RP Data Limited, in the matter of RP Data Limited [2011] FCA 228

Federal Court of Australia|2011-03-17|Before: Stone J

Pursuant to subsection 411(1) of the Corporations Act 2001 (Cth) (Corporations Act): (a) RP Data Limited ACN 087 759 171 (RP Data) convene a meeting (Scheme Meeting) of the holders of ordinary shares in RP Data (other than ordinary shares held by or for the benefit of CoreLogic Inc. (CoreLogic) and/or its subsidiaries) (RP Data Shareholders), for the purpose of considering, and if thought fit, agreeing (with or without modification) to a scheme of arrangement proposed to be made between RP Data and RP Data Shareholders (Scheme), being the scheme substantially in the form of the draft contained in Annexure "B" of the explanatory memorandum containing the explanatory statement in relation to the Scheme, being Exhibit "3" in these proceedings (Explanatory Memorandum). (b) The Scheme Meeting be held at 10.00 am (Sydney time) on 20 April 2011, at Level 9, 70 Pitt Street, Sydney, NSW 2000. (c) The Chairperson of the Scheme Meeting be Mr Ian Fraser and in his absence, Mr Edward Pretty as Alternate Chairperson. (d) The Chairperson appointed to the Scheme Meeting has the power to adjourn the Scheme Meeting in his absolute discretion. (e) All voting at the Scheme Meeting be by poll as declared by the Chairperson. (f) The explanatory statement in the Explanatory Memorandum for the Scheme be approved for distribution to RP Data Shareholders. (g) RP Data cause to be published on a website: (A) the Explanatory Memorandum including Notice of the Scheme Meeting and proxy form; and (B) a facility by which RP Data Shareholders can electronically lodge a proxy online. (h) RP Data place an advertisement in The Australian newspaper, substantially in the form of Annexure "A" to these Orders, on or before 21 April 2011 and RP Data shall otherwise be exempted from compliance with the requirement to publish such notice following the Scheme Meeting and prior to the second court hearing for approval of the Scheme pursuant to Rule 3.4(3)(a) of the Federal Court (Corporations) Rules 2000 (Cth).

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 223 of 2011

IN THE MATTER OF RP DATA LIMITED ACN 087 759 171 RP DATA LIMITED ACN 087 759 171

JUDGE: STONE J DATE: 17 MARCH 2011 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 By application under s 411(1) of the Corporations Act 2001 (Cth) filed on 25 February 2011, the plaintiff, RP Data Limited (RP Data), seeks orders for it to convene a meeting of the holders of its ordinary shares, other than those held by or for the benefit of CoreLogic, Inc (CoreLogic) or its subsidiaries (Scheme Shareholders). The purpose of the meeting is for the Scheme Shareholders to consider a Scheme of Arrangement (Scheme), and if thought fit to agree to the Scheme (with or without modification). Pursuant to the Scheme all of the Scheme Shares will be acquired by either: (a) CoreLogic Australia Pty Limited (CoreLogic Australia), an Australian incorporated proprietary company limited by shares; or (b) CoreLogic Information Solutions Holdings, Inc (CoreLogic ISH), a subsidiary of CoreLogic. 2 At the conclusion of the first court hearing on 14 March 2011 I made the orders sought by the plaintiff. These are my reasons for making those orders.

Evidence 3 The details of the Scheme were established by evidence tendered at the hearing including by the following affidavits and their exhibits, which were read in support of the application: Two affidavits of Michael James Field Parshall affirmed respectively on 25 February and 10 March 2011. Mr Parshall is a partner of Allen & Overy, the solicitors acting on behalf of the plaintiff in this proceeding; Affidavit of Graham Brian Sergio Mirabito, affirmed on 10 March 2011. Mr Mirabito is a director and the Chief Executive Officer of the plaintiff; Affidavit of Ian Harley Fraser affirmed on 9 March 2011. Mr Fraser is an independent director and Chairman of the plaintiff. He has agreed to act as chairman of the Scheme Meeting; Affidavit of Edward Noel Pretty affirmed on 8 March 2011. Mr Pretty is an independent director of the plaintiff. Mr Pretty has agreed to act as alternate chairman of the Scheme Meeting; Affidavit of Sebastian Stevens affirmed on 9 March 2011. Mr Stevens is a director and the authorised representative of BDO Securities (NSW-VIC) Pty Limited, the independent expert engaged by the plaintiff; and Affidavit of Jerald Lee Hoerauf sworn on 9 March 2011. Mr Hoerauf is the Executive Vice President, Corporate Development for CoreLogic, Inc and a director of CoreLogic Australia.

The Implementation Agreement 4 On 12 January 2011, the plaintiff and CoreLogic entered into a Scheme Implementation Agreement. A copy of the agreement was attached to the plaintiff's announcement of 12 January 2011. On 9 March 2011, the agreement was amended and restated to facilitate CoreLogic being able to elect which of CoreLogic Australia or Corelogic ISH, both of whom are parties to the amended and restated agreement, should be the entity to acquire the Scheme Shares (Acquirer Entity). The amendments did not alter the material terms and conditions upon which the parties intend to implement the Scheme. References in these reasons to the Implementation Agreement should be taken to refer to the Amended and Restated Implementation Agreement. 5 In his affidavit, Mr Mirabito explained why the Implementation Agreement provided for the Acquirer Entity to be one of two companies. It is intended that CoreLogic Australia acquire the Scheme Shares, however if the approval of the Foreign Investment Review Board (FIRB) is not received by the date of the second hearing then the shares will be acquired by CoreLogic ISH which is a US company entitled to the higher threshold applying to US Enterprises under the Foreign Acquisitions and Takeovers Act 1975 (Cth). As both companies are parties to the Implementation Agreement and to the Deed Poll the rights of Scheme Shareholders are equally protected in either case. 6 Clause 3.1 of the Scheme provides that it is subject to certain conditions which, except for the approval of the Court, must be waived or satisfied by 8.00 am on the date of the second court hearing. The conditions are clearly summarised in section 5 of the Scheme Booklet.

'No shop' and 'no talk' provisions 7 The Implementation Deed also contains exclusivity provisions that, during a defined exclusivity period, restrict the plaintiff and its representatives from encouraging or engaging with any proposal competing with the proposal put by CoreLogic. These obligations are common in schemes of arrangement such as the present Scheme. They recognise the commercial reality that a company such as CoreLogic wishes to protect the investment it makes in putting together a scheme proposal and not have that proposal used "as a stalking horse for a better one"; Re Arthur Yates & Co Ltd (2001) 35 ACSR 758 at [11] per Santow J. The protection given to the bidder must be proportionate in duration and extent and must not conflict with the directors' fiduciary obligations. 8 The period during which the restrictions apply is from 12 January 2011 to the earliest of three dates, namely, the Implementation Date, the termination of the Implementation Deed in accordance with its terms and 30 June 2011 (unless extended by the Court). The Implementation Date is defined as four business days after the Record Date or such other date as the plaintiff and CoreLogic agree. The maximum period for the exclusivity provisions to apply is therefore about six months. I accept the plaintiff's submission that this is a reasonable period and comparable to other schemes of arrangement: see In Re Arthur Yates at [3]; Re Dyno Nobel Limited [2008] VSC 154 at [26]; and Re Tower Australia Group Limited [2011] FCA 224 at [22]-[24]. 9 The 'no shop' and 'no talk' restrictions do not apply where a competing proposal might reasonably be expected to lead to a superior proposal and failing to respond would lead to a breach of fiduciary duty. CoreLogic is, however, given a period of three business days to make a matching bid to the competing proposal and successive modifications to it. 10 As described below, the restrictions, and the exceptions to them, are properly disclosed in the summary in the Scheme Booklet, and therefore I am satisfied that they do not present an obstacle to the Scheme's eventual approval by the Court.

The Scheme and the Scheme Booklet 11 The Scheme Booklet, which was exhibited to the affidavit of Mr Mirabito, provides detailed information concerning the Scheme. It is proposed that it constitute the explanatory statement for the Scheme for the purpose of s 412(1) of the Corporations Act and to be registered with the Australian Securities Investments Commission (ASIC) pursuant to s 412(6). The Booklet annexes copies of the Scheme, the Deed Poll, the Independent Expert's Report, the plaintiff's announcements to the Australian Securities Exchange (ASX) since 27 September 2010, the proposed Notice of Scheme Meeting and the plaintiff's Half-Year Report for the half-year ending 31 December 2010. A Summary of the Implementation Agreement is also annexed. 12 If the Scheme is approved by the requisite majority of Scheme Shareholders and by the Court, and if all other conditions precedent are satisfied or waived (see [6] above), all of the Scheme Shares will be transferred to the Acquirer Entity. Scheme Shareholders who are on the register of members of RP Data at 7pm on the eighth business day following the date on which the Scheme becomes effective (Record Date) will receive a cash payment of $1.65 (Scheme Consideration) for each RP Data share paid for by the CoreLogic group. 13 In addition it is proposed that RP Data will declare a special dividend of $0.05 per share which will be franked "to the fullest extent possible". This dividend is not part of the Scheme Consideration and its payment is not part of the Scheme. The letter in the Scheme Booklet from the Chairman of RP Data, Mr Fraser, advises that the cash payment that Scheme Shareholders will receive represents a premium of 57% over the closing price of $1.08 per share on 11 January 2011 which was the last trading day immediately before the announcement of the proposed Scheme. Other, more favourable, comparisons are also made. 14 CoreLogic is listed on the New York Stock Exchange. As at 31 December 2010 the company had US$447 million in addition to undrawn debt facilities of about US$300 million. CoreLogic ISH has had the largest shareholding in RP Data since 2006. As at 14 March 2011 it had approximately 40.2% of the issued share capital of RP Data. According to information in the Scheme Booklet the next largest shareholder at that date had 14.63% of the issued share capital. 15 The Chairman's letter also refers to the Independent Board Committee established to assess the proposed Scheme. The Committee members are the three independent directors, namely, Mr Mirabito, Mr Pretty and Mr Fraser. The letter states: The Independent Directors have given the CoreLogic Proposal careful consideration and believe that the CoreLogic Proposal represents a compelling premium to the historical trading price of RP Data shares and is a highly attractive outcome for Shareholders. In the absence of a Superior Proposal, each Independent Director unanimously recommends that RP Data shareholders vote in favour of the Scheme and intends to vote his Shares in favour of the Scheme. 16 The Scheme Booklet contains a list of questions and answers concerning aspects of the Scheme. There are many questions and the answers are quite detailed. By this device the Scheme Booklet explains aspects of the proposal that may not be apparent to some Shareholders and summarises information that is provided in more detail in other parts of the Booklet. 17 The Scheme Booklet lists key reasons that the Independent Directors have recommended that Shareholders vote in favour of the proposed Scheme and identifies the following: that the Independent Directors unanimously recommend the Scheme; the cash payments are substantially higher than the most recent trading price of the Scheme Shares and substantially above the analysts' price targets for the Shares prior to the announcement of the proposed Scheme; the Independent Expert's conclusion that the Scheme is fair and reasonable and in the best interests of Scheme Shareholders; see below at [26] the absence of a competing superior proposal; and the likelihood that the share price will fall if the Scheme is not implemented. 18 These advantages are explained in more detail in other parts of the Scheme Booklet. The Booklet also identifies potential disadvantages. These include: disagreement with the Independent Directors' recommendation; no longer being able to participate in benefits of being an RP Data shareholder; losing exposure to a business that may be "a proxy for the Australian property market"; the "tax consequences of the Scheme may not be preferable in individual circumstances; and belief that a superior proposal may emerge.

Options and performance rights 19 In his affidavit, Mr Mirabito refers to the existing options to acquire shares in RP Data. He deposes that RP Data has entered into cancellation agreements with each option holder whereby the options will be cancelled in return for payment of an amount determined on the advice of the financial adviser to the Independent Board Committee using the Black Scholes valuation methodology. Cancellation of the options and the subsequent payment is subject to and conditional upon the Scheme becoming effective. The arrangements for the cancellation of options are set out in the Scheme Booklet at 5.9. A table showing the consideration to be paid for each tranche of options is included. 20 Arrangements for the lapsing of performance rights on the implementation of the Scheme have also been negotiated. The Scheme Booklet states that: It is intended that key executives will be offered a cash-based retention bonus scheme under which CoreLogic will make cash payments conditional on the executive's continued employment for a period after the Scheme is implemented.

Staff Share Ownership Plan 21 The Scheme Booklet contains information about the participation in the Scheme of shares held under the Staff Share Ownership Plan of RP Data. Shares issued under this plan may not be disposed of within 3 years from the date of acquisition or on termination of employment with RP Data group whichever is earlier. The holders of these shares may vote at the Scheme Meeting and participate in the Scheme in the same manner as in respect of other shares. The Scheme Booklet states: Any holding locks to which such Shares are subject will be released prior to the Implementation Date (subject to the Scheme becoming Effective) to enable the Shares to participate in the Scheme.

Performance risk 22 The potential risk for Scheme Shareholders of non-performance by CoreLogic has been dealt with in the Scheme itself and in the Deed Poll executed by CoreLogic, CoreLogic Australia and CoreLogic ISH. The Deed Poll provides that the Scheme Consideration will be paid to each Scheme Shareholder "in accordance with the terms of the Scheme". The Scheme provides that payment of the Scheme Consideration is to be made into a trust account operated by RPA Data on trust for the purpose of paying the Scheme Consideration to the Scheme Shareholders. This payment is to be made before the Implementation Date on which the Scheme Shares will be transferred.

The deemed warranty and no encumbrance clause 23 The Scheme of Arrangement contains the usual deemed warranty and no encumbrance provisions. By the deemed warranty the Scheme Shareholders are treated as having warranted that on the date of the transfer the Scheme Shares will be "free from all mortgages, charges, liens, encumbrances, and interests of third parties of any kind" and that they have full power to sell and to transfer their shares to the Acquiring Entity. The clause is fully disclosed in the Scheme Booklet. 24 A clause to the effect of the deemed warranty was explained and approved by Lindgren J in APN News & Media Ltd (2007) 62 ACSR 400 at 412-413. His Honour's approach has been followed in numerous decisions of this Court. See for instance Re Sylvastate Limited [2011] FCA 211 at [24] Re Provet Holdings Ltd [2010] FCA 1388 at [14] and Re Adelaide Bank [2007] FCA 1582 at [33].

Proxies 25 The Scheme provides, at cl 8.5, that the proxy right in favour of the Acquiring Entity does not arise until the Scheme Consideration is provided. It thus ensures that the Scheme Shareholders retain full control of their shares until that time.

Independent Expert's Report 26 The Directors of RP Data engaged BDO Securities (NSW-VIC) Pty Limited (BDO) to review the proposed acquisition of shares under the Scheme and to provide an Independent Expert's Report. The Report is annexed to the Scheme Booklet. The Chairman's letter accurately summarises the conclusion contained in the Expert Report as follows: The Independent Expert, BDO Securities, has assessed the merits of the Scheme and concluded that the "Scheme is fair and reasonable and therefore in the best interests of [Scheme Shareholders]. 27 In reaching this conclusion the Independent Expert took into account the additional value that accrues to shares where 100% of the shares in a company are to be acquired, that is the premium for control. In assessing the premium for control, the Report took into consideration Australian public company acquisitions over the past three years and concluded that a premium in the range of 20% to 35% was appropriate here. 28 The Independent Expert explained in detail the process by which it assessed the value of the shares. It is not necessary to repeat that detail here. It is sufficient to note that the Report concluded the value (including the premium for control) is between $1.40 and $1.55 per share. On that basis the Share Consideration of $1.65 is considerably in excess of maximum value assessed by BDO, even ignoring the special dividend to be declared by RP Data. The report therefore concluded that the Scheme is fair and reasonable and consequently in the best interests of shareholders.

Special Dividend 29 As previously explained, it is intended that RP Data will declare a special dividend of $0.05 per share if the Scheme receives the necessary shareholder and Court approvals. In relation to this dividend the written submissions for the plaintiff draw the Court's attention to the requirements of s 254T of the Corporations Act in relation to the payment of a dividend. The submission is that the requirements of the section have been met and, if necessary, evidence in support of this position will be adduced at the second court hearing. That being so it is not necessary for me to address the issue at this stage. 30 I agree with the plaintiff's submission that to the extent that payment of the dividend could amount to financial assistance in the acquisition of shares under s 260A of the Corporations Act, the exception in s 260A(1)(a) will apply for the following reasons: It will not materially prejudice the interests of the company or its shareholders because … the Special Dividend will be fully funded by CoreLogic and the [Scheme Shareholders] will have voted in favour of the Scheme. Further … payment of the Special Dividend will not materially prejudice the ability of RP Data to pay its creditors. 31 RP Data has indicated that it will apply for a ruling from the Australian Taxation Office to confirm whether it will apply the anti-avoidance rules to prevent Scheme Shareholders from receiving the franking credits in respect of the dividend and whether the dividend will be considered as part of the Scheme Consideration. 32 The implementation of the Scheme is not conditional upon a favourable tax ruling however the issues are fully disclosed in the section of the Scheme Booklet that addresses taxation implications. There is clear advice in that section that the comments are of a general nature and that Scheme Shareholders should seek independent advice.

Verification of Scheme Booklet 33 Mr Mirabito has described the processes of the Due Diligence Committee that was established by RP Data to oversee the drafting of the Scheme Booklet. At paragraph 75 of his affidavit Mr Mirabito states: In reliance on the due diligence and verification process described above, and on the basis of the undertakings provided by the parties who have signed verification certificates, I am able to state that having made reasonable enquiries, to the best of my knowledge, information and belief, all the material statements in the Explanatory Memorandum, so far as they relate to R Data, are true and not misleading or deceptive and there is no omission of material information from the Explanatory Memorandum in relation to RP Data. 34 Evidence of a similar verification process in relation to CoreLogic information was given by Mr Hoerauf. I am satisfied that in each case the procedures have been comprehensive and thorough and that the process of verification provides an adequate basis for the deponents' respective assertions as to the accuracy of the statements in the Scheme Booklet.

Duty of Disclosure 35 In an application under s 411, the plaintiff has a duty of disclosure as described by Barrett J in Re Permanent Trustee Co Ltd (2003) 43 ACSR 601 at [7]: The fact that the application is ex parte is not without some significance. The absence of any defendant or contradictor sharpens the duty of the [Plaintiff]. While a case such as the present is distinguishable from one where an interlocutory injunction is sought in the absence of the defendant (in that there is here no defendant as such) I think it is fair to say that a [plaintiff] in this kind of situation, like [a plaintiff] ex parte for an injunction, carries the responsibility of bringing to the court's attention all matters that could be considered relevant to the exercise of discretion. 36 In accordance with this duty the plaintiff drew to the attention of the Court aspects of the proposed Scheme that have been discussed above. For reasons given above, I accept that none of these provisions provide an obstacle to the Court's approval, in due course, of the proposed Scheme.

Evidence necessary for a first court hearing 37 I am satisfied from the evidence before me that the requirements necessary to be proved at a first court hearing in relation to an application under s 411(1) of the Corporations Act have been met. In particular I am satisfied that the plaintiff is a Part 5.1 body, that the proposed Scheme is an "arrangement" within the meaning of s 411, that Mr Fraser has consented to act as chairman of the meeting and Mr Pretty has consented to act in his absence. 38 I am satisfied that the Scheme is bona fide and properly proposed and that ASIC has been given an opportunity to examine the proposal and adequate notice of the first court hearing date. The plaintiff has tendered a letter dated 14 March 2011 from ASIC stating that it does not propose to appear at the first court hearing or to oppose the Scheme at that time.

Conclusion 39 On the basis of the evidence tendered by the plaintiff and for the reasons given above, I was satisfied that the orders sought by the plaintiff should be made. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.

Corporations Act 2001(Cth)ss 411(1), 412

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