Australia: Judge requires from Coopers’ “takeover war” participants more information
Alan Goldberg, the IF Justice wants to ensure that Coopers Brewery shareholders are properly informed before they vote on whether to kill off Lion Nathan's A$352 million takeover offer, then he will ensure that the explanatory memorandum doesn't go out until the brewer's auditor, KPMG, has established a "fair value" for the company's shares, so that it can be included in the document, The Australian reported on October 12.
This matter should be possible because it's now more than two weeks since a number of shareholders sought to exercise their pre-emptive rights and buy 6000 shares that a shareholder, Barry Schrapel, had agreed to sell to Lion Nathan at its bid price of A$260 a share. All but one of those shareholders have exercised their right to substitute a "fair value", fixed by Coopers' auditor KPMG, for the price nominated by Schrapel.
The brewer Lion Nathan went to court after the directors called a shareholders meeting for October 20, following a requisition from shareholders owning more than 5 % of the company, seeking to amend the constitution to prevent Lion Nathan's bid from proceeding.
It sought a declaration that the proposed changes would not bind existing shareholders unless they agreed to them in writing, because it would increase restrictions on their right to transfer Coopers shares, and to injunct the meeting until after shareholders had been provided with additional information, including the fact that two years ago Coopers had bought back shares at A$45.01 a share, the fair market value set by the auditor, and in the 3 1/2 years prior to that at A$16.27 a share fair value, also set by the auditor.
In a hard-hitting judgement in the Federal Court yesterday, Goldberg said he was satisfied there was a serious question to be tried that the explanatory memorandum sent with the notice of meeting was misleading and did not constitute a full and fair statement of the matters to be put to the shareholders.
An additional statement containing additional information would not do; the directors had to start again and come up with a consolidated memorandum.
On October 11 Coopers reacted to the injunction by declaring that the meeting would be postponed until after the directors had released the target's statement in relation the Lion Nathan bid, which would spell out their reasons for recommending rejection of the offer, and the Full Court of the South Australian Supreme Court decides Lion Nathan's appeal against a ruling that Kirin Brewery's purchase of a 46 % shareholding represented a change in control of Lion Nathan. The appeal is before the court and a decision is expected before October 20.
Coopers shareholders will now receive the target's statement and the Coopers board will be forced to address the issue of the true value of Coopers shares.
Goldberg was critical that the memorandum did not contain an explicit statement that the effect of the resolutions proposed by some Coopers shareholders would be to kill off the Lion Nathan bid and that it was "disingenuous and not a full or fair explanation" to describe the effect as "deleting all references to Lion Nathan from the constitution".
Likewise, the section which purported to explain the implications of passing the resolutions "lacked fullness and fairness". He said that although the directors had stated they made no recommendation as to how shareholders should vote, in effect four of the directors had made a de facto recommendation to vote for the proposal, thus bringing Lion Nathan's bid to an end, by stating that they intended to do so.
By taking the stance they did it was arguably misleading not to include some of the information which would be required in the target's statement, although Goldberg did not agree they had to supply all of that information. He said the proper characterisation of the issue for the shareholders was: did they want to keep open the opportunity to receive the Lion Nathan bid, or not? If so, the should reject the resolution; if not, they should vote in favour.
A basic issue underlying those questions was the value their shares would have if they were to forego the opportunity to consider the Lion Nathan bid. They could see they could get A$260 a share from Lion Nathan but were not told what the consequences or effect was for the value of their shares if the offer was no longer open to them.
Coopers told the court that the directors were not in a position to say what price the auditors might fix their value at once requested to do so.
What Goldberg didn't allude to, but what is known, is that a month ago Coopers put KPMG on a retainer and told it to undertake preparatory work to establish a fair value. Moreover, it's now more than two weeks since the buyers for Schrapel's shares indicated that they wanted KPMG to fix a "fair value". The company told Schrapel it didn't know how long KPMG would take, but independent expert's are commonly required to prepare their reports in takeover situations within four weeks.
Given that the meeting is unlikely to be held for a further six weeks or so it is probable KPMG will have concluded its valuation before that time. Significantly, unlike earlier occasions, this time around the "fair value" will be established against a background that there is a willing buyer at A$260, prepared to take all of Coopers shares.
In the past those valuation reports have not been released, but it's strongly arguable that this time it will be required to be included in the target's statement, to ensure that shareholders have all the information they require to enable them to take an informed decision.
Înapoi
(libra 0.7686 sec.)