The Panel has considered the application by Bruandwo Pty Limited (Bruandwo) dated 27 August 2004 alleging unacceptable circumstances in relation to its takeover bid for all the ordinary shares in Australian Leisure & Hospitality Group Limited (ALH).
The Panel has decided not to conduct proceedings in relation to the application.
This decision follows ALH’s agreement to issue a supplementary target’s statement containing further disclosure regarding:
- change of control clauses in ALH’s material agreements which might be relevant to one of the defeating conditions in Bruandwo’s bid; and
- the effect of ALH’s takeover defence costs on its expected dividend and earnings.
Bruandwo alleged that unacceptable circumstances existed because of misleading or deceptive statements in, or material omissions from, ALH’s target’s statement. Specifically, Bruandwo alleged that the target’s statement was deficient in the following ways:
- it raised concerns regarding the process undertaken by KPMG Corporate Finance (Aust) Pty Limited (KPMG) in the preparation of its independent expert report, which was included in ALH’s target’s statement, as well as the content of that report;
- there was no information about the impact of ALH’s takeover defence costs on the expected earnings and dividend for the 2004/2005 financial year;
- there was insufficient information regarding the ALH material agreements which could trigger the defeating condition set out in clause 8.8(a)(vii)(B) of Bruandwo’s bidder’s statement (the Change of Control Waiver Condition); and
- there was no information from the ALH board regarding its view of the likely post-bid ALH share price.
The Panel received preliminary submissions from ALH in response to the application, as well as further correspondence from Bruandwo in support of its application.
In its preliminary submissions to the Panel, ALH advised that there were no material agreements that could be the subject of the Change of Control Waiver Condition other than those agreements summarised in ALH’s IPO prospectus dated 19 September 2003.
The Panel considered that this statement was significantly more informative than the statements made in Part D of ALH’s target’s statement that there were “many” material agreements to which the Change of Control Waiver Condition could apply.
Given the additional information provided in ALH’s preliminary submissions, the Panel advised ALH that it would be appropriate for ALH to inform ALH shareholders about which of its material agreements were relevant to the Change of Control Waiver Condition. The Panel considered that this disclosure is important to an ALH shareholder’s decision whether or not to remain a shareholder if Bruandwo attains control of, but does not wholly own, ALH.
ALH agreed to provide the relevant information in its supplementary target’s statement.
Takeover defence costs
The Panel advised ALH that if there were circumstances under which the quantum of defence costs payable to ALH’s advisers would have a material effect on ALH’s earnings or dividend for the 2004/2005 financial year, ALH would be required to disclose that possibility in its target’s statement.
ALH agreed to include a statement in its supplementary target’s statement regarding the effect that its defence costs may have on ALH’s expected earnings and dividend.
Other issues raised in the application
Independent Expert Report
The Panel carefully reviewed Bruandwo’s allegations regarding KPMG’s independent expert report, as well as the details set out in ALH’s preliminary submissions regarding the process undertaken in the preparation of KPMG’s independent expert report. The Panel also had regard to ASIC Practice Note 42: Independence of expert’s reports.
The Panel considered that neither Bruandwo’s application, nor the details provided in ALH’s preliminary submissions indicated that the independence of KPMG had been diminished or compromised, and that no additional disclosure regarding the preparation of KPMG’s report was required.
Future Share Price
Bruandwo asserted that the ALH board’s view about the post-bid ALH share price was material information which should have been included in the target’s statement, given the ALH board’s recommended rejection of Bruandwo’s offer and the trading price of ALH shares prior to the announcement of Bruandwo’s bid.
KPMG’s independent expert report includes statements (at page 6) regarding the prospect of the ALH share price falling in the event that Bruandwo’s offer lapses. The Panel notes that Bruandwo has emphasised these statements in its own public releases following the dispatch of ALH’s target’s statement.
Given KPMG’s stated view and the absence of any marked change in ALH’s affairs, the Panel does not think that it is necessary for ALH to make any prediction regarding the future market price of ALH shares in the event that Bruandwo’s bid lapses and there is no counter-bid.
The Panel considered that ALH’s further disclosure in its supplementary target’s statement addressed the only issues raised in Bruandwo’s application on which it might have decided to conduct proceedings.
Accordingly, under Regulation 20 of the ASIC Regulations, the Panel decided not to conduct proceedings on the application. The Panel will publish reasons for its decision in due course, in which it will address in more detail issues relating to independent expert reports and compliance with the Panel’s procedural rules regarding media canvassing.
The sitting Panel is Elizabeth Alexander (sitting President), Jennifer Seabrook (sitting Deputy President) and Ian Ramsay.
Director, Takeovers Panel
Level 47 Nauru House, 80 Collins Street
Melbourne VIC 3000
Ph: +61 3 9655 3501