Solicitors:
Herbert Smith Freehills (Plaintiff)
King & Wood Mallesons (Acquirer)
File Number(s): 2020/364467
[2]
Background and nature of the application
By Orders made on 10 February 2021, for the reasons set out in my judgment delivered on 19 February 2021 ([2021] NSWSC 108), I directed that the Plaintiff, The Trust Company (Re Services) Ltd ("VTH RE") as responsible entity of the Vitalharvest Freehold Trust ("VTH") was justified in convening meetings of unitholders to consider a proposed trust scheme and in proceeding on the basis that, if approved by unitholders, consequential amendments to the constitution of the trust would be within the powers conferred by the constitution and s 601GC of the Corporations Act 2001 (Cth).
Subsequently, VTH announced to Australian Securities Exchange ("ASX") that, on 25 February 2021, it had received a non-binding proposal from ROC Private Equity Pty Ltd ("ROC") to acquire all of the issued units in VTH for $1.08 cash per VTH unit by way of a trust scheme or, if that trust scheme was not approved by the requisite majority of VTH unitholders but they approved a resolution under ASX Listing Rule 11, all of the assets of VTH for a specified cash consideration, subject to certain adjustments. On 1 March 2021, VTH announced to ASX that it was seeking further information from ROC and would postpone the unitholder meeting for the trust scheme from 4 March 2021 to a date to be determined.
On 5 March 2021, VTH announced to ASX that, following receipt of that further information from ROC, VTH RE had determined that the ROC proposal would be reasonably likely to result in a Superior Proposal (as defined), triggering a matching right process under the Scheme Implementation Deed ("SID") with the proposed acquirer, Macquarie Agricultural Funds Management Ltd as trustee of Macquarie Agriculture Fund - Crop Australia 2 ("MAFM"), in respect of the proposed trust scheme.
On 11 March 2021, VTH announced to ASX that MAFM had provided, within the matching right period under the SID, an improved offer which VTH RE had determined would or would likely provide an equivalent or superior outcome for unitholders than the ROC proposal and had agreed specified amendments to the SID by which MAFM agreed to acquire all of the issued units in VTH at $1.08 per unit by way of a trust scheme or, if the trust scheme was not approved by the requisite majority of VTH Unitholders but they approved a resolution under Listing Rule 11, the purchase of the assets of VTH for a specified cash consideration, and MAFM extended a waiver it had previously granted to permit payment of an interim distribution subject to certain conditions.
Under the terms of an amended SID agreed with MAFM, certain amendments were made in relation to the exclusivity provisions, including as to the information which must be provided to MAFM following receipt of a third party proposal, and the reimbursement fee was increased to $2 million, which remained approximately 1% of the revised scheme consideration. Grant Thornton has prepared a supplementary independent expert's report, which is to be annexed to a supplementary scheme booklet, and concludes that each of the trust scheme and asset sale is fair and reasonable to, and in the best interests of, VTH unitholders in the absence of a Superior Proposal and the terms of the facilitation agreement do not constitute the receipt of a net benefit by the manager.
On 18 March 2021, VTH announced to ASX that it had received a further non-binding proposal from ROC to acquire the issued units in VTH for $1.12 cash per VTH unit by way of a trust scheme or, if that trust scheme was not approved by the requisite majority of VTH unitholders but they approved a resolution under Listing Rule 11, all of the assets of VTH for a higher cash consideration, subject to certain adjustments.
On 22 March 2021, VTH RE determined that the non-binding revised ROC proposal could result in a Superior Proposal (as defined in the Scheme Implementation Deed), but had not at that point determined that that proposal, which is subject to several uncertainties and conditions, is in fact a Superior Proposal. VTH RE announced that it would engage with ROC to explore whether the Non-Binding Revised ROC Proposal could be progressed to become a binding Superior Proposal, but that it did not then recommend, support or endorse that proposal and, at that point, continued unanimously to recommend that VTH unitholders vote in favour of the Amended Transaction.
By its further application heard on 24 March 2021, VTH RE applied for judicial advice under s 63 of the Trustee Act 1925 (NSW) that it would be justified in postponing the proposed meeting from 4 March 2021 until 16 April 2021 to enable VTH unitholders to consider the amended transaction and distributing a supplementary explanatory statement to VTH unitholders.
[3]
Affidavit evidence
The Plaintiffs rely on an affidavit dated 23 March 2021 of Ms Moodley, who is the General Manager, Legal of Perpetual Limited, which is the ultimate parent company of VTH RE. Ms Moodley sets out the sequence of events to which I have referred above, and refers to the determination reached by the VTH RE board on 10 March 2021 that the revised MAFM proposal is likely to provide an equivalent or superior outcome for VTH RE or VTH unitholders than the ROC proposal, and to the further non-binding proposal received from ROC to which I referred above. Ms Moodley also addressed the amendments to the exclusivity provisions contained in the amended SID and disclosed in section 2.4 of a proposed supplementary scheme booklet, and the amendments as to reimbursement of costs. She also refers to amendments to the VTH supplemental deed to give effect to these matters and to further verification undertaken in respect of the supplementary scheme booklet.
By an affidavit dated 22 March 2021, Ms Dzopalic, who is a Senior Relationship Manager employed by Computershare Investor Services Pty Ltd ("Computershare") addresses the process which will be adopted for dispatch of supplementary materials to VTH unitholders, including electronic and hard copy dispatch. By an affidavit dated 23 March 2021, Mr De Cian, who is a partner of Grant Thornton, confirms that he holds the opinion in the supplementary report prepared by Grant Thornton. By an affidavit dated 23 March 2021, Ms Maslen-Stannage, a solicitor acting for VTH RE, refers to correspondence with the Australian Securities & Investments Commission in respect of the supplementary scheme booklet.
By an affidavit dated 23 March 2021, Mr Natale, who is a solicitor acting for MAFM in respect of the proposal, confirms the steps taken to verify information concerning MAFM in the supplementary scheme booklet and addresses the negotiation of exclusivity and break fee provisions and the execution of a further deed poll in favour of scheme participants.
[4]
Submissions and determination
Mr Williams, who appears for VTH, rightly submits that, where the Court has ordered, or given judicial advice as to, the convening of a scheme meeting or trust scheme meeting respectively, and has approved an explanatory statement, its approval should be sought before additional explanatory material is dispatched: Re Centro Retail Ltd [2011] NSWSC 1321 at [11]; Re Trust Company Limited [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 Limited [2019] NSWSC 1888 at [5].
Mr Williams also 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 Billabong International Limited (No 2) [2018] FCA 496; Re Tawana Resources NL (No 2) [2018] FCA 1724 at [18]; Re Prime Media Group Limited above at [6]. Mr Williams notes that, subject to the Court's advice, the supplementary materials to be sent to unitholders will be a supplementary scheme booklet substantially in the form exhibited to Ms Maslen-Stannage's affidavit and either a revised hard copy proxy form or access to a portal through which proxy instructions can be lodged electronically. I am satisfied that the additional disclosure contained in the proposed supplementary scheme booklet is consistent with these principles.
It is proposed that the supplementary scheme booklet and revised proxy form be dispatched to unitholders recorded on the register of unitholders of VTH as at 7:00pm (AEST) on 22 March 2021. The supplementary scheme booklet would be released to ASX and also sent by email to VTH unitholders who have elected to receive communications electronically, and in hard copy to VTH unitholders who have not elected to receive communications electronically. The time for the receipt of proxy forms would be extended to 2:00pm on 14 April 2021, so that VTH unitholders would have more than 10 days from the date that the supplementary scheme booklet is released to the ASX to the date that proxies are due. Mr Williams points out that this approach is consistent with ASIC's guidance in paragraph 60.96 of ASIC Regulatory Guide 60 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 Williams also points out that, as is disclosed in the Chairman's letter in the supplementary scheme booklet, it is proposed that valid proxy forms which have already been submitted by VTH unitholders will remain valid unless revoked. VTH unitholders who have already submitted a valid proxy form, but who wish to change their vote, can do so by lodging a replacement proxy online, completing and returning a new proxy form, or contacting Computershare on the VTH unitholder information line. Mr Williams submits and I accept that this approach conforms to the Act and the terms of the proxy form previously distributed to unitholders, which provides that the proxy direction previously given by unitholders applies to the meeting originally convened for 4 March 2021 "and any adjournment or postponement of that Meeting". As Mr Williams points out, that approach is consistent with authority in the context of court-ordered scheme meetings: Re Amcom Telecommunications Ltd (No 2) [2015] FCA 410 at [16]-[18]; Re Amcom Telecommunications Ltd (No 3) [2015] FCA 596 at [81]-[83]; Re Tawana Resources NL (No 2) above at [38]-[39]; Re Nzuri Copper Ltd (No 2) [2019] WASC 214 at [35]-[37]; Re Nzuri Copper Ltd (No 3) [2019] WASC 280 at [19].
Mr William also refers to the amendments to the exclusivity provisions in the SID to which I referred above. He points out that the increased reimbursement fee payable under the SID of $2 million remains approximately 1% of the increased consideration for the trust scheme, and remains consistent with the Takeovers Panel's Guidance Note 7: Lock-up Devices, and that payment of break fees of such magnitude are commonplace in schemes of this kind: Re Mosaic Oil NL [2010] FCA 985 at [19]. I can also readily infer that the costs to which MAFM is exposed if the trust scheme does not proceed will have increased as a result of the developments which I have referred above.
Mr Williams notes that payment of the reimbursement fee would previously have been triggered if, among other things, either any VTH RE director failed to recommend or changed his or her recommendation in relation to transaction, unless the independent expert concluded that the transaction was not in the best interests of VTH unitholders or VTH RE was entitled to terminate the SID for material breach by MAFM; or any VTH RE director supported or endorsed or recommended that VTH unitholders accept or vote in favour of an alternative transaction. Under the amended SID, the reimbursement fee will now be triggered if either of the above events occurs at any time up to termination of the SID, even if the Exclusivity Period has already terminated. Mr Williams submits, and I accept, that the amendments to the exclusivity and reimbursement fee provisions are prominently disclosed in section 2.4 of the supplementary scheme booklet, and the affidavit evidence to which I referred above indicates that they were negotiated between the parties in the course of normal commercial negotiations in which all parties were represented by professional advisers (Moodley 23.3.21 [4]; Natale 23.3.21 [14]). It seems to me that these amendments, made in a period where the commercial circumstances of the transaction are now more complex, do not give any reason not to make the orders sought by VTH RE.
Mr Williams also notes that VTH RE seeks to defer the meeting of unitholders which was previously to be held on 4 March 2021 to 16 April 2021 and proposes that meeting will be held in a hybrid manner, by a physical meeting attended only by VTH RE executives, and unitholders participating online, in the manner contemplated by s 252Q of the Corporations Act 2001 (Cth) (Act). Mr Williams points out that a similar order was made as to the way in which a scheme meeting would be conducted in Re Coca-Cola Amatil Limited [2021] NSWSC 270 at [28]. I am satisfied that the unitholder meeting should be deferred where the continuing developments to which I referred above have the potential to improve the commercial terms of the transaction to be put to unitholders.
[5]
Orders
For these reasons, I made the orders sought by VTH RE at the hearing on 24 March 2021.
[6]
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: 21 April 2021