In the matter of Silk Logistics Holdings Limited (No 3)

Catchwords: CORPORATIONS — arrangements and reconstructions — schemes of arrangement or compromise — application under s 411 of the Corporations Act 2001 (Cth) for orders approving scheme of arrangement and ancillary orders

Legislation Cited: - Corporations Act 2001 (Cth), ss 411, 1319

Cases Cited: - Re Bionomics Ltd (No 2) [2024] NSWSC 1666
- Re InvoCare Ltd (No 2) [2023] NSWSC 1350
- Re SG Fleet Group Ltd (No 2) [2025] NSWSC 376
- Re Silk Logistics Holdings Ltd [2025] NSWSC 1
- Re Silk Logistics Holdings Ltd (No 2) [2025] NSWSC 836

Category: Principal judgment

Parties: Silk Logistics Holdings Limited (Plaintiff)

Representation: Counsel:
D Barnett SC / D Monteith (Plaintiff)
T O’Brien (Bidder)
Solicitors:
Hamilton Locke (Plaintiff)
Herbert Smith Freehills Kramer (Bidder)

File Number(s): 2024/473892

Judgment

1. By Originating Process filed on 19 December 2024, the Plaintiff, Silk Logistics Holdings Limited (“Silk”) applied for orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) (“Act”) relating to a proposed scheme of arrangement and associated orders. By way of background, Silk is a logistics business listed on Australian Securities Exchange (“ASX”) which provides integrated “port to door” services in Australia. The proposed scheme of arrangement provides for DP World Australia to acquire all of the issued share capital of Silk for a cash price of $2.14 per share. I made the orders sought by Silk at the conclusion of the hearing on 23 December 2024 for the reasons set out in my judgment in Re Silk Logistics Holdings Ltd [2025] NSWSC 1 (“Silk No 1”).

2. The scheme meeting was initially fixed for 7 March 2025. The date of the scheme meeting was subsequently postponed while a review of the proposed acquisition of shares under the scheme was undertaken by the Australian Competition and Consumer Commission (“ACCC”) and pending approval of the Foreign Investment Review Board (“FIRB”). On 4 July 2025, the ACCC notified DP World Australia that it would not oppose the proposed acquisition of shares under the scheme and, on 15 July 2025, DP World Australia received a no objection notice from FIRB. On 17 July 2025, I made an order that the scheme meeting be convened on 1 August 2025, programming orders to facilitate the provision of supplementary disclosure to shareholders, and an order fixing the second Court hearing in respect of the scheme, for the reasons set out in my judgment in Re Silk Logistics Holdings Ltd (No 2) [2025] NSWSC 836 (“Silk No 2”).

3. The scheme meeting was then held and the scheme was approved by the requisite majorities of Silk shareholders for the purposes of s 411(4)(a)(ii) of the Act. At this second Court hearing, Silk seeks orders approving the scheme. No Silk shareholder or other person indicated an intention to appear at this hearing, or appeared, to oppose the approval of the scheme and I made the orders sought by Silk at the conclusion of this hearing. These are my reasons for making those orders, and I have drawn on the helpful submissions of Mr Barnett, with whom Mr Monteith appeared for Silk, in this judgment.

Affidavit and other evidence

4. Silk reads the affidavit dated 1 August 2025 of Mr Stephen Moulton, the affidavit dated 1 August 2025 of Ms Melanie Leydin and the affidavit dated 4 August 2025 of Mr Justin Fox. Silk also tenders the scheme booklet and a supplementary scheme booklet and the scheme (which was annexure B to the despatched scheme booklet). Silk also tenders conditions precedent certificates in respect of the satisfaction or waiver of the conditions precedent to the scheme and a letter dated 6 August 2025 from the Australian Securities and Investments Commission (“ASIC”) stating that ASIC has no objection to the scheme pursuant to s 411(17)(1)(b) of the Act.

Applicable principles and determination

5. As Mr Barnett submits, the Court must be satisfied of several matters in order to approve a scheme of arrangement at the second court hearing, namely that the plaintiff has complied with the orders of the Court convening the meeting of members; the meeting of members so convened has approved the scheme with the requisite majorities; all other statutory requirements have been satisfied; the scheme is fair and reasonable so that an intelligent and honest person 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 InvoCare Ltd (No 2) [2023] NSWSC 1350 at [8]–[9]; Re Bionomics Ltd (No 2) [2024] NSWSC 1666 at [6]. Mr Barnett also recognises that the Court, in exercising its power of approval, has a residual discretion whether to approve a scheme and is not bound to approve it merely because it has made orders for the convening of meetings or because the statutory majorities have been achieved. He points out that, in exercising that residual discretion, the matters the Court will take into account include whether the scheme is fair and reasonable so that an intelligent and honest member of the relevant class, properly informed and acting alone, might approve it; whether there was full and fair disclosure to members of all information material to the decision whether to vote for or against the scheme; and whether 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.

6. Mr Barnett here submits that:

“The [s]cheme is fair and reasonable in the sense that an intelligent and honest person in the position of a [Silk] shareholder would approve it, and there was sufficient disclosure to shareholders.

First, the [s]cheme was supported by a clear majority of shareholders present and voting (94.72%) and votes cast (99.91%).

Second, shareholders are to receive a substantial premium (45.6%) over the pre- announcement trading price ...

Third, the [s]cheme [c]onsideration ($2.14 per share) is in the upper quartile of the independent experts’ valuation range, who have formed the opinion that the [s]cheme is fair and reasonable and in the best interests of [Silk’s] shareholders in the absence of a superior proposal …

Fourth, at the time of the [s]cheme meeting, there was no superior proposal, nor were the directors aware of any proposal likely to emerge, and the directors continued to recommend the [s]cheme to shareholders …”

7. Mr Barnett also submits that shareholders were provided with full and fair disclosure in the scheme booklet and supplementary scheme booklet dispatched to them. He recognises that shareholders who received supplementary disclosure by post may not have had at least 10 days to consider the supplementary scheme booklet, as contemplated by ASIC Regulatory Guide 60, but he submits, and I accept, that those shareholders nevertheless had sufficient time to consider the matter where the supplementary scheme booklet was the subject of an ASX announcement and available electronically since 17 July 2025, the supplementary disclosure is relatively confined and there are no objections and no complaints regarding the timing of the supplementary scheme booklet relative to the meeting. Mr Barnett also submits that there is no suggestion that the scheme was proposed other than in good faith and for a proper purpose; he further points out that Silk has not received notice from any person stating that they intend to object to the approval of the scheme or appear at the second court hearing.

8. I am satisfied that, subject to the additional matters noted below, Silk complied with the Court’s orders in respect of the distribution of scheme documents to its shareholders. The resolution to approve the scheme was passed at the scheme meeting by the requisite statutory majorities. There is no reason to think there was any defect in the notice of the scheme given to Silk shareholders and the other statutory requirements for the scheme have been satisfied. The scheme was recommended by Silk’s directors and the independent expert whose report was included in the scheme booklet had expressed the view that the scheme was in the best interests of Silk shareholders in the absence of a superior proposal. There is no reason to doubt that the scheme is fair and reasonable so that an intelligent and honest Silk shareholder, properly informed and acting alone, might approve it. There is otherwise no reason to doubt that Silk has brought to the Court’s attention all matters that could be considered relevant to the exercise of the Court’s discretion or that there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme. Subject to the additional matters which I address below, I was satisfied that the scheme was appropriate for the Court’s approval.

Additional matters

9. First, Mr Barnett draws attention to an additional matter, also raised at the hearing on 17 July 2025, in respect of a relatively small number of shares issued to eligible employees under a tax exempt share plan. Mr Barnett points out those shares were subject to a three year holding lock so as to be eligible for a tax concession. The transfer of those shares under the scheme will prevent the holders of those shares from being eligible to apply the tax concession, unless the Commissioner of Taxation permits a shorter holding period. The supplementary scheme booklet disclosed this issue and the Commissioner has not yet made a determination as to the tax concession. Mr Barnett also points out that the shares which are the subject of the tax exempt share plan are held by a trustee, which despatched the scheme booklet and supplementary scheme booklet to the employee participants; the trustee notified the employee participants by email as to how to vote in respect of their shares and received no votes (or voting instructions) from employee participants and did not vote on the scheme resolution. Mr Barnett points to my earlier observation that the potential for eligible employees to receive favourable tax treatment does not raise any class issue: Silk No 2 at [7]. This matter does not give rise to any reason not to approve the scheme at this second hearing.

10. Second, Mr Barnett points out that there was reference at the Court hearing on 17 July 2025 to the disclosure contained in section 3 of the supplementary scheme booklet concerning options held by two Silk Logistics’ directors, Mr Sinclair and Mr Moulton, which would be cancelled in return for a cancellation payment if the scheme is approved, and forfeited if the scheme is not approved. The quantum of the cancellation payment was disclosed in the supplementary scheme booklet distributed to shareholders. Mr Barnett points out that Mr Sinclair acted as chair of the scheme meeting, but there is no suggestion that his interest in the Silk options had any effect on the conduct of the meeting or the exercise of his powers as chair. I have previously held that no class issues arise because of the options held by directors: Silk No 1 at [19].

11. Third, Mr Barnett draws attention to Mr Moulton’s evidence of Silk’s outbound communications to shareholders in relation to the scheme. I accept that Silk’s outbound communications program was consistent with common practice and provides no reason as to why the scheme should not be approved. Fourth, Mr Barnett notes another matter raised at the hearing on 17 July 2025, concerning three ASX announcements relating to the scheme made by Silk that had not been notified to or approved by the Court: Silk No 2 at [11]–[12]. He acknowledges that these announcements (in February and March 2025) included references to the Silk directors’ recommendation in relation to the scheme but did not draw attention to the fuller outline of the scheme and its advantages and disadvantages contained in the scheme booklet. I accept that any issue arising from this matter has been addressed by the distribution of the supplementary scheme booklet.

12. Silk also seeks an exemption from compliance with s 411(11) of the Act. That order is properly made where the rights of shareholders are not modified by the scheme: Re SG Fleet Group Ltd (No 2) [2025] NSWSC 376 at [14].

Orders

13. For these reasons, I made the orders sought by Silk at the conclusion of the second Court hearing on 6 August 2025.

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