The Panel advises that it has today reached a decision in relation to the application concerning the announcement by Magic Millions League Pty Ltd that its proposed takeover offer for the Brisbane Broncos Ltd will not proceed (Brisbane Broncos No.1) and the cross-application concerning a condition of BB Sports Pty Ltd takeover offer for the Brisbane Broncos Ltd (Brisbane Broncos No.2).
The effect of the decision is that the BB Sports bid will proceed, but with an alteration to a condition. Magic Millions is under an obligation to continue with its bid by 29 January, and its failure to do so by that time may give rise to unacceptable circumstances and to liability in damages. The Panel has decided, however, not to make orders requiring it to proceed.
Both applications concern sections 631 and 670F of the Corporations Act (Act), which apply to a person who announces that they will make a takeover bid. They require the person to make that bid within 2 months, unless they show that it would be unreasonable to require them to bid, because of a change of circumstances which the person did not cause, or because of pre-existing circumstances which had not been disclosed and of which the person was unaware.
Brisbane Broncos No.1
Based on the policy of those sections and the particular facts of this matter, the Panel considers that Magic Millions is obliged to dispatch offers to Brisbane Broncos shareholders in accordance with its announcement of 29 November 2001. The Panel considers that unacceptable circumstances are likely to exist, and that it will be prepared to make a declaration to that effect, if Magic Millions fails to dispatch its offers by 29 January 2002 (in accordance with the timetable set out in the Act). Magic Millions may also incur liability in damages to persons who acquired shares in Brisbane Broncos in reliance on its announcement. It would not be practical, however, to compel Magic Millions to take the steps needed to make that bid.
The Panel does not consider that the grounds relied upon by Magic Millions in support of its decision not to proceed with its bid were of the kind contemplated by section 670F of the Act or ASIC Practice Note 59. By making its announcement, Magic Millions undertook the risk of having to buy shares in Brisbane Broncos, without obtaining control. The bid later announced by BB Sports did not substantially alter this situation. It was open to Magic Millions, when it announced its intention to bid for Brisbane Broncos, to protect its position by including a minimum acceptance condition or a condition that no higher bid be made.
Brisbane Broncos No.2
During the course of these proceedings, ASIC made a further application to the Panel. It sought a declaration of unacceptable circumstances in relation to a condition of the BB Sports bid. Under that condition BB Sports could abandon its bid, if any act of ASIC or the Panel or any other event took place before the BB Sports bid closed, which would permit Magic Millions to withdraw its bid or make its bid otherwise than in accordance with the Act.
The Panel considers that the parts of the condition relating to ASIC and the Panel performing their proper functions under the law are unacceptable and have the potential to fetter the performance of each regulator's functions. Accordingly, the Panel considers that BB Sports should dispatch its offers in accordance with its announcement of 14 December but omitting these parts of the condition or waiving the condition.
Like Magic Millions, BB Sports is committed to proceed with its bid, unless something makes it unreasonable to expect it to do so. The Panel considers that it would be unacceptable for BB Sports to rely on its condition being triggered by Magic Millions' abandonment of its bid. The decision in Brisbane Broncos No.1 means that none of these events permits Magic Millions to withdraw. If anything had happened which permitted Magic Millions to withdraw, it was the making of BB Sports' bid, an event on which BB Sports cannot rely, as it was entirely within BB Sports' control.
The Panel is advised that BB Sports will revise the condition to a form that is acceptable to the Panel while ensuring that BB Sports will dispatch offers in accordance with its obligations under section 631(1) of the Act.
The sitting Panel in this matter is Ms Jennifer Seabrook (sitting President), Mr Denis Byrne (sitting Deputy President) and Mr Peter Young.
The Panel's reasons for decision will be posted shortly on its website www.takeovers.gov.au
Counsel, Takeovers Panel
Level 47 Nauru House, 80 Collins Street, Melbourne VIC 3000
Ph: +61 3 9655 3553