Lion Nathan Limited, in the matter of Lion Nathan Limited (No. 2) [2009] FCA 1261

REASONS FOR JUDGMENT 1 On 5 August 2009, the Court ordered that Lion Nathan Limited (Lion Nathan) convene a meeting of its shareholders, other than Kirin Holdings Company Limited (Kirin Holdings) and its related bodies corporate, for the purpose of considering and, if thought fit, agreeing to a proposed scheme of arrangement between Lion Nathan and its shareholders. The purpose of the scheme is for a subsidiary of Kirin Holdings to acquire all of the shares in Lion Nathan not already held by Kirin Holdings or its related companies. As I indicated in my reasons of 5 August 2009, if the scheme is approved and implemented, relevant shareholders will receive cash payments equal to $12 per share, made up of $11.50 scheme consideration for each share and a special dividend of 50 cents in relation to each share. Lion Nathan had recently paid an interim dividend of 22 cents per share on 23 June 2009. 2 The meeting that Lion Nathan was ordered to convene was duly convened and held on 17 September 2009. Lion Nathan now applies to the Court for approval of the scheme pursuant to s 411 of the Corporations Act 2001 (Cth) (the Corporations Act). Lion Nathan relies upon material that was before the Court at the first hearing. That material related to the factual information in the scheme booklet, as described in my earlier reasons, and the report of Mr Craig Edwards and Mr Phillip Holt concerning the appropriateness of the consideration for the proposed acquisition. I am satisfied from the affidavits of Mr Duncan Harold Makeig, sworn 1 October 2009 and Ms Rosalind Kate Hills, sworn 2 October 2009 that the scheme booklet was despatched or made available to relevant shareholders in accordance with the orders made by the Court as subsequently varied. 3 The scheme booklet was lodged with the Australian Securities and Investments Commission (the Commission) following the first court hearing and, by letter of 6 October 2009, the Commission informed the solicitors for Lion Nathan, pursuant to s 411(17)(b) of the Corporations Act, that the Commission has no objection to the scheme of arrangement. The letter indicates that that statement has been given by the Commission having regard to its criteria for providing such a statement as set out in Regulatory Guide 60 and Regulatory Guide 142. The affidavit of Mr Nicholas Aleksander Vesic of 2 October 2009 indicates that the scheme booklet as posted corresponds with the document that was in evidence on the first occasion, subject to several minor inconsequential changes. 4 The affidavits of Mr Makeig of 1 October 2009 and Ms Hills of 2 October 2009 and Ms Helen Lorraine Potbury of 2 October 2009 indicate that proxies were received and appropriately dealt with in respect of the meeting on 17 September 2009. Mr Geoffrey Ricketts, Lion Nathan's chairman of directors, chaired the meeting of shareholders pursuant to the order made on 5 August 2009. Mr Ricketts addressed the meeting and indicated reasons why shareholders should vote in favour of the proposal and also advanced arguments that might have been put against the proposal. 5 Shareholders present at the meeting were invited to put questions. In response, a shareholder observed that the world had changed since the offer was first made and that the market had moved up a long way since then. Mr Ricketts indicated that the market price of shares in Lion Nathan had not dropped to the same extent as the rest of the market and that any deterioration was immaterial. In any event, Mr Ricketts pointed out, the independent report by Messrs Edwards and Holt had valued a 100% interest in Lion Nathan at between $10.95 per share and $12.21 per share. The value of the cash payments under the scheme was above the mid-point of that range of $11.58 per share. Further, the cash payments of $12 per share represented a substantial premium on the pre-proposal trading price of shares in Lion Nathan. In fact, it represented a 54% premium over the volume weighted average price of Lion Nathan shares over the one month prior to 22 April 2009, when the proposal was announced. Indeed, the offer is higher than the all-time high share price of Lion Nathan shares prior to the receipt of the proposal from Kirin Holdings of $9.85 per share. In the circumstances, I am persuaded that there is no concern to be expressed in relation to the matter raised by the shareholder at the meeting. 6 The resolution was put and was carried by a significant majority. The issued share capital of Lion Nathan was relevantly 534,240,495 shares, of which some 246,454,275 shares were held by Kirin Holdings or its related entities. Thus the scheme related to 287,786,220 shares. Shareholders holding shares representing 184,216,834 votes that could be cast at the meeting were present. Thus something in excess of 64 per cent of the eligible shares were represented and voted at the meeting. 181,913,871 votes were cast in favour of the resolution, representing 98.75 per cent of the votes cast. 4,366 shareholders of a total of 4,751 shareholders who voted, voted in favour of the proposal. That number constitutes 91.9 per cent in favour. Accordingly, the resolution was carried by the majority contemplated by s 411 of the Corporations Act. 7 Clause 9.16 of the constitution of Lion Nathan, which effectively regulated the conduct of the meeting, provides that, if a poll is properly demanded, it must be taken in the manner and at the date and time directed by the chairman. The result of the poll is a resolution of the meeting at which the poll was demanded. The arrangements for the taking of the poll at the meeting were somewhat novel. The poll was taken by electronic means, to which I referred briefly in my reasons of 5 August 2009. Having regard to the novelty of the mechanism, it is desirable that I say something briefly about it. Mr Oliver Bampfield, in affidavits of 31 July 2009 and 2 October 2009, gave evidence of the mechanism whereby the vote was taken at the meeting of shareholders of 17 September 2009. 8 Mr Bampfield of IML Interactive Pty Limited (IML) attended the meeting. Prior to the commencement of the meeting, he supervised the installation of systems for the taking of the poll electronically. The systems consisted of several components as follows. · a series of hand-held keypads of similar appearance to, but slightly larger than, a mobile phone; · a series of laptop computers; · two central wireless transmitters, one of which communicates with the hand-held keypads and one of which communicates with the laptop computers; · a central data server for processing and storing digital information connected to the central wireless transmitters by data cables; · software on the central server which operates a database containing shareholder information and tallies votes; and · a back-up server. 9 The individual keypads and the laptop computers send and receive data wirelessly to and from the central server by way of the wireless transmitters. The keypads communicate with their central wireless transmitter using a frequency hopping system, which makes communications between them secure from interference from other wireless devices. The laptop computers communicate with their central wireless transmitter by means of standard wireless network, which requires an IML password to gain access. 10 In order for the laptop computers used by IML to communicate with the central server by way of the wireless transmitter, it is necessary for a device - curiously known as a dongle - to be inserted into a USB port of the computer. Only those dongles registered by IML and held by IML and the keypads are capable of communicating with the wireless transmitter. In order for a hand-held keypad to communicate with the wireless transmitter it is necessary to insert an activated smart card into the keypad. 11 Data in relation to the identity of shareholders and the number of shares held by each, and the proxies, received prior to a meeting, were imported into the central server directly from the system used by Computershare Limited, Lion Nathan's share registrar, to maintain shareholder registers and to record proxy votes as they were received. Once the data had been imported into the central server, reports were produced by the relevant software, which verifies the number of shareholders and the number of proxy votes recorded. In order to gain entry to the meeting, shareholders were required to produce an attendance form or proxy form at the registration desk in the foyer of the meeting hall. 12 When shareholders, proxies or attorneys, who were entitled to a vote at the meeting, arrived at the relevant venue on 17 September 2009, they attended a registration area where Computershare personnel, who had access to laptop computers, were situated. The personnel electronically scanned the barcode on each person's attendance or proxy form to register that person's presence at the meeting. The barcode allowed the Computershare personnel to view, on a laptop computer, the relevant shareholder or shareholder's representative's details and to determine that each person was, indeed, eligible to vote, by reference to the data that had been uploaded into the central server, as I have already described. 13 Each eligible voter was given a unique smart card by the Computershare personnel. Each smart card contained a data chip into which the eligible voter's name was burnt, linking that particular card to the information about the eligible voter in the software system. Each eligible voter was then given a handheld keypad into which the smart card was inserted. Computershare personnel verified that each handheld keypad had a properly inserted smart card and was operating correctly. 14 After the chairman declared the meeting open, and delivered his chairman's address, to which I have referred, Mr Bampfield explained to those present, how voters could use handheld keypads to cast votes. The explanation was accompanied by a presentation using Microsoft PowerPoint slides. Mr Bampfield explained how to operate the keypads and how they were to be used by eligible voters to record votes, namely, by pressing the 1 key, to vote for the resolution, the 2 key, to vote against it and the 3 key, to abstain. Mr Bampfield pointed out that Computershare personnel were available to give assistance in the event that an eligible voter had any difficulties using the keypads. Mr Bampfield also explained to those present how it was possible to split votes if a shareholder wished to do so. When the poll was declared open, the handheld keypads became active for the purpose of voting on the resolution. 15 Holders of directed proxies were not able to vote other than in accordance with the instructions, which had been input into the database. While the poll was being conducted, the chairman had access to a laptop that allowed him to view the votes that were being cast and collated on the central server in real time. That allowed the chairman to see the rate at which votes were being cast so as to avoid closing the poll before all shareholders, who wished to vote, had voted. After the poll had been declared closed by the chairman, Mr Bampfield caused the system to be locked, thereby prohibiting the lodging of any further votes on the system or the changing of any votes cast. Mr Bampfield supervised the tallying of the final votes for and against the resolution for the approval of the scheme. Shortly after the poll was closed, the final tally was displayed on the screen at the front of the meeting hall. 16 I have described the system in some detail because of its novelty. I am satisfied that the poll was conducted fairly and that there is no reason to conclude that the poll was conducted otherwise than in accordance with the directions given by the chairman, pursuant to clause 9.16 of Lion Nathan's constitution. 17 The matter was heard in Canberra, mainly as matter of convenience for the Court. However, a video link was available to Sydney, in case anybody wished to appear in Sydney, where the first order was made. I am satisfied that the hearing of today's application has been advertised in accordance with the Federal Court (Corporations) Rules 2000. When the matter was called, both in Canberra and in Sydney, there was no appearance except by senior counsel for Lion Nathan and the solicitor for Kirin Holdings. 18 The scheme is subject to several conditions precedent. I am satisfied from certificates, tendered on behalf of both Lion Nathan and Kirin Holdings, that all the conditions precedent, other than the making of an order by the Court approving the scheme, have either been satisfied or waived. 19 Arrangements were put in place for investors to make inquiries concerning the scheme, if they wished to do so. Those arrangements were the subject of affidavits by Ms Caroline Veitch of the 3 August 2009 and the 2 October 2009. I am satisfied that adequate arrangements were in place to enable shareholders to make inquiries if they had any desire to do so. 20 In my earlier reasons, I made reference to employee incentive plans. The affidavit of Mr Makeig of 1 October 2009 explains that the steps referred to in my earlier reasons have been taken, such that the incentive plans do not stand in the way of the scheme. 21 The scheme booklet refers to possible tax implications of the acceptance of the scheme by shareholders. The Australian Taxation Office gave a ruling concerning the possible taxation consequences of the transfer of shares pursuant to the scheme(Class Ruling CR2009/44). I am satisfied that the class ruling given by the Australian Taxation Office is consistent with the disclosure in s 5.2 of the scheme booklet. 22 In all of the circumstances, I am satisfied that the meeting of members of Lion Nathan, ordered on the 5 August 2009, has been convened and conducted in accordance with the orders that I then made. I am satisfied that all of the prerequisites for the approval of the scheme have been satisfied. Accordingly, I propose to make an order, pursuant to s 411, approving the scheme of arrangement. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

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