Overview of Company Takeovers in Australia

Introduction

• Australia has a well-established M&A market with sophisticated players.
• Corporate law aspects are the focus, but there are other important rules:
  • Foreign Bidders: Need government approval.
  • Anti-trust Laws: Regulate anti-competitive takeovers.
• Comparison to UK:
  • Similar emphasis on fair and informed markets, non-entrenchment by directors, and equal treatment of shareholders.
  • Both have a takeovers panel.
  • Difference in takeover threshold: UK has a 30% rule, Australia has a 20% rule.

Types of Transactions

1. Takeover Bid

• Bidder makes offers to shareholders to buy shares.
• Control is gained once enough acceptances are received.

2. Scheme of Arrangement

• Involves shareholders meeting and voting on the acquisition.
• Effective once approved by shareholders and the court.

Choosing Between Takeover Bid and Scheme of Arrangement

• Friendly Transactions: Scheme of arrangement is suitable as it requires target company involvement.
• Hostile Transactions: Takeover bid can proceed without target company support.
• Approval Thresholds:
  • Takeover bid: Requires 90% acceptances for compulsory acquisition.
  • Scheme of arrangement: Requires 75% shareholder support during the meeting.
• Recent trends favor schemes of arrangement due to less risk-averse bidders and the need for due diligence.

Process of a Takeover Bid

1. Announcement: Made to the stock exchange.
2. Bidder Statement: Formal offer document including intentions, offer terms, and financing details.
3. Two-Week Pause: Required before sending to shareholders.
4. Target Statement: Response from the target company with directors' recommendations.
5. Response: Bidder can amend the bid—e.g., increase price or drop conditions.
6. 90% Acceptances: Needed to start compulsory acquisition.
7. Timeline: Typically takes 3-4 months.

Process of a Scheme of Arrangement

1. Formal Agreement: Between target and bidder detailing price and conditions.
2. Scheme Booklet: Disclosure document with proposal terms and expert report.
3. ASIC Review: Two-week review period for comments.
4. Court Approval: Judge reviews and approves booklet.
5. Shareholder Meeting: 75% support and headcount test needed.
6. Court Approval Post-Meeting: Final approval to make the scheme binding.
7. Implementation: Takes about 3-4 months total.

Conclusion

• Overview provided on main rules of company takeovers in Australia.
• Complex rules exist, further information available through contact or guidebooks.
• Contact details available at herbertsmithfreehills.com.