TP03/110
The Takeovers Panel has decided not to make a declaration of unacceptable circumstances in relation to the affairs of QR Sciences Ltd (QR Sciences) because of an undertaking given by QR Sciences which resolved any issue of unacceptability which the Panel had observed.
The application concerned a non-renounceable 2-for-3 rights issue in QR Sciences (Rights Issue), where the number of shares to be issued was limited to one third of QR Science’s issued capital, with acceptances being scaled back if the offer was oversubscribed (Scaleback).
The Panel considered that the Rights Issue did not comply with Item 10 of section 611 of the Corporations Act (Act) (the rights issue exception to the 20% threshold prohibition)because the Scaleback meant that shareholders were not necessarily being offered the same percentage of shares as they held before the Rights Issue.
In addition, shareholders did not necessarily have an equal opportunity to participate in the Rights Issue. The inability to predict the number of shares likely to be subscribed for by the two major shareholders in QR Sciences meant that shareholders were unable to determine the number of shares for which they needed to apply to preserve their proportionate interest in QR Sciences.
The Panel observed that in the particular circumstances of this matter a disclosure document for an issue like the Rights Issue should contain a clear statement of the intention and ability of the 51% shareholder in QR Sciences, QR Sciences Holdings Ltd (Holdings), to subscribe for shares under the Rights Issue. The particular features of the control relationship between the two companies, the commonality of their senior management, the structure of the Rights Issue to include what was, effectively, an underwriting element dependent on the levels of acceptances, and the proposed use of a majority of the capital to be raised to repay a debt to Holdings, meant that other shareholders would require this information to ensure that any acquisition of a substantial interest by reason of the Rights Issue would occur in a properly informed market. The Panel noted that, in those cases where a capital raising involves issues under Chapter 6 of the Act, the issuer should concurrently satisfy both the disclosure obligations of Chapter 6D or Part 7.9 (as applicable) and the information principles set out in sections 602(a) and (b)(iii) of the Act.
After the Panel informed the parties of its views, QR Sciences undertook not to issue any shares under the Rights Issue.
The sitting Panel was Braddon Jolley (sitting President), Marian Micalizzi (deputy President) and Tro Kortian.
George Durbridge
Director, Takeovers Panel
Level 47 Nauru House
80 Collins Street
Melbourne VIC 3000,
Ph: +61 3 9655 3553
