TP04/043
The Panel advises that it has concluded the proceeding (the Proceeding) arising from the application (the Application) from Skywest Limited (Skywest) dated 7 May 2004 alleging unacceptable circumstances in relation to the off-market takeover bid by CaptiveVision Capital Limited (CVC) for all the fully paid ordinary shares in Skywest (the Bid). The Panel concluded the Proceeding without making a declaration of unacceptable circumstances or any order following the acceptance by the Panel of undertakings from CVC and its preparation of a replacement bidder’s statement.
Background
Bid and Bidder’s Statement
CVC sent a letter to Skywest dated 6 April 2004 advising of its intention to make a takeover bid for all the fully paid ordinary shares in Skywest. The letter was marked private and confidential and stated that CVC was finalising the precise terms of the Bid, and reserved CVC’s right not to proceed if certain conditions were not met. The letter also stated that CVC was still considering the conditions to be attached to the Bid, and set out a list of defeating conditions likely to be included in the Bid.
Following receipt of CVC’s letter, Skywest sent a letter to its shareholders dated 12 April 2004 informing them, among other things, of the receipt of a letter announcing an intention to make a takeover offer for all the issued shares in the company, and advising that the announcement was highly conditional. This letter did not name CVC or disclose the terms of the proposed bid.
On 15 April 2004, Skywest lodged a disclosure notice with ASIC and issued a media release disclosing summarised details of CVC’s letter, including the intention to make a takeover bid for all the fully paid ordinary shares in Skywest at an offer price of $0.20 cash per share and indicating that CVC was still finalising the precise terms of the Bid.
On 27 April 2004, CVC lodged a bidder’s statement with ASIC and sent a copy to Skywest (the Bidder’s Statement). The
Bidder’s Statement set out the following terms of the Bid:
- the consideration offered was $0.20 per fully paid ordinary share;
- the bid class the subject of the Bid was 100% of the fully paid ordinary shares in Skywest on issue as at 8.00pm (Perth time) on 27 April 2004; and
- several defeating conditions attaching to the Bid, including one that the identified conditions relating to CVC’s financing be satisfied.
The Bidder’s Statement also set out details regarding CVC’s source of funds for the Bid.
Application
Following an exchange of correspondence between Skywest and CVC regarding the Bidder’s Statement, Skywest applied to the Panel on 7 May 2004 for a declaration of unacceptable circumstances and orders in relation to the Bid. The Application alleged unacceptable circumstances arising from:
- CVC’s definition of bid class securities the subject of the Bid, and sought orders that the bid class include Skywest shares issued upon conversion of convertible notes or the exercise of options during the offer period;
- an alleged breach of sub-section 621(3) the Corporations Act 2001 (Cth) (the Act) in relation to the offer price under the Bid, and sought orders requiring CVC to increase the offer price to $0.22 per share (because it alleged that CVC had acquired convertible notes for $0.22 and exercised them within the four months prior to the Bid);
- insufficient disclosure regarding the financing arrangements CVC had put in place for the Bid;
- the inclusion of certain defeating conditions under the Bid on the basis that these conditions were not clearly set out in CVC’s letter of 6 April 2004;
- the unclear nature of other defeating conditions under the Bid;
- alleged deficiencies in the Bidder’s Statement in relation to CVC’s intentions, and its proposed course of action in relation to convertible securities previously issued by Skywest; and
- CVC’s failure to register as a foreign company under Division 2 of Chapter 5B.2 of the Act.
Discussions between the Parties
Following receipt of the Application, the Panel decided to conduct the Proceeding and accepted an undertaking from CVC that it would not dispatch the Bidder’s Statement to Skywest shareholders without giving the Panel and Skywest two business days prior notice of its intention to do so.
The Panel encouraged the parties to continue to negotiate between themselves to resolve as many of the issues arising from the Application as possible. To assist them, the Panel issued its brief (the Brief) identifying the issues it regarded as important. The Brief allowed approximately a week for negotiations before submissions were required but allowed either party to bring that timetable forward by notice to each other and the Panel in the event that negotiations broke down.
These negotiations led to CVC offering to address some of Skywest’s concerns regarding the defeating conditions and disclosures in the Bidder’s Statement.
However, the parties were unable to resolve all of the issues under the Application. The Panel considered the unresolved issues.
The Panel’s decision
Bid Class
The Panel concluded that CVC was entitled under the Act to limit the offer under the Bid to ordinary shares issued as at 27
April 2004, and that there was nothing in the circumstances of the Bid to fetter CVC’s right to define the bid class in the manner set out in the Bidder’s Statement.
Offer Price
The Panel concluded that there had been no breach of sub-section 621(3) in relation to the Bid and that CVC was entitled to offer the price of $0.20 per share specified in the Bidder’s Statement.
Financing arrangements
Having regard to the Panel’s Guidance Note 14: Financing Arrangements, the Panel considered that the financing arrangements for the Bid as disclosed in the Bidder’s Statement were not adequate to give CVC reasonable grounds to expect that it had sufficient funding arrangements in place to satisfy full acceptance of the Bid if it became unconditional.
The Panel required CVC to take actions necessary to satisfy certain conditions still attached to its financing. The Panel also required CVC to supplement the disclosure in the Bidder’s Statement relating to the identity and the financial capacity of certain of its lenders.
Defeating conditions and other disclosures
The Panel accepted CVC’s offer to delete or revise a number of the defeating conditions under the Bid. The Panel required CVC to amend two of the defeating conditions in order to make their operation clearer to shareholders.
The Panel required CVC to amend statements in the Bidder’s Statement relating to its intentions regarding the redemption of convertible notes issued by Skywest and the working capital requirements of Skywest.
Registration as a foreign company
The Panel accepted CVC’s offer to include a statement in the Bidder’s Statement advising shareholders that CVC had not been registered as a foreign company under the Act.
Undertakings and supplementary bidder’s statement
During the Proceeding, CVC sought and obtained a modification extending the statutory time limit under item 6 of sub-section 633(1) for dispatch of the Bidder’s Statement to shareholders.
The Panel accepted undertakings from CVC to finalise its financing arrangements and to prepare a supplementary bidder’s statement. CVC was required to provide the draft supplementary bidder’s statement to the Panel for its review. The Panel invited comments on the supplementary bidder’s statement from the other parties to the Proceeding.
The Panel has confirmed that CVC may lodge the supplementary bidder’s statement with ASIC and give a copy to Skywest, on the basis that it gives effect to CVC’s undertakings. In accepting the supplementary bidder’s statement as complying with CVC’s undertakings, the Panel is not endorsing it in any other way.
Following a request from the Panel, Skywest has granted its consent under ASIC Class Order 00/344 to allow CVC to dispatch a replacement bidder’s statement, incorporating all the changes set out in the supplementary bidder’s statement, to Skywest shareholders.
Given that CVC sought to address the issues raised in the Application, and on the basis of the undertakings provided by CVC and the revised disclosures made in the supplementary bidder’s statement, the Panel concluded the Proceeding on the basis that it was not necessary or appropriate to make a declaration and that no order was required.
The sitting Panel comprised Alison Lansley (sitting President), Brett Heading (sitting Deputy President) and Carol Buys.
George Durbridge
Director, Takeovers Panel
Level 47, 80 Collins Street
Melbourne, VIC 3000
Ph: +61 3 9655 3553
george.durbridge@takeovers.gov.au
