BreakFree Limited 01 - Resolution of Proceedings Relating to Breakfree Limited

Release number


The Panel advises that the proceedings (the Proceedings) arising from the application (the Application) made by S8 Limited (S8) on 11 July 2003 in relation to the affairs of BreakFree Limited (BreakFree) have been resolved. The Proceedings were resolved following the termination by BreakFree on 12 August 2003 of certain agreements as contemplated by undertakings voluntarily provided by it to the Panel.

Allegations concerning the Franchising Transactions

The Franchising Transactions

S8 alleged that BreakFree's entry into certain sale and franchise transactions (the Franchising Transactions) amounted to unacceptable circumstances in accordance with the Panel's frustrating action guidance note because they could frustrate S8's announced takeover bid for BreakFree (S8 Bid).

The Franchising Transactions involved the sale by BreakFree of the management rights (Management Rights) to four of the holiday properties under its management. Each of the sales was subject to a condition precedent that the purchasers (the Franchisees) enter into a franchise agreement (together the Franchise Agreements) with BreakFree in relation to the Management Rights so that the relevant properties would continue to be operated under a BreakFree franchise.

After considering a number of submissions from the parties, the Panel decided that the following aspects of the Franchising Transactions required further investigation before the Proceedings could be determined:

  1. BreakFree's intention to include a right in the Franchise Agreements (which were still being negotiated during the Proceedings) which could result in the Management Rights being alienated by BreakFree without it retaining the benefit of the Franchise Agreements if the S8 Bid succeeded. BreakFree submitted to the Panel that the value of the Franchise Agreements had been a factor in determining the sale price for the Management Rights; and
  2. the question of whether the Franchising Transactions were entered into in the ordinary course of BreakFree's business, and were arms length transactions.

The Panel requested that the parties provide it with further additional information in relation to these aspects.

The resolution of the Proceedings

Whilst indicating that it could, and would (if necessary), provide the additional information requested by the Panel, BreakFree responded by making a proposal which it believed would remove the need for further investigation of the matters identified by the Panel. BreakFree's proposal (which was provided voluntarily) was that it would provide undertakings to the Panel to use its best endeavours to terminate the Franchising Transactions within a timeframe set by the Panel.

BreakFree advised the Panel that it was proposing the resolution because of the additional time, costs and resources that would be required if the Proceedings were to continue, particularly in order to provide the additional information requested by the Panel. BreakFree was also concerned about the fact that the Panel's request for further information could result in the provision of confidential information of BreakFree to S8 (which is a competitor of BreakFree).

The Panel decided that if the Franchising Transactions were terminated there would be no need for it to conduct any further investigation, or to obtain any further information from the parties. Therefore, the Panel accepted the undertakings volunteered by BreakFree.

As contemplated by the undertakings, BreakFree terminated the Franchising Transactions (without any liability to, or obligation of, BreakFree arising as a result of those terminations) on 12 August 2003.

Other allegations in the Proceedings

The Panel decided that if there were any misleading aspects of BreakFree's announcements in relation to the properties under its management, they were resolved by BreakFree's ASX announcement of 18 July 2003.

The Panel did not conduct proceedings in relation to the allegations made by S8 concerning the acquisition of certain shares in BreakFree.

Conclusion of the Proceedings

In concluding this matter, the sitting Panel stressed the need for transactions which are entered into in the context of a takeover bid to comply with the letter and spirit of relevant Panel policies and to be fully and promptly disclosed to the market.

The Panel concluded the Proceedings on the basis set out above. The Panel will post its full reasons for this decision on its website ( when they have been settled.

The sitting Panel for the Proceedings was Kathleen Farrell (sitting President), Peter Cameron (sitting deputy President) and Meredith Hellicar.

George Durbridge,
Director, Takeovers Panel
Level 47 Nauru House,
80 Collins Street,
Melbourne VIC 3000
Ph: +61 3 9655 3553