MDA National Limited v Medical Defence Australia Limited

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1247 of 2014

IN THE MATTER OF GOODMAN FIELDER LIMITED ABN 51 116 399 430 GOODMAN FIELDER LIMITED

JUDGE: YATES J DATE: 25 FEBRUARY 2015 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 On 12 December 2014, I made orders pursuant to s 411(1) and 1319 of the Corporations Act 2001 (Cth) (the Act) providing for the plaintiff to convene and hold a meeting of certain shareholders (the scheme meeting) to consider and, if thought fit, agree to a scheme of arrangement. These are my reasons for making the orders at that time.

The scheme of arrangement 2 The scheme of arrangement, if agreed to and approved, will provide for the shares of scheme shareholders to be transferred to a special purpose vehicle, currently named W BidCo Australia Pty Ltd (FPW), for A$0.675 cash per share (the scheme consideration). FPW will be owned, ultimately, by Wilmar International Limited (Wilmar) and First Pacific Company Limited (First Pacific), who will each hold 50% of FPW's issued capital. 3 The plaintiff is a public company listed on the Australian Securities Exchange (ASX) and New Zealand Stock Exchange (NZX). It is engaged in the manufacture, marketing and distribution of branded food, beverage and related consumer products and food ingredients. It has manufacturing operations in Australia and overseas. It is a leading producer of branded bakery, dairy and grocery products. 4 Wilmar is one of Asia's leading agribusiness groups, based in Singapore, with business activities including palm oil cultivation, oilseed crushing, edible oils refining, sugar milling and refining, specialty fat, oleochemical, biodiesel and fertiliser manufacturing and grain processing. It is listed on the Singapore Stock Exchange with a market capitalisation, as at 31 October 2014, of approximately US$15.9 billion. FPW Holdings Pte. Ltd is a wholly-owned subsidiary of Wilmar and has a relevant interest in 5,791,579 shares in the plaintiff's issued capital. Wii Pte Ltd, another wholly-owned subsidiary of Wilmar, has a relevant interest in a further 191,644,802 shares in the plaintiff's issued capital. The shareholding of FPW Holdings Pte. Ltd and Wii Pte Ltd represents 10.1% of the plaintiff's issued shares. 5 First Pacific is an investment management and holding company based in Hong Kong, with operations located predominantly in Asia. It is listed on the Hong Kong Stock Exchange with a market capitalisation, as at 31 October 2014, of approximately US$4.6 billion. Oceanica Developments Limited (ODL) is a wholly-owned subsidiary of First Pacific and has a relevant interest in 191,644,802 shares in the plaintiff's issued capital, representing 9.8% of those shares. 6 Currently, FPW is ultimately wholly-owned and controlled by Wilmar. It is proposed that FPW will be renamed FPW Australia Pty Limited and, through certain restructuring events, will come to be ultimately owned as described in [2] above. 7 Given the interests in the plaintiff's issued shares to which I have referred, Wilmar, First Pacific and certain other companies will not participate in or vote at the scheme meeting.

Conditions precedent 8 The scheme of arrangement is subject to a number of conditions precedent, including various regulatory approvals. The regulatory approvals condition has already been satisfied insofar as it relates to the approval of the Australian Competition and Consumer Commission and the Foreign Investment Review Board. The conditions relating to approval by the New Zealand Overseas Investments Office and the Anti-Monopoly Bureau of the Ministry of Commerce of the People's Republic of China (MOFCOM) have yet to be satisfied.

The scheme consideration 9 The scheme of arrangement is structured so that, before the implementation date, Wilmar, First Pacific and FPW must deposit, in cleared funds, an amount equal to the aggregate amount of the scheme consideration payable to scheme shareholders in a trust account operated by or on behalf of the plaintiff as trustee for those shareholders. On the implementation date, the plaintiff must pay, or procure the payment of, the relevant scheme consideration to each scheme shareholder from the trust account. Thereafter, all of the shares in the plaintiff held by the scheme shareholders will be transferred to FPW. By this structure, the completion risk to scheme shareholders in relation to the receipt of the scheme consideration is effectively eliminated. 10 The scheme of arrangement provides for the scheme consideration to be paid to scheme shareholders by electronic funds transfer or by cheque, for the relevant amount. The scheme consideration will be paid in Australian dollars or New Zealand dollars, depending on the circumstances set out in the scheme of arrangement. These circumstances are brought to the attention of the plaintiff's shareholders in the scheme booklet. I accept the plaintiff's submission that these circumstances in relation to payment of the scheme consideration are not class-creating for the purposes of voting at the scheme meeting.

Deeds poll 11 The obligations of Wilmar, First Pacific and FPW under the scheme of arrangement will be supported by a deed poll to be given in favour of the scheme shareholders. The deed poll will be executed once MOFCOM approval is obtained. The deed poll has not been executed at the present time because of reasons associated with Chinese law. 12 In the meantime, two deeds poll have been executed in favour of scheme shareholders. One deed poll has been executed by Wilmar and FPW, and the other has been executed by First Pacific and one of its wholly-owned subsidiaries FP BidCo Australia Pty Limited, pursuant to which Wilmar and First Pacific have agreed to provide, respectively, half the scheme consideration and to comply with their respective obligations under the scheme of arrangement. However, these deeds poll will terminate upon execution of the deed poll to be given by Wilmar, First Pacific and FPW following the receipt of MOFCOM approval.

The recommendation of directors 13 The plaintiff's directors unanimously recommend that shareholders vote in favour of the scheme of arrangement, in the absence of a superior proposal.

Independent experts 14 The plaintiff has retained Deloitte Corporate Finance Pty Limited (Deloitte) as an independent expert to assess the scheme of arrangement and to provide a report thereon for the benefit of shareholders. Deloitte has assessed the fair market value of the plaintiff's shares on a control basis to be between A$0.646 and A$0.755. Deloitte has expressed the opinion that the scheme of arrangement is fair and, therefore, reasonable. As the scheme of arrangement is fair and reasonable, Deloitte has concluded that it is also in the best interests of shareholders who will be voting on the scheme. Tapan Parekh, an authorised representative of Deloitte, who has had overall responsibility for the preparation of the report, has verified that the opinions expressed in the report are opinions held by him. 15 There is, however, one aspect of the value of the scheme consideration to which particular reference should be made. On 15 May 2014, ODL entered into conditional share purchase agreements with two of the plaintiff's largest shareholders, Perpetual Investment Management Limited and Ellerston Capital Limited, to acquire 9.8% of the plaintiff's issued shares at a price of A$0.70 per share. The conditional purchase agreements were disclosed to the plaintiff and the ASX by First Pacific on 19 May 2014. The share purchase agreements have been completed. These matters have been fully disclosed in the scheme booklet. 16 As noted, the scheme consideration is A$0.675 per share. Accordingly, if Wilmar and First Pacific had sought to make a takeover bid for the plaintiff under Ch 6 of the Act, there may have been an issue as to whether these acquisitions would have been consistent with the minimum bid price rule under s 621 of the Act, which requires the consideration offered under a takeover bid to equal or exceed the maximum consideration that the bidder has provided or agreed to provide for the bid class security in the four months before the date of the bid. 17 The plaintiff submitted that these pre-scheme acquisitions are not matters that should prevent the Court from making orders convening the scheme meeting. In advancing that submission the plaintiff submitted, in reliance on Re Ranger Minerals Ltd; Ex parte Ranger Minerals Ltd (2002) 42 ACSR 582, that there are material distinctions between a takeover under Chapter 6 and a scheme of arrangement under Chapter 5. 18 In Ranger Minerals 42 ACSR 582, the acquirer under a scheme of arrangement had, pursuant to a separate agreement, acquired the shares of one shareholder in the scheme company for a price alleged to be greater than the scheme consideration. The Australian Securities and Investments Commission (ASIC) submitted that this offended the "equality principle" derived by the application by analogy of the minimum bid requirement in s 621(3) of the Act and the prohibition on collateral benefits in s 623. Parker J (at [44]-[45]) said: 44 A scheme of arrangement is quite different in form and elements. There is no offer date as a benchmark. Necessarily, the ultimate outcome that is whether or not the scheme will proceed, will be determined by court decision and lodgement of the order. The process involves two court applications, either or both of which may be opposed, and a vote of shareholders at which the support of at least 75% of the shareholders is essential. The process is necessarily prolonged. It ensures that shareholders have full and frank disclosure of all relevant issues. In a case such as the present, where the concern is whether a past and concluded acquisition of a minority holding involved a more valuable consideration than is proposed by the scheme, the court can ensure that the facts relating to the acquisition are fully and frankly presented to the shareholders, and that the shareholders are assisted by independent expert opinion as to the value of the scheme consideration according to a variety of considerations including market price and how it compares with the consideration paid for the past acquisition. 45 The circumstances of, and reasons for, that past acquisition and the justification offered by the propounders of the scheme for the consideration then paid, can be assessed by shareholders, who should be in a sound position to assess for themselves whether they are disadvantaged by inequality of treatment. 19 As I have noted, the circumstances of these share purchase agreements have been drawn to the attention of shareholders in the scheme booklet. The disclosure is made in Section 2.4 of the scheme booklet dealing with an aspect of "Key considerations relevant to your vote" and Section 6.8 dealing with an aspect of "Information about the Consortium". The matter is also referred to in Deloitte's report. 20 I accept the plaintiff's submission that these pre-scheme acquisitions do not stand in the way of the Court making orders convening the scheme meeting.

The plaintiff's half year results 21 The plaintiff will release its half year financial results before the scheme meeting. Those results will be released to the ASX and NZX in the ordinary course. The plaintiff proposes to seek confirmation from Deloitte that nothing disclosed in the half year results would cause it to change its opinion that the scheme is fair and reasonable to, and therefore in the best interests of, scheme shareholders. 22 The plaintiff has sought an order approving, in advance, the publication of a statement confirming, if it be the case, that following a review of the half year results, Deloitte confirms its conclusion that the scheme of arrangement is in the best interests of scheme shareholders. 23 I am satisfied that it is appropriate to make that order. A similar order was made by Gyles J in Promina Group Limited, in the matter of Promina Group Limited [2006] FCA 1772.

Treatment of performance rights 24 The plaintiff has issued certain unvested performance rights which entitle the holder to be issued with shares in the plaintiff, subject to performance or service-based vesting conditions. These rights were issued under the Goodman Fielder Equity Incentive Plan. The plaintiff intends to exercise its discretion under the rules of the plan to cancel the rights and to replace those rights with new entitlements under a new incentive plan, or amend the rules so that the relevant entitlement is to receive a cash payment rather than shares. The proposed treatment of these rights is set out in Section 11.2 of the scheme booklet. I accept the plaintiff's submission that those current shareholders who also hold performance rights do not constitute a separate class for the purpose of voting at the scheme meeting.

Exclusivity arrangements 25 The scheme implementation deed entered into by the plaintiff, Wilmar, First Pacific, FPW and FP BidCo Australia Pty Limited contains certain exclusivity provisions. Certain provisions of the deed are discussed in Section 11.1 of the scheme booklet, including the exclusivity provisions. The provisions include "no shop", "no talk", "no due diligence" and "matching right" restrictions as well as certain "notification" obligations. I am satisfied that the disclosure of these provisions in the scheme booklet is sufficient and satisfactory. 26 Section 11.1 of the scheme booklet also draws attention to reimbursement fee arrangements into which the plaintiff has entered. The amount of the reimbursement fee is A$13.2 million and the circumstances in which it is payable are clearly set out. Importantly, the reimbursement fee is not triggered by shareholders failing to agree to the scheme of arrangement. Thus the circumstances under which the fee might be paid do not stand as a disincentive to shareholders in relation to voting either for or against the scheme at the scheme meeting. 27 There is evidence before me that the reimbursement fee was negotiated during the course of lengthy negotiations in which all parties were represented by experienced legal and financial advisers. The fee represents just under 1% of the equity value of the plaintiff and is, therefore, consistent with the Takeover Panel's guidelines.

Deemed warranty 28 The scheme of arrangement includes a deemed warranty by scheme shareholders that their shares will be free from encumbrances. The terms of the warranty are set out in Section 4.11 of the scheme booklet. I am satisfied that this provides satisfactory and sufficient disclosure to shareholders of their obligations in that regard.

ASIC's attitude 29 ASIC has provided a letter in which it states that it has been given the required period of notice of the hearing of this application and that it has had reasonable opportunity to examine the terms of the scheme of arrangement and the draft explanatory statement (which has been provided in the form of the scheme booklet), and to make submissions to the Court thereon: Exhibit A.

Compliance with prescribed disclosure requirements 30 I have been provided, helpfully, with a table setting out the prescribed disclosure requirements of Pt 3 of Sch 8 of the Corporations Regulations 2001 (Cth) and the relevant parts of the scheme booklet containing those disclosures.

Verification 31 There is evidence before me of the verification of the factual information contained in the scheme booklet.

Chairman of scheme meeting 32 Steven Gregg, the plaintiff's Chairman of Directors, has signified his consent to act as chairperson of the scheme meeting. Clive Hooke, one of the plaintiff's directors, has signified his consent to act as chairperson should Mr Gregg be unable to so act. Both gentlemen have provided affidavits disclosing their relevant interests.

Dispatch of the scheme booklet 33 The plaintiff seeks orders for the dispatch of the scheme booklet and proxy form by electronic means to those shareholders who have nominated an electronic address for the purposes of receiving notices of meeting and proxy forms from the plaintiff. This will be done by an email notice to the shareholders containing links to the scheme booklet and proxy form. In my view, it is appropriate for the scheme booklet, notice of meeting and proxy form to be dispatched in that way: MDA National Limited v Medical Defence Australia Limited [2014] FCA 954 at [87]-[105]. Otherwise, the relevant documents will be dispatched by prepaid post or delivered to shareholders (including where attempted electronic delivery to a shareholder has been notified as having been ineffective).

Generally 34 I am satisfied that the plaintiff is a Pt 5.1 body and that the scheme is an "arrangement" for the purposes of s 411(1) of the Act. 35 The formal requirements that are preliminary to the Court convening a meeting under s 411(1) have been satisfied. 36 I am satisfied that the proposed scheme is of such a nature, and is cast in such terms that, if it receives the requisite statutory majority, the Court will be likely to approve it on an unopposed application. 37 In the course of the hearing of this application, I have raised the need for the plaintiff to address, by way of evidence at the second court hearing, the valid execution of the deeds poll on which, by that time, it proposes to rely.

Disposition 38 Orders, substantially as sought by the plaintiff, should be made. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.