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Australia – Continuously Quoted Scrip Bid Disclosure.

7 July, 2014

 


What You Need To Know

 

  • Panel considered disclosure in a bidder’s statement offering continuously quoted scrip inadequate
  • Further disclosure was necessary due to the impact of the bid on the bidder, which had farm-in rights over the target’s main asset 

 
In Dampier Gold Limited the Panel was minded to make a declaration of unacceptable circumstances in relation to inadequate disclosure in a bidder’s statement offering continuously quoted scrip.

 
Prospectus Content For Continuously Quoted Scrip

 
A prospectus for continuously quoted scrip need only disclose the effect of the offer on the issuer, together with any information not disclosed previously in reliance on the continuous disclosure carve-outs. These requirements effectively take the place of the usual prospectus requirements of providing information regarding assets and liabilities, financial position and performance, profits and losses and prospects.

 
Effect Of The Offer In This Case

 
Bidder Ord River Resources relied on the reduced content requirements to argue that its disclosure in offering continuously quoted scrip for target Dampier Gold was adequate. The Panel disagreed, noting that the main asset of the target was the Plutonic Dome Gold Project, in respect of which the bidder had farm-in rights to earn up to 75% under a JV with the target. The Panel considered that, given the impact of the bid on Ord, the bidder’s statement omitted material information in relation to:

 

  • Ord’s future commitments and funding, particularly over the following 6 months, during which it needed to pay AUD 2m under the JV and under a proposed conditional placement 
  • the terms of the JV and
  • Ord’s intentions, particularly with respect to its rights under, or seeking to amend, the JV (or if none, clear and prominent disclosure to that effect).

The Panel agreed with a submission by ASIC, referring to its Regulatory Guide 66, that the bidder’s statement may need to include some disclosure similar to that required by the ordinary prospectus content requirements. RG 66 observes that the amount and type of information required in relation to continuously quoted scrip depends in part on the potential impact of the issue of scrip on the issuer’s structure and operations. In the context of a scrip bid, this will vary depending (among other things) on the relative size of the bidder and the target.

 

Decision

 
The Panel found it unnecessary to make a declaration or orders after Ord obtained ASIC relief to withdraw its bid, relying on a breached bid condition.

 

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For further information, please contact:

 

Sarah Dulhunty, Partner, Ashurst 
sarah.dulhunty@ashurst.com

 

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