 10 days to consider any supplementary documentation distributed before being required to vote on a scheme.
Mr Jackman recognises that it remains a matter for the Court to determine whether sufficient time will be given to shareholders to consider the supplementary information in question and to understand its effect: Re Tawana Resources NL (No 2) [2018] FCA 1724 at [34]; Re Prime Media Group Ltd above at [8]; Re Zenith Energy Ltd; Ex Parte Zenith Energy Ltd (No 2) [2020] WASC 275 at [15]. He refers to McKerracher J's observation in Re Amcom Telecommunications Ltd (No 2) [2015] FCA 410 at [20] that:
"The Courts have approached this with some flexibility, but factors which govern the exercise of discretion as to the content and timing of the supplementary disclosure include the question of whether the information had already been made available through a market announcement, as it has in this instance, how complex the supplementary information is, how significant the supplementary information is and the corresponding response from the target directors, the expert and ASIC. It may also be, in some circumstances, that the supplementary material was effectively foreshadowed at the time of the first hearing."
Mr Jackman also refers to my decision in Re Investa Listed Funds Management Ltd as responsible entity for the Armstrong Jones Office Fund and the Prime Credit Property Trust [2018] NSWSC 1369 ("Investa"), where a supplementary scheme booklet was proposed to be sent to unitholders and released on ASX following an increase in the proposed (all cash) offer consideration. The unitholders there had five clear calendar days (being three clear business days) from the date the supplementary scheme booklet was to be released to the ASX until proxies were due and a further two clear business days until the meetings: Investa at [13]. I did not there require a longer adjournment of the meetings where the proposed increase in the cash consideration would be readily understood by unitholders, the revised proposal had been well-publicised in ASX announcements since its receipt and any unitholder had likely been on notice of the scheme's more favourable terms for at least 10 days prior to the due date for proxies: Investa at [14]. Mr Jackman also notes that, in Redflex Holdings Limited, in the matter of Redflex Holdings Limited (No 2) [2021] FCA 474 ("Redflex"), an order was made to dispatch a supplementary scheme booklet following an increase in the proposed (all cash) offer consideration three days prior to the proxy deadline, and five days prior to the scheme meeting. The Court was satisfied that shareholders had adequate time to respond to the changed circumstances where the only material change to the scheme was increased scheme consideration, and the supplementary scheme booklet provided adequate further information for shareholders to consider the proposed change to the scheme, adequately addressed the reasons for the proposed change, and gave clear notice of how that change qualified the other information in the original scheme booklet which the Court previously approved: Redflex at [9] -[11]. It may be arguable that shareholders should be allowed a somewhat longer period to consider a decrease in a scheme consideration than an increase, where that raises the question whether a shareholder should reverse any previous decision that he or she should accept a proposal they would previously have accepted at a higher price, although that decision is a less complex one where any change relates to the amount of a cash offer.
I accept Mr Jackman's submission that, in the present circumstances, Link shareholders will here have sufficient time to consider the supplementary information contained in the supplementary explanatory booklet and to understand the supplementary information being provided. First, as he points out and as I noted above, the time between a release of the supplementary scheme booklet on the ASX on 2 August 2022 to 20 August 2022 when proxies are due, is longer than the 10 calendar days' notice referred to in RG 60,and the only material information disclosed in the supplementary explanatory booklet is the reduction to the consideration payable under the revised scheme; and Link shareholders will also have a further 2 days after proxies are due before the scheme meeting to consider and understand the supplementary information.
Second, the change in the consideration payable and the reasons for the change are disclosed in the letter from the chairman and in section 1 of the supplementary explanatory booklet, and are clearly and prominently disclosed. As Mr Jackman points out, section 2 of the supplementary explanatory booklet also provides further information to assist Link shareholders to consider the proposed revised scheme, including information regarding the Link board's recommendation, and reasons to vote for and against the revised scheme. The independent expert has also prepared a supplementary report which outlines the revised scheme and concludes that it is fair and reasonable to, and in the best interests of, Link shareholders in the absence of a superior proposal. I accept Mr Jackman's submission that the reduction in the consideration payable to Link shareholders under the revised scheme is a relatively confined change and will not be difficult for Link shareholders to comprehend; and this application does not rise the more difficult issues that arise, for example, where a competing proposal is made a party with sufficient votes to block a scheme and it is difficult to predict all of the issues that may eventuate, so that a longer notice period may be required: for example, Re Envestra Ltd (No 2) [2014] FCA 483 at [10]-[14]; Re Asciano Ltd (No 2) [2015] NSWSC 1651 at [10]-[11].
Importantly, as Mr Jackman points out, the circumstances leading up to the announcement of the revised scheme, including the revised proposals received from Dye & Durham, were previously announced to the ASX in ASX announcements dated 27 June 2022, 4 July 2022, 7 July 2022 and 11 July 2022, and the reduction in the Base Scheme Consideration payable under the revised scheme to $4.81 per share was first announced by Link to the ASX on 21 July 2022, 32 calendar days before the scheme meeting. I accept that this has the result that interested shareholders are likely to have had notice of the decreased consideration and the circumstances of its decrease for more than 10 days prior to the date of the proxy deadline. I can more readily accept the timing for the proposed meeting on that basis.
[5]
Amendment to the SID and the deed poll
Mr Jackman points out that the SID has now been amended by the parties by an amending deed to reflect the reduced Base Cash Consideration payable by Dye & Durham under the scheme, as described in sections 1.2 and s 4.6 of the supplementary explanatory booklet, and there are no other changes to the SID. The deed poll has been amended by the parties by an amending deed to amend the definition of "Implementation Deed" and to replace, at Attachment 1, the scheme of arrangement as amended. I have noted Ms Wexler's evidence concerning the execution and enforceability of the amending deed above.
Mr Jackman also notes that, adopting the approach approved by Barrett J in Re Citect Corporation Ltd (2006) 225 ALR 137; [2006] NSWSC 143 at [13], [16] and [18], at the scheme meeting, Link will seek shareholder approval to amend the scheme in accordance with the amended Scheme at Annexure 2 of the supplementary explanatory booklet (being the "Revised Scheme"), by resolution 1 in the supplementary notice of meetings at Annexure 3 of the supplementary explanatory booklet. Link will then seek shareholder approval for the revised scheme, by resolution 2 in the supplementary notice of meetings at Annexure 3 of the supplementary explanatory booklet. If the Revised Scheme is approved by shareholders at the scheme meeting, Link will seek orders at the second Court hearing for orders approving the Revised Scheme under s 411(6) of the Act. Mr Jackman foreshadows reliance on s 411(6) of the Act and refers to case law concerning the scope of that section: Re Boart Longyear Ltd (No 2) (2017) 122 ACSR 437 at [92], [108]; Re Afterpay Ltd [2021] NSWSC 1709 at [16]. Nothing arises from the nature of the amendment that would prevent the Court convening the scheme meeting to consider the Revised Scheme, and the question of the amendment can otherwise be left to the second Court hearing.
[6]
Orders
I was satisfied that an order should be made convening the adjourned scheme meeting and approving the supplementary explanatory booklet for distribution to shareholders, and I made the orders sought by Link at the conclusion of the first Court hearing on 2 August 2022.
[7]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 16 August 2022