The Takeovers Panel Five Years On

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The Takeovers Panel - An Update 2011

March 2011

Slide 1 - The Takeovers Panel - An Update 2011

 

Topics

  1. Purpose
  2. Reminder of Panel background
  3. The market last year
  4. Overview of Panel's process & work
  5. What's new
  6. Discussion

Slide 2 - Topics

 

Part 1 - Purpose

Slide 3 - Purpose

 

Purpose of today's session

  • Meet with practitioners
  • Explain some recent developments
  • Discuss issues
  • Give feedback

Slide 4 - Purpose of Today's Session

 

Part 2 - Reminder of Panel background

Slide 5 - Reminder of Panel Background

 

Panel organisation

Slide 6 - Panel Organisation

 

Welcome Kathy Farrell

We welcome Kathy Farrell as our new President

Kathy was previously a member from 2001 to 2010

She has had considerable experience as a lawyer in Mergers and Acquisitions and policy

Slide 7 - Welcome Kathy Farrell

 

Panel members - by profession

Profession

Number of
Panel Members

Banker 10
Corporate 14
Finance 4
Lawyer 25

Slide 8 - Panel members - by profession

 

Panel members - by location

Location

Number of
Panel Members

Melbourne 21
Sydney 19
Perth 6
Brisbane 4
Adelaide 2
New Zealand 1

Slide 9 - Panel members - by location

 

Part 3 - The market last year

Slide 10 - The market last year

 

Control transactions 2008-2010

  Schemes Takeovers
2008 48 63
2009 24 46
2010 40 55

Slide 11 - Control transactions 2008-2010

 

Deals by sector in 2010 - industries

Sector Percent
Metals & Mining 38
Energy 17
Financials 10
Capital Goods, Chemicals & Materials 10
Telecoms & Media 6
Healthcare 4
Other 15

Slide 12 - Deals by sector in 2010 - industries

Type of consideration

 

2009

2010
  Percent Percent
Scrip 53 23
Cash 36 62
Cash/Scrip 11 15

Slide 13 - Type of consideration

 

Regulatory involvement 2009-2010

 

2009

2010
Takeovers Panel 19 14
FIRB 25 27
ACCC 10 8

Slide 14 - Regulatory involvement 2009-2010

 

Part 4 - Overview of the Panel's process & work

Slide 15 - Part 4 Overview of Panel's Process & Work

 

Panel process

  • Procedural rules – new rules effective 1 June 2010
  • Media canvassing and confidentiality
  • Applications:
    • Length – limit in rules
    • Attachments – size, limit number, extract relevant parts, properly identified

 

How an application runs

  • Choosing 3 Panel members - conflicts
  • Process letter/Declaration of interests
  • Conduct proceedings?
  • Brief, submission, rebuttals
  • Conferences
  • Decision, reasons and media releases

Slide 17 - How an application runs

 

Procedural changes

  • Naming legal and financial advisers to parties in reasons – aids market transparency
  • Website upgrade:
    • GN 3 Making Rules and GN 10 Public Consultation – withdrawn
    • More discussion on processes, how quickly applications move, statistics, summary of takeover provisions
  • ASIC referrals – more public
  • Possible consultation on GN 4 re undertakings as to damages
  • Post matter reviews - earlier

Slide 18 - Procedural changes

 

Panel applicants

  2000-2010
(350 applicants)
2010
(26 applicants)
  Percent Percent
Bidder/acquirer 37 27
Target 31 19
Shareholder/other 24 50
Rival bidder 6 0
ASIC 2 4

Slide 19 - Panel applicants

 

Panel applications by year

Year

Number of
Applications

2000 22
2001 33
2002 22
2003 49
2004 33
2005 26
2006 36
2007 34
2008 37
2009 32
2010 26

Slide 20 - Panel application by year

 

Panel matters by decision

Average days from Decision to publication of Reasons

Year Average Days
2000 11.5
2001 18.8
2002 24.2
2003 17.1
2004 16.4
2005 15.8
2006 16.5
2007 14.4
2008 9.8
2009 13.4
2010 13.3

Average days from Application to Decision

Year Average Days
2000 20.9
2001 31.8
2002 55.5
2003 84.8
2004 28.9
2005 47.3
2006 92.7
2007 30.0
2008 7.4
2009 4.6
2010 5.2

Slide 21 - Panel matters by decision

 

Part 5 - What's new

Slide 22 - Part 5 What's New

 

Nearly finished the GN rewrites

Issued a revised GN 1 – Unacceptable circumstances

  • Provided some guidance on reverse takeovers

Consulted on three Guidance Notes rewrites:

  • GN 6 – Minimum bid price
  • GN 13 – Broker Handling Fees
  • GN 15 – Trust scheme mergers
  • Should finalise GNs in the next month

Slide 23 - Nearly finished the GN rewrites

 

Frustrating action

Transurban Group [2010] ATP 5

  • An announced rights issue did not frustrate scheme proposals
  • The proposals did not constitute potential bids because they were proposed schemes that were rejected
  • The revised proposal was not conditional on the rights issue proceeding

Amendments to GN 12 – Frustrating action

  • Acknowledging Transurban
  • Allowing for a limited form of private ‘put-up or shut-up’ regime

Slide 24 - Frustrating Action

 

New policy

GN 22 – Recommendations and Undervalue Statements

  • Follows Origin Energy Limited 02 [2008] ATP 23 and Tully Sugar Limited [2009] ATP 26
  • Allows a holding statement (eg ‘wait for more information’)
  • The reasons for an undervalue statement should be clearly disclosed
  • Directors must provide shareholders with some guidance as to the value of the target

Slide 25 - New Policy

 

New Issues - Association

The Panel has considered a number of association applications in the last 12 months:

Matter name Conduct on association? Declaration of UC? Orders?
Mesa Minerals Limited [2010] ATP 4 Yes Yes Divestment, resticting voting, disclosure
Mesa Minerals 01R [2010] ATP 6 Yes Declaration varied Set aside original orders as parties had accepted into bid
Vesture Limited 02 [2010] ATP 15 No n/a n/a
Viento Group Limited [2011] ATP 1 Yes Yes Divestment, resticting voting, disclosure
Brockman Resources Limited [2011] ATP 3 Yes No n/a

CMI Limited [2011] ATP 4
CMI Limited 01R [2011] ATP 5

Yes
No

Yes
Declaration stands

Divestment, disclosure
Orders stand

Slide 26 - New Issues - Association

 

New Issues - Association

Association matters at March 2011

Association Matters
Not conduct 19
Association found 18
Conduct but no association found 15

Slide 27 - New Issues - Association

 

Association - questions for future policy?

Use rebuttable presumptions in relation to association?

  • UK or Hong Kong models?
  • Family relationships?
  • Other categories?
  • Indicators of association rather than rebuttable presumptions?

Should the Panel expect a certain standard for association applications?

Slide 28 - Association - Questions for Future Policy?

 

GN 7 - Overview

Lock-up device Panel guidance
Break fees
  • 1% of equity value of target
  • Break fee within guidelines may still be unacceptable (eg if triggers unreasonable)
No-shop
  • Longer period, more anti-competitive
  • Generally does not need fiduciary out
No-due-dilligence & no-talk
  • Fiduciary out generally required
  • May be less anti-competitive if auction process conducted first
Notification obligations & matching rights
  • Increase the anti-competitive effect of restrictions

Slide 29 - GN 7 Overview

 

RHD - Deal protection measures

  ...deal protection measures need to be subject to certain basic structural requirements to ensure that they do not unreasonably hinder competition for control of the target company.

Ross Human Directions Ltd [2010] ATP 8 at [28]

  • The Panel queried the terms of the deal protection measures in the scheme implementation agreement
  • Parties undertook to amend the agreement to address the Panel’s concerns

Slide 30 - RHD - Deal Protection Measures

 

Deal protection measures - outcome?

  • Not necessarily a "precedent"
  • Cap on liability?
  • Period of matching rights?
  • Drafting?
  • Are deal protection measures evolving too far?
  • What is the onus on Target directors?
  • Experience in other jurisdictions - UK

Slide 31 - RHD - Deal Protection Measures

 

Independent expert reports

We think [the expert’s] report was long and would not have been clear to shareholders. In the instances where matters were raised, this was only remedied by the corrective disclosure we required. While an expert report is often technical, which can make it difficult to simplify, it would be more helpful to shareholders if written with them clearly in mind...

Northern Energy Corporation Limited [2011] ATP 2 at [112]

Slide 32 - Independent Expert Reports

 

Other issues before the Panel

Representation of directors’ independence

North Queensland Metals Limited 02 [2010] ATP 7
Gladstone Pacific Nickel Limited [2010] ATP 12

Downstream acquisitions

Leighton Holdings Limited 01, 02 and 03 [2010] ATP 13
Leighton Holdings Limited 02R [2010] ATP 14

Interpretation of a force majeure condition

NGM Resources Limited [2010] ATP 11

Slide 33 - Other issues before the Panel

 

Law reform

A number of proposals for reform being ventilated, including:

  • Members’ schemes
  • Increasing takeover threshold
  • Abolishing or reducing “creep”
  • Abolishing prohibition for escalators
  • Including long equity derivative positions in substantial holding disclosure and the calculation of voting power for the purposes of s606
  • Timetable reforms

Slide 34 - Law Reform

 

Takeovers Panel Book

  • The Takeovers Panel and Takeovers Regulation in Australia
  • Edited by Ian Ramsay
  • Published by Melbourne University Publishing
  • Chapters written by practitioners

Slide 35 - Takeovers Panel Book

 

Thank you.

Discussion

Slide 36 - Discussion