In the matter of Origin Energy Limited (No 2) [2023] NSWSC 1351

In the matter of Origin Energy Limited (No 2) [2023] NSWSC 1351 - NSWSC 2023 case summary — Zoe

Affidavit evidence

The application is supported by an affidavit dated 6 November 2023 of Ms Jordan, who is the General Counsel and Executive General Manager, Company Secretariat, Risk and Governance of Origin. Ms Jordan refers to the proposed draft supplementary explanatory statement, and I have been taken through that document by Mr Williams, who appears for Origin, in submissions. She refers to an amendment to the Scheme Implementation Deed ("SID") executed between Origin, MidOcean Reef BidCo Pty Ltd ("Bidder") and Brookfield Renewable Group Australia Pty Ltd, which increases the cash consideration to be offered to all Origin shareholders under the scheme by approximately 69 cents per share, and also extends the implementation date of the scheme to 31 January 2024. Ms Jordan also refers to \changes to a standstill arrangement to which I will refer briefly below, and notes there is no proposed change to the date of the scheme meeting or the second Court hearing.
Ms Jordan notes that Origin has previously released an announcement to the Australian Securities Exchange ("ASX") in relation to the proposed changes to the terms of the scheme and a copy of that announcement is in evidence. Ms Jordan explains how the change in consideration operates and that is also addressed in the supplementary scheme booklet. She refers to the consideration of the revised scheme by the Origin board which has maintained its unanimous recommendation of the scheme, now at the increased consideration, subject to there being no superior proposal and the independent expert continuing to conclude that the scheme is in the best interests of Origin shareholders.
Ms Jordan also addresses the process for verification of the Origin Information, as defined, in the supplementary scheme booklet, which was in common form; the proposed manner of dispatch of the supplementary scheme booklet to Origin shareholders which, as I noted above, corresponds to the manner in which the explanatory booklet was previously sent to shareholders; the process for proxies, which it is proposed will remain valid unless revoked by the relevant shareholder, as is common where there is an increase in the proposed scheme consideration; and communications with shareholders. I have reviewed those communications, although my approval is not sought for them, and I should record that I have no difficulty with them.
As I noted above, I have been taken through the supplementary scheme booklet in the course of Mr Williams' submissions. The letter from the chair of the Origin board refers to the increased consideration now offered under the proposed scheme and to the comparison between the amount of the consideration now offered and the independent expert's valuation of Origin shares. An overview of the revised scheme also refers to those matters, and to how the increased total consideration would be payable. It explains the reasons for the Origin directors' recommendation of the scheme and to the position in respect of the independent expert's report in that respect.
The supplementary scheme booklet also draws attention to a change to a standstill arrangement which Origin had previously negotiated in respect of the bidding consortium's initial non-binding indicative proposal, which has now been agreed between Origin and the bidding consortium. The effect of that change is, broadly, that if the scheme is not approved by the requisite majorities at the scheme meeting and the bidding consortium subsequently acquires more than five percent of Origin shares, an off market takeover bid would then be made for all of the shares in Origin, subject to a 50.1 percent minimum acceptance condition which could not be waived without Origin's consent, within a specified timeframe. These matters are sufficiently disclosed in the proposed supplementary scheme booklet, so that Origin shareholders can have regard to them. I recognise that a standstill arrangement is not unusual in these circumstances and the amendment to that arrangement appears to be favourable to Origin shareholders, so far as it promotes equality of opportunity in allowing Origin shareholders to sell their shares into a takeover bid, if the bidding consortium acquires the specified percentage of Origin shares. There is no reason to think that any regulatory difficulty arises from that amendment, where the Australian Securities and Investments Commission ("ASIC") has had the opportunity to review the supplementary scheme booklet and, as I will note below, has raised no concern with it.
The scheme booklet also addresses the position in respect of the US dollar component of the scheme consideration and fairly notes the possibility of changes in the exchange rate in the extended period to the implementation date of the scheme, and discloses the fact that Origin is considering taking out foreign currency hedges in that respect. The supplementary scheme booklet also refers to additional equity commitments made available from entities associated with the Bidder and the bidding consortium, in order to fund the additional scheme consideration, which are broadly of the same nature as those which existed in respect of the original scheme.
Origin also reads the affidavit dated 6 November 2023 of Mr Cugati, a solicitor acting for the bidding consortium, which refers to the verification process for Supplementary Bidder Information, as defined, in the supplementary scheme booklet, which was also in common form.
I have been taken, as I noted above, to Origin's proposed communications with shareholders, by way of an inbound call script, an outbound call script, and a briefing for proxy advisers, together with reminder communications to Origin shareholders. As I noted above, I have no difficulty with those proposed communications and it seems to me generally desirable that shareholders be reminded of the opportunity to vote at the scheme meeting.
Origin also tenders an email dated 6 November 2023 from ASIC, which indicates that it has no comments on the proposed supplementary scheme booklet, a matter which I noted above.

[4]

Determination

As Mr Williams points out, where the Court has ordered the convening of a scheme meeting and approved an explanatory statement, its approval should be sought before additional explanatory material is dispatched, as Origin now does. That requirement is generally attributed to the decision of Barrett J (as his Honour then was) in Re Centro Retail Ltd [2011] NSWSC 1321 ("Centro") at [11] and has been applied in many subsequent decisions of this and other Courts; for example, 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 ("Investa") at [1]; Re Prime Media Group Ltd [2019] NSWSC 1888 ("Prime Media") at [5]. Mr Williams notes that, in approving additional explanatory material, the Court will have regard to whether shareholders are given supplementary information in sufficient time to evaluate that supplementary information, and to the nature of the amendments made and whether they are more favourable to members than the original terms proposed: Centro at [12]; Investa at [10], [14]; Re Billabong International Ltd (No 2) [2018] FCA 496; Re Tawana Resources NL (No 2) [2018] FCA 1724 at [18]; Prime Media at [6].
I bear in mind that the primary change disclosed by the supplementary scheme booklet is the increase in the scheme consideration, although there is also a change in the implementation period for the scheme. Mr Williams fairly draws attention to the time which will be available for Origin shareholders to consider the supplementary information. That information involves relatively straightforward changes to the scheme and I bear in mind that the changes have been well publicised, including by Origin's announcement to the ASX to which I referred above. I am satisfied that sufficient time will be available to Origin shareholders to consider that information. Mr Williams also notes that it is proposed that Origin shareholders who have already lodged a valid proxy form and wish to change their vote will be able to do so, and valid proxy forms will otherwise remain valid unless revoked or changed in that way. I see no difficulty with that course, so far as what has occurred is an increase in the scheme consideration, albeit with the other changes to which I have referred, and it is relatively unlikely that shareholders who have already lodged a proxy that is supportive of the scheme would change their minds because increased consideration was payable.
Mr Williams also addresses the process which is to be adopted in respect of the resolution to be put to members. The proposed scheme resolution will not be amended at this point, and Origin will rely on the fact that the existing resolution extends to alterations or conditions to the scheme that are approved by the Court and to which Origin and the Bidder agree. Mr Williams foreshadows that, if the amended scheme (reflecting the altered terms including the increased scheme consideration) is approved by the shareholders at the scheme meeting, then Origin will seek approval for that amended scheme at the second Court hearing. This approach has been permitted in several earlier cases, and it seems to me an effective way to address the relevant changes.

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