Takeovers Panel Decision in Relation to Ballarat Goldfields

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The Panel advises that it has made a declaration of unacceptable circumstances in relation to a break fee that Ballarat Goldfields NL (BGF) agreed to pay to Rexadis Pty Ltd. The Panel has ordered that BGF not pay the break fee, and that Rexadis not acquire the shares which are the subject of the break fee, nor any other benefit in substitution for the break fee.

The Panel has also postponed the meetings at which shareholders of BGF are to vote on the competing proposals from Rexadis, RFC Corporate Finance Ltd and Republic Gold Ltd. The Panel postponed the meetings for seven days to 4 June, 2002.

BGF granted the break fee to Rexadis (a company associated with past or present officers of BGF) on the afternoon 6 February 2002. Prior to BGF's decision, RFC had advised BGF that it would be sending, that afternoon, an alternative proposal to BGF that "would be superior" to the Rexadis proposal. The break fee agreement was an extension of an earlier agreement between BGF and Rexadis in relation to an proposal by Rexadis to acquire the core gold assets of BGF. The initial agreement was made on 3 August 2001.

Under the break fee, BGF agreed to issue to Rexadis shares in BGF equal to 14.9% of the BGF shares on issue on the day the Break Fee shares would be allotted, less the number of shares which were issued to Rexadis as a placement on 2 April 2002.

The Panel made no adverse finding on the intentions or good faith of the directors of BGF. However, the Panel considered that the break fee was likely to have a coercive effect on the decision of BGF shareholders when they consider the three alternative proposals for the future of BGF. The Panel considered it unacceptable that the shareholders of BGF might be forced to allow Rexadis to acquire a substantial interest in BGF as a cost of rejecting the Rexadis proposal to sell BGF's gold assets to Rexadis.

The Panel considered BGF shareholders would now need additional time to consider the three competing alternatives without the pressure of the break fee.

The sitting Panel is Chris Photakis (sitting President), Michael Burgess and Meredith Hellicar.

The Panel will post the reasons for its decision on its website when finalised.

Nigel Morris
Takeovers Panel
Ph: +61 3 9655 3501