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Australia – “Last And Final” Statements: Bidder Beware.

 3 October, 2012

 

In brief

 

  • Panel unable to rule on application of "truth in takeovers" to a revised bid that did not exist.
  • But Panel comments suggest it will hold persons to considered and deliberate "last and final" statements.

 

The Takeovers Panel's decision in Alesco 03 confirms, to the extent that it could, that the Panel is likely to hold market participants to "last and final" statements. The decision also illustrates the limitations created by the Panel's lack of power to give advance rulings.

 

DuluxGroup announced a "best and final" offer increasing its cash offer for Alesco to $2.05 per share and stating that Alesco shareholders would be allowed to receive up to $0.18 per share in franking credits (which would require Alesco to pay a $0.42 dividend, when it had only announced a $0.15 dividend). After discussions between the parties on a proposal for Alesco to pay a $0.75 dividend, DuluxGroup announced that it was willing to engage in a Panel process to determine whether that proposal could be implemented having regard to "truth in takeovers", on condition that Alesco would recommend the $0.42 dividend proposal if the $0.75 dividend proposal could not be implemented without significant financial consequences.

 

Alesco applied to the Panel complaining that DuluxGroup's announcement about the discussions was misleading. As well as seeking corrective disclosure, Alesco sought orders preventing DuluxGroup deducting the value of franking credits if a $0.75 dividend was paid and declaring that the "truth in takeovers" policy not apply.

 

The Panel declined to conduct proceedings on Alesco's application noting that there was no dispute before the Panel about whether "truth in takeovers" applied to a revised bid, as there was no revised bid. The Panel did comment, however, that while they had not had the benefit of submissions and the matter was not before them, they had seen nothing that provided them with any confidence that the $0.75 dividend proposal would be permitted.

 

The Panel does not have power to make advance rulings on circumstances that have yet to occur, nor can it forestall a later application by declaring in advance that circumstances will be acceptable. Alesco's application was effectively seeking an advance ruling that a $0.75 dividend proposal, if it eventuated, would be acceptable. In this, the Panel stands in contrast to the UK Takeover Panel – which can and regularly does give advance rulings.

 

Given that limitation, the Panel's comments on truth in takeovers may not count for much. However, they support the view that the decision in Ludowici is consistent with the Panel holding a person to a considered and deliberate "last and final" statement. Ludowici was seen by some as indicating a weakening on the Panel's stance on truth in takeovers. However, Ludowici was concerned with failure to correct a Reuters report of an interview, not (as here) a written statement in an announcement that was clearly intended to invoke the truth in takeovers policy.

 

No doubt, had the matter been properly before the Panel, there would have been argument as to what the statement meant as far as franking credits are concerned (including whether it is possible, and consistent with Chapter 6 of the Corporations Act, to deduct the value of franking credits). Nevertheless, the Panel's cautious comments send a clear message that the greatest of care is required in drafting a deliberate "last and final" statement. On 28 September 2012, the board of Alesco recommended shareholders accept DuluxGroup's best and final offer of $2.05 per share. As part of the agreement between DuluxGroup and Alesco:

 

  • Alesco may pay an additional fully franked special dividend of up $0.27 per share if DuluxGroup achieves a 90% interest and a favourable tax ruling is received from the ATO. If paid, DuluxGroup will not deduct up to $0.18 per share of franking credits from the offer price.
  • DuluxGroup has agreed not to declare its offer unconditional while there is a possibility that an additional dividend can be paid (provided it is paid before 31 December 2012).
  • If the conditions for payment of the additional dividend are not met, Alesco shareholders who have accepted the offer will have the right to withdraw their acceptances.

 

 

For further information, please contact:

 

Kylie Lane, Ashurst

kylie.lane@ashurst.com

 

Ashurst Corporate/M&A Practice Profile in Australia

 

Homegrown Corporate/M&A Law Firms in Australia

 

 

 

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