Anzon Australia Limited, in the matter of Anzon Australia Limited [2008] FCA 309 (4 March 2008)

Last Updated: 12 March 2008

FEDERAL COURT OF AUSTRALIA

Anzon Australia Limited, in the matter of Anzon Australia Limited

[2008] FCA 309

ANZON AUSTRALIA LIMITED
(ABN 46 107 406 771)

NSD 264 OF 2008

LINDGREN J
4 MARCH 2008
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 264 OF 2008

IN THE MATTER OF ANZON AUSTRALIA LIMITED (ABN 46 107 406 771)

BETWEEN:

ANZON AUSTRALIA LIMITED (ABN 46 107 406 771) Plaintiff

JUDGE:	LINDGREN J
DATE OF ORDER:	4 MARCH 2008
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:


1. Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Act):

(a) the Plaintiff, Anzon Australia Limited (Anzon) convene a meeting (Scheme Meeting) of the ordinary shareholders in Anzon other than the holders of Excluded Shares, for the purpose of considering and, if thought fit, agreeing to a Scheme of Arrangement (with or without modification) proposed to be made between Anzon and its ordinary shareholders, other than the holders of Excluded Shares, the terms of which are contained in annexure B of the scheme booklet which is exhibit 1 in these proceedings (Scheme Booklet);

(b) the Scheme Meeting to be held on 18 April 2008 at 2.00 pm at Deacons, Level 18, Grosvenor Place, 225 George Street, Sydney in the State of New South Wales;

(c) Stephen Joseph Koroknay or failing him Andrew Alexander Young, act as Chairman of the Scheme Meeting;

(d) the Chairman have the power to adjourn the Scheme Meeting for such time that the Chairman considers appropriate;

(e) the Explanatory Statement comprising the Scheme Booklet be approved for distribution to shareholders;

(f) the Scheme Booklet to be dispatched to each of the shareholders of the plaintiff be in the form or to the effect of exhibit 1 and may be sent by pre-paid post, and in the case of a member of the plaintiff whose registered address is outside the country, by pre-paid airmail post, or dispatched by air courier for overseas pre-paid post; and

(g) the proposed ASX announcement in terms of paragraph 65 of the affidavit of Andrew Alexander Young sworn 4 March 2008 be approved as a matter of form.

2. Rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) shall not apply to the Scheme Meeting, except in so far as that rule applies Regulation 5.6.13 of the Corporations Regulations 2001 (Cth).

3. The plaintiff publish a notice of the hearing of any application for an order approving the Scheme substantially in the form of "Annexure A" hereto on or before 15 April 2008, and the plaintiff is relieved from compliance with rule 3.4 of the Federal Court (Corporations) Rules 2000 (Cth) to the extent necessary.

4. The proceedings be adjourned to 22 April 2008 at 10:15 am before Justice Lindgren for hearing of any application to approve the Scheme.

5. The plaintiff be granted liberty to apply.

6. These Orders be entered forthwith.

An "Excluded Share" is a fully paid ordinary share in Anzon held by Nexus Energy Limited or its Related Bodies Corporate as defined in s 50 of the Act.



Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ANNEXURE A

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 264 OF 2008

IN THE MATTER OF ANZON AUSTRALIA LIMITED (ABN 46 107 406 771)

BETWEEN:

ANZON AUSTRALIA LIMITED (ABN 46 107 406 771) Plaintiff

JUDGE:	LINDGREN J
DATE:	11 MARCH 2008
PLACE:	SYDNEY

REASONS FOR JUDGMENT
(first court hearing)

INTRODUCTION

1 On 4 March 2008 I made an order pursuant to s 411(1) of the Corporations Act 2001 (Cth) (the Act) on the application of the plaintiff (Anzon Australia) that Anzon Australia convene a meeting of its ordinary shareholders, other than the holders of Excluded Shares, for the purpose of their considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement between Anzon Australia and its shareholders (Scheme Meeting, Shareholders and Nexus Scheme respectively). An Excluded Share is a fully paid ordinary share in Anzon Australia held by Nexus Energy Limited (Nexus) or its Related Bodies Corporate as defined in s 50 of the Act.

2 I also made an order pursuant to s 411(1) of the Act approving the explanatory statement required by s 412(1)(a) of the Act to accompany the notice convening the Scheme Meeting for distribution to the Shareholders.

3 The following are the reasons why I made those orders.

4 Earlier, on 13 December 2007, I had made similar orders in connection with a then proposed scheme (ARC Scheme) by which ARC Energy Limited (ARC) was proposing to acquire the shares in Anzon Australia other than fully paid ordinary shares held by ARC or its Related Bodies Corporate as defined in s 50 of the Act: see Anzon Australia Limited, in the matter of Anzon Australia Limited [2007] FCA 2079 (earlier Reasons). What has happened is that Nexus has made a superior offer in the light of which the directors of Anzon Australia have withdrawn its support for the ARC Scheme in favour of supporting the Nexus Scheme.

REASONING

5 The Nexus Scheme is very similar to the earlier ARC Scheme. In these circumstances, I have decided not to set out extensively my reasons for my making of the orders of 4 March 2008. I will ensure that a copy of the submissions dated 3 March 2008 of senior counsel for Anzon Australia is placed on the Court file. Those submissions reflect in substance my reasons. I will refer here only to certain aspects of the Nexus Scheme and evidence that appear to call for comment.

Break Fee

6 As noted in the earlier Reasons at [25]–[28], the Merger Implementation Deed (MID) for the ARC Scheme provided in cl 10 for a break fee of $4 million. Since the directors of Anzon Australia have withdrawn their support for the ARC Scheme in favour of the Nexus Scheme, that amount has been paid to ARC. The new MID between Anzon Australia and Nexus provides in cl 10 for a break fee in an identical amount. As under the earlier MID, there are reciprocal break fees and Anzon Australia’s liability to pay the break fee is not triggered simply by the Shareholders voting down the Scheme (a "naked no vote" break fee): cf Re Bolnisi Gold NL (No 2) [2007] FCA 2078. The amount of the break fee represents 0.63% of the total equity value of Anzon Australia, which is well below the Takeover Panel’s 1% "guidance ceiling". The reasonableness and appropriateness of the break fee is supported by affidavit evidence of the kind to which I referred in Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400 at [55].

A possible takeover bid for the shares in Anzon Australia

7 In the earlier Reasons at [16] I noted a feature which applies equally in the present case. If the Nexus Scheme is not agreed to by the Shareholders, but a certain related scheme between Anzon Energy Limited (which holds approximately 53% of the shares in Anzon Australia) and its shareholders is approved by them and by the Court, Nexus must make a takeover bid under Ch 6 of the Act in respect of the ordinary shares in Anzon Australia. The consideration which Nexus would offer under the takeover bid would the same as the "All Shares Consideration Option" under the Nexus Scheme. There would be no cash consideration. However, the Shareholders would be offered the opportunity to participate in a sale facility under which the Nexus shares offered would be sold.

Independent Expert’s Report

8 In relation to the earlier ARC proposal, Deloitte Corporate Finance Pty Ltd (Deloitte), an independent expert retained by the board of directors of Anzon Australia, assessed the then proposed ARC Scheme and concluded that the ARC Scheme was in the best interests of the shareholders in the absence of a superior proposal. Deloitte has performed a similar role in relation to the Nexus Scheme. In summary, Deloitte has assessed the fair market value of each share in Anzon Australia as lying between $1.40 and $1.60, and has estimated the value of the scheme consideration to be received (under the "default consideration", namely, a "Mixed Scheme Consideration Option") to be $1.75 per ordinary share in Anzon Australia. In its report in respect to the earlier proposed ARC Scheme, Deloitte had estimated the fair market of a share in Anzon Australia again to be between $1.40 and $1.60 and estimated the value of the scheme consideration to be received by the shareholders as being between $1.65 and $1.75 per ordinary share in Anzon Australia.

Announcement of further financial results by Nexus

9 Nexus intends to release its half year financial results to 31 December 2007 on 14 March 2008. This information will be an update of the financial information for Nexus contained in the Scheme Booklet. Deloitte will be asked whether the results released change its opinion that the Nexus Scheme is in the best interests of the Shareholders and, if they do not, an announcement will be made to the Australian Stock Exchange (ASX) to that effect. The orders that I made on 4 March 2008 provide for this.

Section 411(17) of the Act

10 The choice of a scheme rather than a takeover is not an indication that a purpose is to enable avoidance of the operation of any of the provisions of Ch 6 of the Act: see Re Hostworks Group Limited [2008] FCA 64 at [30].

11 It has been suggested that, if a certain conditional special dividend of seven cents per ordinary share in Anzon Australia is not paid to the Shareholders because the related scheme involving Anzon Energy does not become effective, the Nexus Scheme will not observe the equality of opportunity principle in Ch 6 of the Act as embodied in the minimum bid price principle found in s 621(3) of the Act.

12 Under s 621(3), the consideration offered under a takeover bid must equal or exceed the maximum consideration that the bidder or an associate provided or agreed to provide during the four months prior to the date of the bid.

13 The minimum bid price principle does not directly apply to schemes of arrangement: see Re Ranger Minerals Ltd; Ex parte Ranger Minerals Ltd [2002] WASC 207; (2002) 42 ACSR 582 at [32], [36] and [40]. Possible comparable dates to the date of a takeover bid, that is, the date on which offers are first made under a takeover bid, are the date of despatch of the scheme booklet, or the date of the meeting of the shareholders.

14 In the present respect, I accept the submission made by Senior Counsel for Anzon Australia in the following paragraphs of his written submissions:

44. Nexus acquired shares in Anzon Australia over the period 21 August 2007 to 3 December 2007, at prices ranging from $1.16 to $1.82 per ordinary share in Anzon Australia. The average price paid by Nexus during this period was $1.72 per ordinary share in Anzon Australia. The disclosure in section 12.2 of the Scheme Booklet includes details of all acquisitions by Nexus during such period, including between 20 September and 6 November 2007 at prices in excess of $1.75 being the value of the Scheme Consideration, ignoring the Special Dividend.

45. All of the purchases by Nexus in excess of $1.75 per share occurred more than 4 months before the proposed date of posting of the Scheme Booklet (expected to occur on 11 March 2008). Further, all such purchases also occurred more than 4 months before the expected date of approval of the Scheme Booklet (assuming such an order is made on 4 March 2008), other than the acquisition by Nexus on 6 November 2007 of 1,368,264 shares at $1.789.

46. There are sound reasons for the parties to proceed with a merger by way of scheme rather than takeover (see affidavit of Michael Fowler, paras 13 and 14; and Andrew Young, para 26). It is submitted that for temporal reasons alone, no issue arises in this case concerning the equality principle. In any event, the Scheme Consideration, valued by Deloitte, exceeds the fair market value of Anzon Australia shares, and the Shareholders will be given the opportunity to vote on the matter after full disclosure. See sections 1.4(2), 2(Q&A) and 12.2, Scheme Booklet (Re Ranger Minerals Ltd [2002] WASC 207; (2002) 42 ACSR 582 at [44]).

47. ASIC has indicated, following representations by the solicitors for Nexus, that it does not intend to appear and makes submissions on this issue at the first court hearing, but reserves its right to do so at the second court hearing.

CONCLUSION

15 It was for the above reasons and the additional reasons set out in Senior Counsel’s submissions to which I referred, that I was of the opinion that the Shareholders should have the opportunity of voting on the Nexus Scheme and that I ordered Anzon Australia to convene the Scheme Meeting.

I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate:

Dated: 11 March 2008

Counsel for the plaintiff:	Mr F Gleeson SC
Solicitor for the plaintiff:	Deacons
Counsel for Nexus Energy Limited:	Mr I M Jackman SC
Solicitor for Nexus Energy Limited:	Baker & McKenzie
Date of Hearing:	4 March 2008
Date of Judgment:	4 March 2008
Date of Publication of Reasons	11 March 2008