Panel Publishes Reasons for Varying ASIC Decision in Federation Bid for Pinnacle

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The Takeovers Panel has published its reasons for varying a decision by ASIC in relation to an application by Federation Group. The application was to modify the Corporations Law to allow Federation to exercise options in Pinnacle VRB which would increase Federation's voting power above the 20% threshold. The Panel decided the application on 8 February. It received it on 25 January.

Under the original relief granted by ASIC, Federation was allowed to exercise the options and acquire the shares, but was required to sell within 14 days, any shares it acquired by exercising the options that would give it more than 20% of the voting rights in Pinnacle. The Panel has removed the requirement to sell the excess shares.

Federation had made takeover offers dated 2 October 2000, for all of the shares in Pinnacle, and for the two series of listed Pinnacle options. Under its bids, Federation acquired 10.6% of the voting shares in Pinnacle and 50% and 5% of the two sets of options. One series of the options expired on 1 February 2001, the second on 31 January 2002. Federation would have an interest in between 18.92% and 24.45% of the voting shares of Pinnacle if it exercised all of the options.

The Panel accepted the proposition that the market, and Pinnacle shareholders, would have expected Federation to have been able to exercise the options, and to have exercised them, especially given that the options were deep in the money, and one series was to expire shortly after the bid closed.

The Panel decided under the circumstances of this application that it was reasonable to allow Federation to retain the excess shares because:

  • ASIC's policy, including the requirement for announcement of intention prior to the bid, was not public at the time of Federation's bid;
  • the Panel accepted the view that the market expected Federation to be able to exercise the options; and
  • there appeared no evidence that shareholders and optionholders were unequally or unfairly treated.

The sitting Panel was Les Taylor (sitting President), Trevor Rowe, Maxine Rich.

The reasons are on the Panel's website at

Nigel Morris
Director, Corporations and Securities Panel
Level 47 Nauru House, 80 Collins Street, Melbourne VIC 3000
Ph: +61 3 9655 3501