TP03/045
The Panel advises that it has today made a declaration of unacceptable circumstances in relation to the affairs of the AMP Shopping Centre Trust (ART). ART is a listed managed investment scheme which has investment interests in a number of shopping centres. The Panel has made orders preventing ART's interests in five major shopping centres being bought out solely because AMP Henderson Global Investors Ltd. (AMPH) is removed as Responsible Entity of ART following a successful takeover bid for ART.
CPT Manager Limited (as responsible entity for Centro Property Trust) (Centro) announced a takeover bid for ART on 18 March 2003.
On 26 March 2003 AMPH announced that a change of Responsible Entity of ART as a result of a takeover bid under Chapter 6 of the Corporations Act (Act) (Change of Responsible Entity) would be likely to breach provisions contained in agreements (Co-Owners' Agreements) in relation to five of the largest and most important shopping centres in which ART owned interests (the Shopping Centres). AMPH said that those breaches may activate pre-emptive rights (Pre-Emptive Rights) in the Co-Owners Agreements which may lead to the Co-Owners being entitled to require ART to sell its interests in the shopping centres to the other Co-Owners at market value. The interests are worth over $1 billion and comprise around 63% of ART's assets. AMPH's announcement in relation to the Pre-Emptive Rights was in response to the announcement by Centro of its takeover bid.
The Co-Owners to the Co-Owners Agreements are essentially all subsidiaries of, or insurance or investment funds within, AMP Life Limited (AMP Life) or the AMP Ltd. group.
Centro applied to the Panel for a declaration of unacceptable circumstances and orders under sections 657C & D of the Act on 10 April 2003.
The Panel accepted Centro's submissions that the commercial effect of the Pre-Emptive Rights are such that they would effectively deter any takeover bid by any person who wasn't acceptable to the AMP group.
The Panel is concerned that the effect of the Pre-Emptive Rights which is now being contended by AMP Life and AMPH i.e. the Pre-Emptive Rights being activated by a Change of Responsible Entity, had not been disclosed to ART unitholders or the market prior to AMPH's announcement to ASX on 26 March and the subsequent publication by AMPH of the terms of the Co-Owners Agreements and has not been consented to by ART unitholders. The Panel considers that this has impaired the efficient, competitive and informed market for control of ART units.
Orders
The Panel has ordered AMPH (as Responsible Entity of ART and AMP Wholesale 2), AMP Life and the other parties to the relevant Co-Owners' Agreements, not to exercise any Pre-Emptive Rights in relation to shopping centres in which ART owns interests, solely because of a Change of Responsible Entity (as defined).
In arriving at these orders the Panel has taken into account: past disclosure; market participants assessments of the Pre-Emptive Rights; the interests of ART unitholders and their knowledge and consent; whether they would cause any person unfair prejudice; and other potential remedies advanced by the parties to this application.
The Panel offered the Co-Owners an opportunity to resolve the Panel's concerns by giving the Panel undertakings that they would not seek to exercise any Pre-Emptive Rights if they were activated due to a Change of Responsible Entity. The Co-Owners declined the Panel's offer.
AMP Life
AMP Life is essentially the other Co-Owner in the Shopping Centres. The Panel asked AMP Life to advise ART unitholders of its position in the event of a Change of Responsible Entity. AMP Life has declined to do so. AMP Life has consistently suggested that the Panel should not be conducting these proceedings unless to order some form of disclosure by Centro as to whether Centro would waive the defeating condition in its offer. AMP Life has also advised the Panel that it reserved the right to appeal, after the close of Centro's bid, any Court decision unfavourable to it if the Panel referred any question of law to the Court under section 659A of the Act.
The Panel accepts AMP Life's right to make choices concerning participation in Panel proceedings in light of its own commercial interests and fiduciary duties. However, AMP Life chose to join the proceedings on 28 April well after proceedings had commenced and as a participant in the proceedings declined to provide information that the Panel considered may have been relevant for its consideration. Where a person or party chooses not to provide information to the Panel or not to participate in proceedings, the Panel will proceed with its proceedings and make its decision on the information which it has before it.
AMP Life, and to a lesser extent AMPH, has asserted that it has not made any contentions as to how the Pre-Emptive Rights might operate in the event of a Change of Responsible Entity. However, the Panel considers that the statements made by AMP Life and AMPH through the course of these proceedings make it reasonable for the Panel to infer, and to proceed in its decision on the basis, that AMP Life and AMPH can reasonably be taken to have contended to the Panel that the Pre-Emptive Rights would, or would likely, be activated by a Change of Responsible Entity.
Past Disclosure
The Panel considers it highly unlikely that prospective purchasers of ART units would reasonably have understood from reading the ART 1997 Prospectus that a change of trustee under the prescribed interest regime would have activated the Pre-Emptive Rights. The Panel considers that they would likely have understood that an attempt by any of the Co-Owners to sell the assets out of the group would have activated the Pre-Emptive Rights. But that is different to the Pre-Emptive Rights being activated merely by a change of trustee with no change in beneficial ownership of the interests in the Shopping Centres (i.e. still beneficially owned by the unitholders of ART).
Based on the facts presented to the Panel there appear to have been a series of points since 1997 at which circumstances changed, or AMPH or AMP Life have received advice or information, which might have triggered a decision by AMPH, as Responsible Entity for ART, to make disclosures to the market and to ART unitholders concerning the effect of the Pre-Emptive Rights in relation either to the change of a trustee or a change of the Responsible Entity.
Market Participants' Knowledge
Centro and Westfield Management Limited (Westfield) have each recently spent over $200 million acquiring units in ART. Their evidence to the Panel is that they did not know, after diligent enquiries prior to acquiring their current stakes in ART in March 2003, that the Pre-Emptive Rights in the Co-Owners' Agreements might be activated by a change of trustee under the prescribed interests regime, or by a Change Of Responsible Entity under the MIA regime. The Panel takes this as supportive evidence that the activation of the Pre-Emptive Rights contended by AMPH and AMP Life had not been adequately or effectively disclosed.
Interests of ART Unitholders
Disclosure and Consent
The Panel notes that:
a) although the main elements of the Pre-Emptive Rights (i.e. concerning sale of interests in the Shopping Centres) were disclosed in the 1997 Prospectus, the fact that merely a change of trustee of ART may activate the Pre-Emptive Rights in the Co-Owners' Agreements was not disclosed; and
b) on or around 12 April 1999, ART offered its unitholders the opportunity to vote on whether unitholders wanted self-custody by AMPH, a related party custodian or an independent custodian when ART moved from the prescribed interests regime to the MIA regime. It would have been appropriate for AMPH to have conducted a thorough review of the effects of the transition, especially in relation to the Pre-Emptive Rights, and disclosed to ART unitholders what the various consequences of those alternatives might have been. It may also have been appropriate for AMPH to seek unitholder consent to those specific effects, or to have proposed alternative arrangements to avoid the entrenching effect2 of the Co-Owners' Agreements under the MIA regime. Whatever AMPH's conclusion about the impact of appointing an external custodian, this analysis would have revealed the issue whether a Change of Responsible Entity would have triggered the Pre-Emptive Rights;
c) unitholders did not consent to the effect of the Pre-Emptive Rights proposed by AMP Life and AMPH; and
d) subsequent disclosures by AMPH to the Panel (after AMPH had reviewed its earlier files on the issues) suggest that persons within AMPH, and likely AMP Life, had turned their minds to the exact, or very similar, issues in relation to a Change of Responsible Entity in ART, as those raised by the Centro bid.
Uncertainty
If the Pre-Emptive Rights would not be activated, but that fact had not been determined with finality by a court, the existence of the uncertainty (initiated for Centro, rival bidders, the market and ART unitholders by the announcement of AMPH on 26 March 2003):
a) makes it impossible for unitholders to assess the value of their units; and
b) threatens the prospects of the current takeover bid for ART, or any other takeover offer not supported by the Co-Owners.
Either of these circumstances means that the competitive, efficient and informed market for units in ART has been impaired.
Entrenching
The Panel considers that there is a "non-entrenchment" principle in the Managed Investment Scheme provisions of the Act and in the purposes of Chapter 6 of the Act and that it should apply that principle in its consideration of this application.
It appears clear to the Panel that the introduction of the CLERP Act in 2000, which brought takeovers of listed managed investment schemes under Chapter 6 of the Act, was intended to expose the responsible entity of listed managed investment schemes to similar scrutiny and discipline by an efficient, competitive and informed market as managers of public companies. To impose the sort of commercial burden on unitholders as exercise of the Pre-Emptive Rights would impose on ART unitholders, in the event of a Change of Responsible Entity, would frustrate the express purpose of bringing listed managed investment schemes under Chapter 6 of the Act.
It appears to the Panel that the activation of the Pre-Emptive Rights that AMP Life and AMPH contend would very strongly tend to entrench AMPH as Responsible Entity of ART and would therefore constitute unacceptable circumstances. A possible exception to this legislative policy would be where the unitholders had given their informed consent to such entrenchment.
Orders - No Unfair Prejudice
The Panel is of the view that it would not unfairly prejudice any person to make the orders it has made because it appears from the evidence before the Panel that, amongst other things:
a) parties have agreed that the Pre-Emptive Rights would not have been activated by a change of management company under the prescribed interests regime prior to the commencement of the MIA. Under AMPH and AMP Life's contentions, that would in effect now occur;
b) the parties have provided the Panel with no evidence of, or any rational commercial basis for, any intention of the Co-Owners that the Pre-Emptive Rights in the Co-Owners' Agreements, when they were entered into, would be activated merely because of a change of trustee of ART under the prescribed interests regime. The Panel infers that this was likely to be an issue of negligible value under the prescribed interests regime;
c) the orders affect only a very small portion of the Pre-Emptive Rights compared to the commercial and other value of the aspects of the Pre-Emptive Rights that would be untouched by the Panel's order (i.e. all the parts which were clearly disclosed in the Prospectus); and
d) any activation of the Pre-Emptive Rights on a Change of Responsible Entity would be a windfall benefit to the Co-Owners, to the detriment of ART unitholders, that the Co-Owners neither intended or knew about, and which the ART unitholders had not been informed of and to which they had not consented. To deprive the Co-Owners of the windfall and return it to the ART unitholders would not be unfair.
Other Potential Remedies
Uncertainty
The Panel does not accept AMPH's submissions that the Panel cannot or should not seek to determine these proceedings until the uncertainty (or the proper construction of the Pre-Emptive Rights) has been resolved by referral to a court. That would cause additional delay, in proceedings which have already extended for a long period, and it may well not give the certainty which AMPH said would be a pre-requisite for a court referral being appropriate.
Request for the Panel to refer a question of law to the Court
The Panel considers that the decision and orders above obviate the need to refer the issue to the Court. The Panel considers that its decision is likely to be materially more timely and efficient, while still being fair and reasonable, than referring the question to court (and potentially being faced with the same issue for determination after receiving the Court's advisory opinion). On that basis, the Panel does not intend to refer the requested question of law to the Court.
AMP Life has declined to undertake to be bound by any advice to the Panel by a court on a question of law referred to the Court. It also put forward the possibility of it "advocating and successfully establishing a contrary view to that decided by the Court after the close of the takeover bid." Without an undertaking that AMP Life and the other Co-Owners would be bound by the Court's decision, a decision by a Court of a question of law would have materially reduced certainty and utility for these proceedings.
Disclosure as a Remedy
AMP Life has submitted that the proper remedy for any unacceptable circumstances that exist in relation to the affairs of ART (but AMP Life contends that none do) is to ensure that:
a) AMPH fully disclose to ART unitholders and to the market the terms of the Co-Owners' Agreements;
b) AMPH and Centro fully disclose their different contentions as to the operation and existence of the Co-Owners' Agreements and Pre-Emptive Rights; and
c) CPT discloses, in light of that information, whether it intends to seek to rely upon any relevant bid condition.
AMP Life suggested to the Panel that unitholders would then be in a position to determine for themselves what the risk is of the Pre-Emptive Rights existing and being activated by a Change of Responsible Entity.
Disclosure is an inadequate remedy in these proceedings, and cannot be made to become an adequate remedy, because of the potential effect on those ART unitholders who would prefer to stay as unitholders of ART. If Centro proceeds with its bid, acquires more than 50% of the units in ART, replaces AMPH as Responsible Entity of ART, and AMP Life or another Co-Owner exercise their Pre-Emptive Rights, the remaining ART unitholders would have their investment changed from a valuable, diversified, shopping centre fund to essentially a cash box. In addition, any ART unitholders who accepted the offer would receive Centro units and the value and composition of Centro's assets would be materially changed, in similar ways to those of ART, if the Pre-Emptive Rights were exercised.
As noted above, AMP Life, for its part, has declined to disclose to the Panel, ART unitholders or the market, whether or not it would seek to exercise any Pre-Emptive Rights in the event of a Change of Responsible Entity.
Centro's Conditions
When and if it is settled that the Pre-Emptive Rights will not be exercised, when and if Centro replaces AMPH as responsible entity of ART, and any reviews of this decision are complete, the Panel expects Centro to waive any conditions of its bid to the extent that they may have been triggered by the existence or disclosure of the Co-Owners' Agreements.
Costs
The Panel considers that parties to the proceedings are likely to have incurred additional costs because of the late time in the proceedings that AMP Life sought to become a party, despite the Panel's repeated invitations for it to become a party. On that basis, the Panel has made an order that each party pay their own costs incurred up until 28 April 2003, and that AMP Life pay all parties' costs incurred after that date, in the manner set out in the Panel's Guidance Note on Costs.
Issues for other Managed Investment Scheme and Responsible Entities
The Panel considers that all listed managed investment schemes and their responsible entities should urgently review their constitutions and other material contracts to assess whether they are parties to contracts with rights similar to the Pre-Emptive Rights in the Co-Owners' Agreements. If they find rights which have similar effects to those that AMP Life and AMPH contend for the ART Pre-Emptive Rights, they will have been put squarely on notice by this decision that the ongoing existence of such pre-emptive rights, in the absence of clear and full disclosure and informed consent by unitholders, risks the Panel declaring the circumstances to be unacceptable circumstances in the event it received an application in relation to those rights.
Review
AMP Life and AMPH's right of review of this decision under section 657EA of the Act ends at 5.00 p.m. Thursday 15 May 2003.
The President of the Panel appointed Les Taylor, Jenny Seabrook and Robyn Ahern to constitute the Panel for the application.
The Panel's reasons for its decision will be posted on the Panel's website when they are settled.
Nigel Morris,
Director, Takeovers Panel
Level 47 Nauru House, 80 Collins Street, Melbourne VIC 3000
Ph: +61 3 9655 3501
nigel.morris@takeovers.gov.au
Annexure
Takeovers Panel
Corporations Act 2001
Sections 657A and 657D
Declaration and Orders
In the matter of the AMP Shopping Centre Trust
A. AMP Henderson Global Investors Limited (AMPH) is the responsible entity of the AMP Shopping Centre Trust (ART);
B. As responsible entity of ART, AMPH is a tenant in common of the shopping centres known as Warringah Mall (Brookvale, NSW), Pacific Fair (Broadbeach, Qld), Macquarie Centre (North Ryde, NSW), Garden City (Mt Gravatt, Qld) and Garden City (Booragoon, WA) (the Shopping Centres);
C. The other tenants in common of the Shopping Centres (Co-Owners) are listed in the Schedule;
D. It is now the view of AMPH that it is bound (and a successor responsible entity would be bound) by Co-Owners' Agreements first made on 3 November 1997, and subsequently confirmed and amended by other instruments, with the other Co-Owners in relation to each of the Shopping Centres;
E. On 18 March 2003, CPT Manager Ltd as responsible entity of the Centro Property Trust announced to Australian Stock Exchange Ltd (ASX) that it proposed to make a takeover bid for units in ART (the Centro bid) and replace AMPH as responsible entity of ART under Part 5C.2 of the Corporations Act 2001;
F. On 26 March 2003, in response to the Centro bid, AMPH announced to ASX that the replacement of AMPH as responsible entity of ART "is likely to involve a breach" of the Co-Owners' Agreements and that "such a breach may entitle a co-owner to commence a default process and, if the breach is not rectified, may entitle the co-owner to require ART to sell its interests in [the Shopping Centres] to the co-owner at the market value of the property interest";
G. If AMPH is correct in the views it has announced, the rights of co-owners under the Co-Owners' Agreements mentioned in clause F (the Pre-Emptive Rights) would be activated if a takeover bid was made for ART, the bid was successful and the bidder removed AMPH as responsible entity and appointed as responsible entity a company unrelated to AMPH, without the consents of the co-owners;
H. the exercise of the Pre-Emptive Rights would result in the forced sale from ART of its interests in essentially irreplaceable super-regional shopping centres worth over $1 billion to ART and comprising over 60% of the net assets of the trust ;
I. In view of their amount and nature, these effects are material in relation to ART;
J. AMPH's understanding of the effect of the Co-Owners' Agreements was not publicly disclosed until AMPH made an announcement to Australian Stock Exchange Ltd on 26 March 2003;
K. By 26 March 2003, units in ART had traded since 1997, substantial holdings had been accumulated in ART and a takeover bid had been announced for ART, without the information announced by AMPH in clauses F and G having been disclosed to the market or ART unitholders;
The Panel finds that:
L. If AMPH is correct in the view it has announced, the existence of the Pre-Emptive Rights tends to prevent a successful takeover bid being made for ART without the support of the Co-Owners;
M. If AMPH is correct in the view it has announced, the market in units in AMPH was uninformed in a material respect until 26 March 2003;
N. If AMPH is correct in the view it has announced, there has been a significant change in the commercial position of unitholders (i.e. the Co-Owners have effectively gained a right of veto over any choice by unitholders to change the Responsible Entity of ART) without their consent;
O. If AMPH is mistaken in the view it has announced, the market in units in ART is now misinformed in a material respect;
P. The effect of the Pre-Emptive Rights on the possibility of a takeover bid for ART is inconsistent with an efficient, competitive and informed market in units in ART;
Q. Whether or not AMPH is correct in the view it has announced, the market in units in ART has been uninformed or misinformed, is at present uninformed and may at present be misinformed regarding that issue;
Pursuant to section 657A of the Corporations Act 2001, the Panel declares that the circumstances referred to in paragraphs L to Q are unacceptable circumstances in relation to the affairs of ART; and
Pursuant to section 657D of the Corporations Act 2001, the Panel orders each of the Co-Owners listed in the Schedule not to seek to, or purport to, exercise any right under any of the Co-Owners' Agreements to acquire an interest in any of the Shopping Centres where that right is enlivened as a direct or indirect result of the replacement of the Responsible Entity of ART (actual or proposed) in connection with a takeover bid under Chapter 6 of the Corporations Act 2001, or by a consequent transfer or registration of title to the Shopping Centres (actual or proposed); and
Pursuant to section 657D of the Corporations Act 2001, the Panel orders AMPH (as Responsible Entity for ART) to announce the effect of these orders to ASX and ART unitholders; and
Pursuant to section 657D of the Corporations Act 2001, the Panel orders AMP Life Ltd to pay the costs of the other parties from the date it became a party to this matter until the date of this instrument.
Schedule - the Co-Owners of the Shopping Centres
AMP Life Limited
AMP Henderson Global Investors Limited (as Responsible Entity of the AMP Wholesale Shopping Centre Trust 2)
Warringah Mall Pty Ltd
AMP Pacific Fair Pty Ltd
AMP Macquarie Pty Ltd
Dated 13 May 2003
Signed by Jennifer Seabrook
Sitting Panel Member
AMP Centro Panel Proceedings
1 Warringah Mall (Brookvale, NSW), Pacific Fair (Broadbeach, QLD), Macquarie Centre (North Ryde, NSW), Garden City (Mt Gravatt, QLD) and Garden City (Booragoon, WA) the (Shopping Centres).
2 The Panel uses the term "entrench" to mean significantly impeding, or constituting a significant disincentive to, in commercial and commonsense ways, the exercise by the ART unitholders of their statutory right to replace AMPH as Responsible Entity.
