SIMEON WINES LTD No. SCCIV-02-53 [2002] SASC 204 (21 June 2002)

"1. That the plaintiff shall summon and convene a meeting ("the Meeting") of all of the members of the plaintiff for the purpose of considering, and if it thought fit, agreeing (with or without modification) to a Scheme of Arrangement to be made between the plaintiff and its members the terms of which are set forth in an [explanatory memorandum annexed to the order]...

2. That the Meeting be held on 14th June 2002 at the Adelaide Convention Centre...

3. That the Meeting be convened by sending on or before 15 May 2002;

(i) a written notice in the form or to the effect of the Notice of Meeting set forth in the document annexed [to the order which was a notice convening the Meeting]...

(ii) The form of proxy, the form of which is set forth in the document, [also annexed to the order].

4. That each Notice sent to convene the Meeting should be accompanied by the following:

(i) a copy of the Explanatory Statement... subject to the correction of typographical errors and the inclusion of information that cannot be established prior to the sealing of the order...

(ii) such additional information as ought to be given to members of the plaintiff in relation to any event which may occur after the making of this order and before the despatch of the Notice.

5. That... the Meeting be convened and conducted in accordance with the Constitution of the plaintiff.

6. That Mr John Gilbert Branson, or failing him Mr Neil Ronald MacKenzie, be the Chairman of Meeting."

That application and that order are the initiating proceedings in relation to an application under s411(6) of the Act for the approval of this Court to a compromise or arrangement under s411(1) of the Act.

The plaintiff has, for the purpose of this application, relied upon an affidavit of Mr Noack, company secretary of the plaintiff. It has also relied upon oral evidence from Mr Noack to supplement that affidavit. Mr Noack has deposed that the meeting was convened as ordered at 10.30 am on Friday, 14 June 2002 (his affidavit wrongly refers to July) pursuant to an order of this court to consider the scheme of arrangement proposed to be made between the company and its members. He has deposed to various differences in the explanatory statement from those which appeared in the explanatory statement which was annexed to the affidavit upon which the application was made for the convening of the meeting. Those differences are immaterial.

Mr Noack was present during the meeting and he has declared that the following motion was submitted to the meeting and passed:

"The motion is pursuant to and in accordance with s411 of the Corporations Act, the scheme of arrangement proposed to be entered into between the company and its ordinary shareholders as more particularly described in the explanatory statement which accompanies a notice convening this meeting was agreed to."

He has also deposed that 1,945 members representing 53,527,429 shares were present and voted either in person or by proxy. Of the members present in person or by proxy 1,926 members voted 53,397,944 shares in favour of approving the scheme of arrangement. That number represented 99.02 per cent of all members present and voting at the meeting, and 99.76 of the total nominal value of all shares represented and voted at the meeting. The motion, of course, was passed.

The motion was passed by the requisite majority. Section 411(4)(a)(ii) of the Act provides that the resolution has to be passed by 75 per cent of the votes cast on the resolution. That percentage has been exceeded.

I am satisfied from Mr Noack's oral evidence that proper notice of the meeting was given to the members. I am satisfied that the meeting was convened and held in accordance with the order made by Judge Burley on 7 May 2002.

This application is made as a consequence of the approval by the members of the scheme of arrangement. It is necessary that this court grant its approval to the scheme before the scheme can have an effect. The court's approval involves the court being satisfied first, that all the procedural matters have been complied with, and secondly that the scheme of arrangement is fair and reasonable to the members in a general sense.

The court is precluded, however, from approving a scheme of arrangement unless it is satisfied that the scheme has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6, or there is produced to the court a statement in writing by ASIC that it has no objection to the compromise or arrangement.

In this case the plaintiff has produced to the court a statement in writing by ASIC stating that it has no objection to the compromise or arrangement. This court is therefore not precluded from approving the scheme of arrangement, but nevertheless the court still retains a discretion to refuse to approve the scheme of arrangement if it believes the scheme of arrangement is not fair and reasonable to the members.

The plaintiff is a public company, as is Brian McGuigan Wines Limited. Both companies are quoted on the Australian Stock Exchange (ASX). The scheme of arrangement proposes that scheme shares will be issued and transferred to Brian McGuigan Wines Limited, and Brian McGuigan Wines Limited will issue to the holders of Simeon ten shares for each 16 shares held by Simeon shareholders. The new Brian McGuigan Wines Limited shares will be issued and allotted to scheme shareholders on the terms set out in the Brian McGuigan Wines Limited Constitution. The end result of the scheme is that the applicant will become a subsidiary of Brian McGuigan Wines Limited.

The explanatory memorandum shows that the scheme has been proposed, for the purpose of advantaging the shareholders of both existing companies. It is the view of the existing directors of both companies that a merger of the two companies would benefit the existing shareholders of both companies, in particular, by increasing the earnings per share attributable to the Simeon Wines Limited shareholders in the merged group in the 2003 financial year.

The companies which operate in the wine industry will, on a merger, become the fourth largest wine company listed on the ASX by share market capitalisation.

Simeon has obtained a report, as it is obliged to do, from an independent expert. The expert offered the opinion that the proposed scheme to facilitate the merger of Simeon and McGuigan is, on balance, in the best interests of the shareholders of Simeon. The reasons for that opinion are set out in the independent expert's reports, which were provided to the members of Simeon prior to the meeting which was convened by order of this Court.

I am satisfied on the evidence presented to me that the proposed scheme of arrangement is fair and reasonable to the shareholders of Simeon Wines Limited and, as the independent expert's report opines "in their best interests".

There are a number of conditions precedent to the implementation of the scheme which are set out in para 3.1 of the explanatory memorandum. I am satisfied that except for the order to be made by this Court all condition precedents have been satisfied. I'm satisfied of that because of the certificate of Mr Noack dated 21 June 2002 together with the affidavit of Mr Jonathan David Swaine, a solicitor employed in the firm of Clayton Utz, solicitors for Brian McGuigan Wines Ltd.

In those circumstances I am satisfied that the procedural matters have been complied with and that the purpose of the exercise of my discretion the proposed scheme of arrangement is fair and reasonable to the existing members of Simeon Wines Ltd.

The merger will affect persons who are resident in the United States. The issue by Brian McGuigan Wines Ltd of its shares to scheme shareholders who are United States citizens or residents pursuant to the proposed scheme will be in breach of the registration requirements of the Securities Act 1933, (United States and Federal) unless the issues fall within an exemption. Brian McGuigan Wines Ltd will seek to bring its offer in issue of shares to scheme shareholders who are United States citizens or residents within the exemption which is provided for in s 3A(10) of Securities Act (supra).

The requirements of that Act would be met if the following matters occur:

1. The securities, the subject of the exemption in the scheme, are issued in exchange for other securities.

It is the fact that the scheme of arrangement does contemplate that the securities which would form part of the exemption will be issued in exchange for other securities.

2. The issuer [will] advise the court whose order will be relied upon, that the issuer itself will rely on s 3A (10) on the basis of the court's approval.

Mr Bagot, who appeared today on behalf of Brian McGuigan Wines Ltd, has advised this court that the order which I will make today will be relied upon by Brian McGuigan Wines Ltd to seek an exemption under s 3A (10) of the Securities Act (supra).

3. The court has sufficient information before it to determine the value of the securities to be surrendered and those to be issued in the proposed transaction.

This court has been fully informed of the value of the securities to be surrendered and the valuation placed upon the securities to be surrendered, and the expected valuation to be placed on those to be issued in the proposed transaction. That information is contained in the explanatory memorandum which has been tendered to this court as an exhibit to Mr Noack's affidavit.

4. The court holds a hearing to determine whether the terms and conditions of the transaction are fair to all those who will receive securities and approval of the terms of the exchange.

It is an obligation in an application under s 411(6) for this court to consider the fairness and reasonableness of the proposed scheme of arrangement. I have done that and in those circumstances there has been a hearing of the kind referred to in the fourth condition.

5. The hearing is open to everyone to whom the securities would be issued in the proposed exchange and a notice of the hearing in appropriate terms has been provided in a timely manner.

Rule 3.4 of the Federal Court (Corporations) Rules 2000 (Cth) (the Rules) requires that advertisements be placed in accordance with form 6 of the Rules and published in accordance with Rule 2.11 of the Rules at least five days before the date fixed for the hearing of the application.

Mr Noack has exhibited to his affidavit a notice appearing in The Advertiser newspaper, which is a newspaper circulating in this State, and a notice appearing in The Australian newspaper, which is a newspaper circulating throughout Australia, which conforms with Rule 6. All members have therefore been given notice of the hearing in the appropriate terms and in accordance with the Rules of this Court.

The hearing has been heard in public, but nobody, apart from Simeon Wines Ltd, Brian McGuigan Wines Ltd and ASIC have appeared.

It is not for this Court to determine whether the matters to which I have referred to will satisfy the appropriate regulators in relation to the exemption sought under the Securities Act (supra), but these reasons will be available to any regulator who might wish to rely upon them if any application is made.

There will be an order that the scheme of arrangement made between the plaintiff and its members, the terms of which are set forth in the document annexed hereto, which is a true copy of Chapter 13 of the explanatory statement exhibited to the affidavit of Michael Heinz Noack, sworn 18 June 2002, and marked MHN1, at the meeting convened pursuant to the order made by this honourable court on 8 May 2002 be approved.