Love letter or harassment? Minter Ellison investigates

Love letter or harassment? How a Board should deal with an unsolicited proposal to make a takeover offer

Unsolicited proposals to make a takeover offer are a hot M&A topic. They bring into play duties to shareholders, regulatory restrictions, gamesmanship and animal spirits. A listed company Board that receives an unsolicited proposal needs to focus hard on value and tactics. It needs to act in response to the specific proposal, but also consider the possibility of an auction for control.

Consider the following scenario: Private Equity Fund (PEF) contacts the Chairman of Listed Co with a confidential proposal and asks to be allowed to conduct ‘limited confirmatory due diligence’. PEF says that, after due diligence, it proposes to offer to bid for Listed Co at a 25% premium to the three month VWAP of Listed Co’s shares. PEF says that it would prefer that Listed Co’s Directors recommend the bid.

On 15 February, The Wall Street Journal carried an article entitled ‘Love Letters’ for a Takeover – Private-Equity Firms’ New Way to Seduce Companies Starts With an Email. The article noted that an approach such as that described above can have the effect of putting the recipient in play, but without being overtly hostile to management, and without being off-limits to those institutional investors in the private equity bidder whose investment mandates prohibit participation in hostile bids.

We have known Boards to react reflexively in a defensive and dismissive way to such approaches. However tempting, this response can be dangerous, because the next steps for the ‘friendly’ suitor may include contacting key shareholders and informing them of the Board’s dismissive response, or leaking the rebuff to the media to encourage traders or shareholders to move the share price in anticipation of a possible transaction.

These tactics are intended to put commercial pressure on the Board to treat the suitor seriously. They may succeed. If they do, it will be harder for the Board to control or manage the next steps of the suitor’s evaluation and transaction process than if the Board had constructively but assertively managed a process for allowing the suitor to conduct due diligence and either confirm its proposal to bid, or go away.

What do we mean by constructively but assertively managing the process? If the suitor’s indicated price is good enough, and it is both a well funded and credible party, the Listed Co can require the suitor to enter into a confidentiality agreement with standstill provisions typically prohibiting the suitor from acquiring or offering to acquire shares in Listed Co for a period, other than by means of a transaction recommended by the directors of Listed Co.

Imagine a different scenario. This time the Board of Listed Co believes that PEF is offering a good price, and is in principle supportive of a bid at that price. But PEF is dragging its heels, claiming that its internal evaluation process is taking longer than expected. The Board is concerned that by presenting its proposal and then moving slowly, PEF is leaving the Board and possibly Listed Co’s share price in limbo. The Board wants PEF to put up or go away.

In these circumstances, Boards sometimes disclose to ASX the fact of an unsolicited approach, to try to force the suitor to firmly and publicly state its intentions. The disclosure may breach confidence (if the approach was confidential and has not leaked), but occasionally some Boards take this action if they are concerned:

the suitor will talk a high price and then use due diligence to chisel the price, or
the suitor may be trying to make the Board anxious that the transaction may not occur, so that the Board will soften its negotiating position.
Disclosure in these circumstances by the Board, or more commonly a leak in these circumstances by its advisers, might be an attempt by the Board to neutralise the PEF’s own pressure tactics. The tactic might be to disempower PEF by moving the onus from Listed Co to respond to the approach and on to PEF to firm up its approach.

Alternatively, the Board may disclose the fact of the approach to ASX if the Board considers that the fact of the approach is material to the value of Listed Co securities, and either the information is no longer confidential (as a result of a leak), or the Board considers that a reasonable person would expect the information to be disclosed – ensuring that the carve outs in ASX Listing Rule 3.1A to the obligation to disclose do not apply.

The UK Takeovers Panel is considering adopting a proposal that a party publicly named as a potential bidder will have a short period in which to announce a firm intention to bid or announce that it will not bid. A rule along these lines would limit the period in which a suitor could use its alleged interest in bidding to put pressure on the target board.

In Australia, the regulatory and policy tools currently available to limit excessive gamesmanship in the context of unsolicited approaches and responses to them are less specific and more limited. They include the requirement to proceed with a bid within two months of announcement, general prohibitions on misleading and deceptive conduct and statements, a prohibition on target frustrating action, and ASIC’s vaunted ‘truth in takeovers’ policy.

Unsolicited proposals to make a takeover offer are likely to remain one of the key testing grounds in public M&A of duties to shareholders, regulatory restrictions and tactics. A listed company Board that receives an unsolicited proposal needs to respond in a considered manner, mindful of the value and tactical implications of the proposal and the target’s response. Needless to say, careful analysis and good advice can help ensure that the response is good for shareholders and avoids embarrassment for the Board.

The author thanks his colleague Michael MacMahon for his assistance with this note.

> The Panel, associates and disputed questions of fact: accuracy vs. efficiency

The Takeovers Panel’s decision not to make a declaration of unacceptable circumstances in Brockman Resources Limited [2011] ATP 3 reinforces two important issues in Panel proceedings: first, the difficulty that the Panel faces due to its lack of effective powers of discovery or adequate procedures for handling disputed questions of fact; and second, that the applicant bears the entirety of the burden of providing a ‘sufficient body of material’ from which inferences can be drawn and findings made regarding relationships of association.

Wah Nam’s offer for Brockman

Wah Nam International Holdings Limited (listed on the Hong Kong Exchange and ASX) launched its unsolicited 30-for-1 conditional scrip takeover offer for Brockman Resources Limited in November 2010. Two months later, Brockman applied to the Panel seeking a declaration of unacceptable circumstances. Brockman alleged that Wah Nam had breached the prohibition on acquiring a relevant interest that increases a person’s voting power in excess of the 20 per cent threshold.

No ‘sufficient body of material’

The Panel decided not to make a declaration on the basis that Brockman failed to produce a ‘sufficient body of material’ from which it could establish the necessary associations between Wah Nam and relevant Brockman shareholders, despite noting a ‘concern’ about certain business, family and social connections documented. As was submitted by the respondents, it was not open to the Panel itself to undertake investigations without first being provided with substantive allegations and reasons for, or evidence supporting, those allegations (Boulder Steel Limited [2008] ATP 24) – something that Brockman failed to do.

The challenge with allegations of ‘association’

Allegations of association are by their very nature difficult to prove as it can be challenging for persons who are not parties to the association to provide direct evidence of their existence. An association is not of itself a breach of the Corporations Act, nor is it unacceptable; an association is simply a basis for aggregating relevant interests held by different people to determine voting power (Coopers Brewery Limited 03R and 04R [2005] ATP 23 & ATP 24).

When considering whether parties are associated in the context of takeover law, one conundrum is whether the conduct reveals that the parties are carrying out an agreement, or understanding to pool voting power in pursuit of a shared goal or purpose with respect to an entity, or whether their conduct merely reveals that they are separately following interests which coincide (as per Bridgewater Lake Estate Limited [2006] ATP 3).

Eliciting the necessary evidence to prove this commonality is a notoriously difficult, time-consuming and frustrating process for the applicant in Panel proceedings.

The starting point is for the applicant to demonstrate there is a sufficient body of material to satisfy the Panel that an association can be established. The Panel is then free to draw inferences from partial evidence, patterns of behaviour, structural relationships, actions which are uncommercial, prior collaborative conduct, common investments and dealings, common knowledge of relevant facts and any other evidence suggestive of association (Winepros Limited [2002] ATP 18; Mount Gibson Iron Limited [2008] ATP 4).   

No sufficient evidence of ‘warehousing’ or a ‘common goal’

The essence of Brockman’s submission was that the relevant parties were acting in concert to warehouse Brockman shares to seek to effect a change of control through the Wah Nam offer.

The regulation of the circumstances in which a change of control of a company can take place is the essence of chapter 6 of the Corporations Act, with section 606 providing what is effectively a control threshold by prohibiting a person from acquiring a ‘relevant interest’ that increases their ‘voting power’ in a company to more than 20 per cent, unless one of the exceptions applies. An aim of chapter 6 is to promote an efficient, competitive and informed market in the context of an acquisition for control.

Brockman claimed that Wah Nam breached section 606 as it had increased its voting power to as much as 40 per cent, with the result that Brockman shareholders were denied the right to an equal opportunity to participate in the benefits accruing from the Wah Nam offer.

However, Brockman failed to provide sufficient material to suggest that the trading in Brockman shares was more than a coincidence of buying and that it was for the purpose of ‘warehousing’ as opposed to an ordinary investment decision-making process in relation to what was potentially an attractive investment opportunity.

Brockman’s evidence pointed to certain commercial relationships between the parties concerned: loans between them to fund acquisition of Brockman shares, a common Beach Road address and a string of family, employment and brokering relationships. While this was sufficient to raise the Panel’s concern, it did not go so far as to allow it to infer a relationship of association and the necessary element of a common goal in respect of Brockman.

Limited use of Panel’s powers

Brockman highlights the extent to which the Panel considers itself limited by the substantiveness (or lack thereof) of the applicant’s allegations, and the supporting evidence and reasons for those allegations. Brockman made unsubstantiated inferences and some of its conclusions were drawn using language such as ‘it remains possible that [A] was holding legal title for [B]’ and ‘[C] would have known [B] reasonably well’.

The Panel’s emphasis on its ‘remaining concerned’, despite declining to make a declaration, suggests its own frustration with the inadequacy of Brockman’s submissions, and the timorous application of its policy of requiring ‘substantive’ allegations where most if not all material facts are within the sole knowledge of potential wrongdoers. The Panel expressed ‘sympathy’ with the applicant’s view that certain respondents had not been ‘fully candid’ with it and specifically commented on the ‘clearly implausible explanations’ proffered by certain respondents and their ‘outright’ refusal to provide some information. However, absent a desire to bravely use its existing powers to promote discovery and adequate procedures for handling disputed questions of fact, the Panel was left to conclude that without any ‘direct evidence’ of association, the connections made by Brockman were too tenuous.

The approach in Viento and CMI

In contrast, the reasons for decisions in both Viento Group Limited [2011] ATP 1 and CMI Limited [2011] ATP 4 demonstrate how a sufficient body of material and ‘substantive’ allegations drives the Panel’s preparedness to draw the necessary inferences regarding association and common purpose. In particular, in each decision the Panel reinforced that inferences should be ‘reasonable and definite’ and not merely ‘conflicting inferences of equal degrees of probability’ when looking at ‘partial evidence, patterns of behaviour and a lack of commercially viable explanation for the impugned circumstances’ (Dromana Estate Ltd 01R [2006] ATP 8). The Panel also noted its willingness to conclude that cross beneficiaries under trust arrangements support an inference of association.

In deciding to make a declaration of unacceptable circumstances in Viento, the Panel relied on inconsistent, inadequate and unsatisfactory explanations of both trust arrangements and purchase transaction structures, evidence of money transfers that had no commercially viable explanation, late and deficient substantial holding and tracing notices, as well as a general reluctance to disclose information to draw an inference that the respondents were deliberately seeking to hide their association. Additionally, close personal relationships and connections between the respondents served as supporting factors for the findings.

In CMI, the Panel noted the ‘vague’ nature of responses in circumstances where it is reasonable to expect more detail and relied on a body of direct evidence that included family trusts with holdings in CMI of which the respondents were cross beneficiaries, family and work links, and the uncommercial nature of various aspects of the acquisition of CMI shares that was the subject of the declaration. As in Viento, the Panel inferred that the respondents were deliberately attempting to obscure rather than assist its inquiry into the factual circumstances surrounding the transaction in question.

In each of these matters, the Panel considered the ‘cumulative effect’ of this body of material and drew the necessary inferences of association and a shared purpose of, in CMI, consolidation of control, and in Viento the aim of seeking to influence the composition of Viento’s board. While these types of issues are heavily reliant on individual facts, it is clear that a sufficient body of material from which the Panel can draw that all important inference must be established.

Way forward

As the main forum for resolving takeover disputes, the Panel serves a crucial function by removing tactical litigation and disputes from the courts with the aim of achieving more timely resolution of those matters and reducing costs for the parties involved (Explanatory Memorandum, Corporate Law Economic Reform Program Bill 1998 (Cth) 6. See also Corporate Law Economic Reform Program, Takeovers – Corporate Control: A better Environment for Productive Investment, Paper No 4 (1997) 32 (‘CLERP 4’)). However, the Panel is heavily reliant on the quality of the submissions and supporting evidence put forward by applicants, which it uses in conjunction with its substantial commercial experience to draw necessary inferences and make the relevant findings.

Brockman confirms that the price of this efficiency up til now is the need to rely on the quality of the fact-finding abilities of the relevant parties even though this restricts the Panel’s ability to maintain an efficient, competitive and informed market in the context of an acquisition for control. Clearly, the Panel needs to rethink its policy of requiring ‘substantive’ allegations in circumstances like Brockman while ensuring that Panel proceedings do not get bogged down in procedural and evidentiary matters, while also ensuring that the Panel does not become a party to pure fishing expeditions.

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For further information please contact
Timothy Rowe, Senior Associate
T: +61 2 9921 4578

Mirela Leko, Lawyer
T: +61 2 9921 4580

> Why the Personal Property Securities Act is likely to affect your future M&A transactions

As many of our readers would be aware, the current proposal is that the Personal Property Securities Act 2009 (Cth) (PPSA) and related regulations commence in October this year. The PPSA will represent a major structural reform to the way that security interests (mortgages, charges and more exotic security interests) are regulated, and will have an extremely broad application. However, some readers may not be familiar with how this new regime will impact the M&A and corporate transaction landscape.

Due diligence processes will change, bid documentation will need to take into account new terminology, management of vendors and target companies should review their contracts to determine what existing security interests should be registered, while purchasers should seek new warranties that all such security interests have been so registered (recognising that searches of the new register will not be conclusive). And there’s more…

Why do I need to know about it?

The PPSA will affect M&A and other corporate transactions in several key areas, including when a company:

buys or sells assets
supplies or receives goods
takes on or grants leases or bailments of goods
lends or borrows money
The PPSA is not just for the banks, insolvency practitioners or lawyers!

Overview and key concepts

For an overview of the PPSA and its key concepts, please see this article published in our Business Letter in December 2010. Key concepts include:

Personal property

Any property other than:

land (and buildings and fixtures on or to that land), and
a right, entitlement or authority that is declared by law not to be personal property, or certain government-issued licences.
Personal property includes tangibles such as cars, goods, crops, livestock and intangibles such as trade marks, patents and other intellectual property.

Security interest

An interest in relation to personal property provided for by a transaction that secures a payment or performance of an obligation, regardless of the form of the transaction.

A security interest is said to ‘attach’ to personal property when the grantor has rights in the personal property and either:

value is given for the security interest, or
the grantor does an act by which the security interest arises.
Perfection

A security interest may be perfected by registration on the new publicly available Register of Personal Property Securities (the PPS Register), by possession of tangible personal property, by control of certain property, or by force of the PPSA.

The PPS Register will enable secured parties such as lenders to give notice of actual or prospective security interests. Notice is given by recording data about secured parties, grantors and collateral. The PPS Register will be on-line and is therefore always open.

The priority of a security interest is determined by the perfection of the security interest.

Does the PPSA affect my ability to get clear title to shares accepted into a takeover offer, compulsorily acquired or voted in favour of a scheme?

Possibly. The current practice is likely to continue, where bidders in a public markets/listed acquisition context typically rely on warranties that shares accepted into an offer are free from encumbrances and other third party interests.

There may be an issue in relation to obtaining clear title, however, in connection with shares participating in a scheme, or shares compulsorily acquired under a takeover offer. This is because the PPSA provides that a bidder can take an investment instrument or an investment entitlement free from a security interest – provided that the acquisition is a consensual transaction. Schemes or compulsorily acquired shares would appear to be acquired though a consensual transaction and accordingly there may be an impediment to clear title in such cases. Further changes may be required to the PPSA or related regulations to deal with this issue. We will update readers if the government proposes any changes to deal with his issue.

Bidders in private treaty M&A transactions should naturally be encouraged to search the PPS Register to determine whether there are any substantial impediments to clear title.

So, although the substance may not change significantly, key concepts and definitions under the PPSA will require review and a fresh mindset. Consequently, standard terms and conditions will need to be refreshed across a range of bid documents to conform them with the new terminology and the extended concept of security interest used in the PPSA, including implementation agreements, bidder’s statements, target’s statements etc. This will include prescribed occurrences and unacceptable action provisions, as well as representations and warranties as to security interests, and other encumbrances given by accepting shareholders.

Does the PPSA affect bid planning and due diligence?

Not substantially, but it does affect due diligence because of the information which will be publicly available on the new PPS Register.

One change is that the existing registration system for charges will be replaced by way of registration of a financing statement – which is a notice of the security agreement. The new system also applies to other forms of security interests, including security interests not previously required to be registered. Unlike the existing system in relation to the registration of charges, the actual security agreement creating the security interest does not need to be lodged on the PPS Register, only the financing statement.

So, bidders will need to sift through more information (because of the extended reach of the types of security interests that will be capable of registration), as this information will potentially be of a lesser quality (because the underlying security agreements themselves are not required to be lodged on the PPS Register).

In addition, searches of the PPS Register will not be conclusive: there may be security interests in the assets of a target company which have not been perfected by registration.

Existing security interests already recorded on an appropriate register – eg charges on the ASIC company register – will be migrated automatically to the new PPS Register. But it is important to note that security interests that have not been migrated to the PPS Register (for example, interests which previously did not require registration) will receive temporary perfection (and priority) for a 24 month transitional period after the PPS Register comes into effect even though they will not appear on the PPS Register.

Management of target companies should review their contracts to determine what security interests should be registered, for example goods supplied under contracts which contain retention of title provisions.

What about ‘bolt-on’ acquisitions – what is the impact for their asset sale/acquisition documents?

Again, the substance is not expected to change significantly, however companies involved in private treaty M&A activity should think about the following:

Terminology – as above, standard terms and conditions will need to be refreshed.
Release documents – documents releasing any applicable security interests will need to be provided at completion.
Warranties – new warranties should be sought that all security interests capable of registration under the PPSA have been so registered. This is because a failure by a vendor to avail itself of the mechanisms under the PPSA to perfect securities it holds from its own customers will materially affect the value of the business it may be seeking to sell to a purchaser. A warranty, of course, will never trump perfection of a security interest by registration, and this should not be overlooked by companies preparing assets for sale.
Refundable deposits – purchasers should consider what security interests should be registered where a refundable deposit has been paid in advance of completion (which may ultimately fail).
Deferred purchase consideration – vendors need to think about perfecting security interests where an element of the purchase consideration payable by the purchaser is deferred. Traditional security, such as a share mortgage, to secure any unpaid purchase price under a sale agreement will become a specific security agreement/deed, and should be registered on the PPS Register.
What about joint venture arrangements?

Parties should also review their joint venture arrangements, in particular where there is the possibility of venturers diluting the joint venture interests of fellow venturers. The right to acquire the personal property of another party under a joint venture agreement (such as its shares or joint venture interest) might be registrable under PPS Register.

When do I need to start getting organised?

Now!

However, as noted in our 14 February 2011 client alert, the Council of Australian Governments has announced that the commencement of the new PPSA regime will be delayed until October 2011.

The delay will allow industry a further period in which to prepare for this fundamental change to securities law and related processes.

> Running the numbers: A quantitative review of Takeovers Panel activity in 2010

All parties involved in a public ‘change of control’ transaction such as a takeover bid or scheme of arrangement are typically wary of taking steps that might result in proceedings being commenced before the Takeovers Panel. A declaration of ‘unacceptable circumstances’ by the Panel can, depending on any remedial orders made by the Panel, or any enforceable undertakings required by it, significantly slow the progress of a transaction. Worse still, it can derail it completely if the Panel decides to undermine the commercial appeal of a transaction or if the only remedy able to repair the harm done is to unravel the entire transaction.

This note, via a high level quantitative review of the Panel’s decisions over the last four years, attempts to identify a number of emerging trends about the nature of the matters that end up in the Panel and the likelihood of the Panel taking action.

How many transactions end up in the Panel?

There were approximately 96 takeover bids and schemes of arrangement announced publicly in 2010. This compares favourably with the number announced in 2009 (105) and 2007 (119), remaining well up on the number announced during 2008 (77) – the year that bore the brunt of the GFC. In the 2010 calendar year, the Panel handed down 15 decisions (12 first instance decisions, two Review Panel decisions proceedings commenced in 2010 and one Review Panel decision relating to proceedings commenced in 2009). This compares with 26 decisions in 2009, 29 decisions in 2008 and 33 decisions in 2007.

It is clear that the number of Panel decisions in any one year is only a relatively small percentage of the number of transactions announced in that year. The other point to note here is that this survey only covers the Panel proceedings in which the Panel published its reasons. It does not capture the proceedings that were filed but never commenced, perhaps because they were withdrawn by the parties (for example, in 2010 there were 26 applications filed but only 12 new matters were actually the subject of a Panel decision).

Overall, the number of Panel decisions appears to rise and fall along with the rise and fall of the total number of ‘public change of control’ transactions, although it appears that testing trading conditions also make it more likely that a matter will end up in the Panel. In 2008, the number of Panel decisions was equal to almost 40% of the number of ‘public change of control’ transactions, while in 2007 and 2009 this figure was closer to 25%. In 2010, this figure fell to only 15%. It will be interesting to see whether this is an anomaly or a long term trend, possibly driven by the increasing acceptance of the guidance being given by the Panel as setting the relevant market standard.

What are some of the characteristics of matters that end up in the Panel?

The pattern of Panel decisions in 2010 makes clear that while takeover bids continue to provide the majority of the transactions considered by the Panel, other types of transactions involving changes of control also feature. Of the transactions considered by the Panel in 2010, nine involved takeover bids, two involved schemes of arrangement (Transurban Group [2010] ATP 5 and Ross Human Directions Ltd [2010] ATP 8) and two involved rights issues (TheChairmen1 Pty Ltd and Guildford Coal [2010] ATP 10 and Vesture Limited 02 [2010] ATP 15). The Panel also had the opportunity in 2010 to consider the potential downstream acquisition of a controlling stake in Leighton Holdings Ltd by Actividades de Construccion y Servicios SA (ACS) as the consequence of the then potential purchase by ACS of an increased interest in Leighton’s holding company, Hochtief AG, on the Frankfurt Stock Exchange (Leighton Holdings Limited 01, 02 and 03 [2010] ATP 13 and Leighton Holdings Limited 02R [2010] ATP 14).

In general, the proceedings before the Panel in 2010 were initiated by a bidder, although some were initiated by a target (e.g. Mesa Minerals Limited [2010] ATP 4 and NGM Resources Limited [2010] ATP 11). However, the fact that both schemes and rights issues have featured in transactions before the Panel demonstrates that, while it is not common, it is not unusual for third parties (i.e. not the bidder or target actually involved in the control transaction) to commence Panel proceedings. It also suggests that companies contemplating rights issues, which may not previously have prompted much consideration of Panel issues, should now also give some thought to the likely attitude of their shareholders and the potential for Panel action.   

It also appears that deal value is unlikely to be relevant to whether or not a matter will be the subject of Panel proceedings. The value of the transactions considered by the Panel in 2010 varied by a significant margin. For example, at one end of the scale the rights issue involved in Vesture Limited 02 [2010] ATP 15 was valued at approximately $6.5 million. At the other end of the scale, the value of the takeover bid at issue in Macarthur Coal Ltd [2010] ATP 3 was approximately $668 million.

How often does the Panel take action?

As noted above, the potential consequences for a transaction if the Panel makes a declaration of ‘unacceptable circumstances’ or accepts an enforceable undertaking can be serious. Of the 12 first instance Panel decisions in 2010, only two of these resulted in the making of a declaration of ‘unacceptable circumstances’. Of the three matters that were then the subject of Review Panel proceedings, only one additional declaration of ‘unacceptable circumstances’ was made. This suggests that even when a party is aggrieved enough to take a matter to the Panel, the chances of obtaining remedial orders in those proceedings are generally quite low.

Of course, this can regularly be explained by the party whose conduct has precipitated the proceedings taking unilateral action, such as reversing the offending conduct or giving undertakings to the Panel that the relevant conduct will be modified or will not occur again, in order to remove the need for formal orders to be made. More generally, this trend of only a small number of cases actually giving rise to remedial orders might also suggest that, while some parties may not like it, in general most transactions fall within the parameters of the guidance provided by the Panel in its previous decisions and published guidance notes.

How often are Panel decisions appealed?

As noted above, only three of the 15 decisions handed down by the Panel in 2010 were Review Panel decisions. This is similar to the number of Review Panel decisions handed down in recent years, with five being handed down in 2009, two in 2008 and three in 2007. In general, it appears that the parties to Panel proceedings rarely see value in appealing the first instance decision. In circumstances where a declaration has not been made, this may reflect the speed at which public “change of control” transactions can move, as well as appreciating that where the Panel has had to make a decision about good commercial practice, it is likely to prove difficult to convince a Review Panel to reach a different decision (unless there is a clear error). Unless the result of the declaration is to effectively halt or unwind the proposed transaction, where a declaration has been made it may be easier for the offending parties to simply comply with the Panel’s requirements rather than commence Review Panel proceedings. It may also reflect the fact that a Review Panel is really a rehearing of the issues rather than a true appeal of the original decision – generally speaking, it is difficult to see why a rehearing of the same points will result in a different outcome.

Conclusion

Public M & A activity in 2011 has got off to a strong start with ten public ‘change of control’ transactions (including takeover bids and schemes) being announced in the first two months of the year, including Independence Group NL’s $531 million bid for Jabiru Metals Ltd, Southern Cross Network Pty Ltd’s $689 million bid for Austereo Group Limited and a recommended bid for Redflex from a consortium comprising The Carlyle Group and Macquarie. Minter Ellison is acting for Austereo Group Limited and Redflex respectively.

The Panel has already handed down its reasons for three decisions in 2011 (Viento Group Limited [2011] ATP 1, Northern Energy Corporation Limited [2011] ATP 2 and Brockman Resources Limited [2011] ATP 3) and if it maintains its current level of work, will hand down more decisions in 2011 than 2010. We will be watching to see to what the Panel’s numbers for this year have to tell us about the landscape of public “change of control” transactions in Australia.