FEDERAL COURT OF AUSTRALIA
Corporations Act 2001 (Cth) s 411(1)
Re CSR Ltd (2003) 45 ACSR 34 cited
Hills Motorway [2002] NSWSC 897 cited
Re James Hardie Industries Ltd [2001] NSWSC 741cited
IN THE MATTER OF BRAMBLES INDUSTRIES LIMITED (ACN 000 129 868)
AND THE CORPORATIONS ACT 2001 (CTH)
NSD 1606 OF 2006
LINDGREN J
26 SEPTEMBER 2006
SYDNEY
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
NSD 1606 OF 2006 |
IN THE MATTER OF BRAMBLES INDUSTRIES LIMITED (ACN 000 129 868) AND THE CORPORATIONS ACT 2001 (CTH)
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BETWEEN: |
BRAMBLES INDUSTRIES LIMITED (ACN 000 129 868) Plaintiff
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LINDGREN J |
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DATE OF ORDER: |
13 SEPTEMBER 2006 |
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WHERE MADE: |
SYDNEY |
THE COURT ORDERS THAT:
1. Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (“the Act”), there be convened a meeting (“the BIL Scheme Meeting”) of all shareholders of the Plaintiff for the purpose of considering and, if thought fit, approving, with or without modification, a scheme of arrangement between them and the Plaintiff (“theBIL Scheme”).
2. The BIL Scheme Meeting be held on Thursday, 9 November 2006 at the Mayfair Ballroom, Grand Hyatt Melbourne, 123 Collins Street, Melbourne, Victoria, commencing at 10:30 am AEDT (or as soon thereafter as the 2006 Annual General Meeting of the Plaintiff, convened for 10:00 am AEDT on the same day and at the same place, shall be concluded or been adjourned).
3. The BIL Scheme Meeting can resolve to be adjourned.
4. Mr Donald Robert Argus AO or, should he be unable to attend for any reason, Mr Mark Douglas Irving Burrows or any other director of the Plaintiff in his place, is to chair the BIL Scheme Meeting and any adjournment of the BIL Scheme Meeting.
5. The shareholders who are eligible to vote at the BIL Scheme Meeting are those whose names are recorded in the register of members of the Plaintiff at 7:00pm AEDT on Tuesday, 7 November 2006.
6. The draft:
(a) explanatory statement entitled “Brambles Information Memorandum Unification Proposal” provided to the Court on 13 September 2006 and marked “Exhibit AA” (“the Explanatory Statement”);
(b) proxy forms contained in tab 6 of the folder provided to the Court on 8 September 2006 and marked “Exhibit CV1” (“Proxy Forms”);
(c) election forms contained in tab 7 of the folder provided to the Court on 8 September 2006 and marked “Exhibit CV1” (“Election Forms”);
be and are hereby approved.
7. The convening of the BIL Scheme Meeting be advertised once in each of The Australian, The Age and The Sydney Morning Herald newspapers in the form, or substantially in the form, of the annexure to these Orders marked “A”, such advertisement to be published not less than 14 days before the date appointed for the BIL Scheme Meeting.
8. The application under subs 411(4) of the Act for orders approving the BIL Scheme be advertised once in each of The Australian, The Age and The Sydney Morning Herald newspapers in the form, or substantially in the form, of the annexure to these Orders marked “B”, such advertisement to be published not less than five days before the date appointed for the hearing.
9. By no later than 29 September 2006, documents in the form, or substantially in the form, of the Explanatory Statement and Proxy Forms be posted by pre-paid post (or, in the case of any holder of the Plaintiff’s shares whose registered address is outside the country, by airmail or dispatched by air courier for postage overseas) to each of the holders of the Plaintiff’s shares as recorded in the register of members of the Plaintiff on 19 September 2006.
10. By no later than 24 October 2006, documents in the form, or substantially in the form, of the “BIL Cash Alternative Booklet” contained in Part 20 of the Explanatory Statement and the Election Forms relevant to BIL shareholders be posted by pre-paid post (or, in the case of any holder of the Plaintiff’s shares whose registered address is outside the country, by airmail or dispatched by air courier for postage overseas) to each of the holders of the Plaintiff’s shares as recorded in the register of members of the Plaintiff on 18 October 2006.
11. The Plaintiff be dispensed from compliance with:
(a) Rule 2.15 of the Federal Court (Corporations) Rules, except in so far as that rule applies Regulation 5.6.13 of the Corporations Regulations to the meetings; and
(b) Replaceable Rules (within the meaning of s 135 of the Corporations Act) which appear in part 2G.2 of the Corporations Act, to the extent that a Replaceable Rule in that part is displaced or modified by the Plaintiff’s constitution.
12. The proceeding be adjourned to 9.30am on Friday, 24 November 2006.
13. The Plaintiff has liberty to apply.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
ANNEXURE A
Newspaper Advertisement – Meeting to consider Scheme of Arrangement
BRAMBLES INDUSTRIES LIMITED
(ACN 000 129 868)
MEETING TO CONSIDER SCHEME OF ARRANGEMENT
NOTICE IS GIVEN THAT, in accordance with an order of the Federal Court of Australia, a meeting of all holders of shares in Brambles Industries Limited (BIL) will be held at 10:30 am AEDT (or as soon thereafter as the 2006 Annual General Meeting of BIL, convened for 10:00 am AEDT on the same day and at the same place, shall be concluded or has been adjourned) on Thursday, 9 November 2006 at Mayfair Ballroom, Grant Hyatt Melbourne, 123 Collins Street, Melbourne, Victoria for the purpose of considering and, if thought fit, approving a resolution to agree (with or without any modification as approved by the Court) an arrangement proposed to be entered into between BIL and the holders of shares in BIL more particularly set out in a scheme of arrangement contained in an information memorandum that has been sent to BIL members.
Members can obtain a copy of the information memorandum (which includes an explanatory statement under s412 of the Corporations Act 2001 (Cth)) by collecting it personally at Level 40, Gateway Plaza, 1 Macquarie Place, Sydney between the hours of 9am and 5pm on weekdays.
NOTICE IS ALSO GIVEN that if the arrangement is agreed, an application for orders to approve the arrangement will be returnable before the Court in Sydney at 9.30 am on Friday, 24 November 2006. Any person proposing to be heard on such motion should give prior notice to BIL’s solicitors, Allens Arthur Robinson of Deutsche Bank Place, Corner of Hunter & Phillip Streets, Sydney (02) 9230 4000 (Attention: Messrs Guy Alexander and Jeremy Low).
BY ORDER OF THE BOARD
Craig Van Der Laan de Vries
Company Secretary
ANNEXURE B
Notice of Hearing to Approve Compromise or Arrangement
TO all the creditors and members of:
BRAMBLES INDUSTRIES LIMITED
(ACN 000 129 868)
TAKE NOTICE that at 9.30am on Friday, 24 November 2006, the Federal Court of Australia at the Law Courts Building, Queens Square, Sydney, will hear an application by Brambles Industries Limited (BIL) seeking the approval of a compromise or arrangement between BIL and its members as proposed by a resolution passed by the meeting of the above members of BIL held on 9 November 2006.
If you wish to oppose the approval of the compromise or arrangement, you must file and serve on BIL a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on BIL at its address for service at least one day before the date fixed for the hearing of the application.
Address for service of BIL: Allens Arthur Robinson of Deutsche Bank Place, Corner of Hunter & Phillip Streets, Sydney NSW 2000, ph (02) 9230 4000, fx (02) 9230 5333 (Attention Messrs Guy Alexander and Jeremy Low).
Name of person giving notice or of person's legal practitioner: Messrs Guy Alexander and Jeremy Low.
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
NSD 1606 OF 2006 |
IN THE MATTER OF BRAMBLES INDUSTRIES LIMITED (ACN 000 129 868) AND THE CORPORATIONS ACT 2001 (CTH)
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BETWEEN: |
BRAMBLES INDUSTRIES LIMITED (ACN 000 129 868) Plaintiff
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JUDGE: |
LINDGREN J |
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DATE: |
26 SEPTEMBER 2006 |
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PLACE: |
SYDNEY |
REASONS FOR JUDGMENT
(First court hearing)
INTRODUCTION
1 On 13 September 2006 I made orders pursuant to s 411(1) of the Corporations Act 2001 (Cth) (“the Act”) that the plaintiff (“BIL”) convene a meeting (“the BIL Scheme Meeting”) of all shareholders of BIL on 9 November 2006, for the purpose of considering, and, if thought fit, approving, with or without modification, a scheme of arrangement between themselves and BIL (“the BIL Scheme”). The following are the reasons why I made those orders. They are based closely on the written submissions of senior counsel for BIL.
GENERAL BACKGROUND
2 BIL is a company registered in New South Wales. BIL and Brambles Industries Plc (“BIP”), a company incorporated in England and Wales, are parties to a dual-listed companies structure (“DLC Structure”) under which they operate as a single economic enterprise with common directors and senior managers (“Brambles Group”), while retaining separate legal identities, tax residences and stock exchange listings. BIL is listed on the Australian Stock Exchange (“ASX”), and BIP is listed on the London Stock Exchange (“LSE”). BIL and BIP have operated under the DLC Structure since 7 August 2001.
3 Pursuant to a plan announced on 29 November 2005, BIL and BIP propose to unify the DLC Structure under a single Australian holding company, Brambles Limited. Brambles Limited will have a primary listing on the ASX and a secondary listing on the LSE. The unification stage of this restructuring was preceded by the divestment of certain businesses assets of the Brambles Group. The remaining major businesses of the Brambles Group operate under the business names, “CHEP” (an acronym for “Commonwealth Handling Equipment Pool”) and “Recall”.
4 The proposed unification is to be effected by way of two schemes of arrangement: one being the BIL Scheme, and the other being between BIP and its shareholders under English law (“the BIP Scheme”) (the BIL Scheme and BIP Scheme together, “the Schemes”). The Schemes are each conditional on the other becoming effective.
5 Each Scheme is a “tophatting” scheme, because a new holding company (Brambles Limited), will be superimposed, shareholders in BIL and BIP becoming shareholders of Brambles Limited, and each of BIL and BIP becoming a wholly owned subsidiary of that company.
6 If the Schemes are implemented:
(a) BIL shareholders will have their shares in BIL transferred to Brambles Limited in return for the issue to them of shares in Brambles Limited (on a one-for-one basis) or payment to them of cash by Brambles Limited (under “the Cash Alternative” discussed below); and
(b) BIP shareholders will similarly have their shares in BIP transferred to Brambles Limited in return for the issue to them of shares in Brambles Limited (on a one-for-one basis) or cancelled in return for the payment to them of cash by Brambles Limited under the Cash Alternative (in which case BIP would issue to Brambles Limited, or to a wholly owned subsidiary of Brambles Limited, new shares in BIP to replace those cancelled).
7 The question for the Court on this first hearing is whether the BIL Scheme is such that, if BIL shareholders agree to it by the required majority, and no objection comes to light at or by the time of the second court hearing, the Court will be likely to approve it under s 411(4)(b), (6) of the Act.
8 The BIL Scheme will cease to have any further force or effect unless, within a specified period, orders of the High Court of Justice of England and Wales sanctioning the BIP Scheme and confirming the reduction of capital provided for in it, come into effect by the delivery of office copies of those orders to the Registrar of Companies (UK) and registration of those orders by that Registrar.
PERFORMANCE RISK
9 The date for implementation of the BIL Scheme (the issue of shares in Brambles Limited, and the dispatch of cheques and direct credit advices for the Cash Alternative where applicable) is 4 December 2006 (“the Implementation Date”). Clause 4.2 of the BIL “Information Memorandum” (or “explanatory statement”, to use the expression found in s 412 of the Act) provides that, subject to, inter alia, the provision of the “BIL Scheme Consideration” (the issue of shares in Brambles Limited or the Cash Alternative), on the Implementation Date, all of the BIL “Scheme Shares” will be transferred to Brambles Limited, without the need for any further act by any BIL Scheme shareholder, by BIL’s effecting a valid transfer or transfers of the BIL Scheme shares to Brambles Limited under s 1074D of the Act, or, if that procedure is not available for any reason, by certain other procedures. Thus, there appears to be no “performance risk” in the sense of a risk that the BIL shareholders will be divested of their shares in BIL without receiving the BIL Scheme Consideration.
THE CASH ALTERNATIVE
10 The boards of BIL, BIP and Brambles Limited (each of which is comprised of the same persons) recognise that not all of the existing shareholders of BIL and BIP will wish to hold, or be able to hold, shares in Brambles Limited following unification. They also consider that, following the divestment of businesses referred to earlier, the Brambles Group will have cash in excess of its requirements. The Cash Alternative is designed to address those issues.
11 Under the Cash Alternative, with the exception of “Ineligible Overseas Shareholders” (discussed below), BIL shareholders will be able to elect to take their consideration from Brambles Limited in the form of cash, subject to a number of matters. If a shareholder does not elect to tender into the Cash Alternative, the shareholder will receive shares in Brambles Limited.
12 On or around 23 October 2006, BIL shareholders will be sent a BIL Cash Alternative Booklet, informing them how to tender their shares into the Cash Alternative. The booklet will be accompanied by an election form which will include tender price points. The BIL Cash Alternative Booklet will be dispatched no more than approximately twenty-five days after the Information Memorandum (titled “Brambles Information Memorandum Unification Proposal”) is dispatched. That is so as not to have an excessive time gap between the date the tender price points are set and the date for the receipt of tenders. The aim is to keep as short as possible the period during which the market price of BIL shares may be subject to unexpected fluctuations.
13 It is proposed that some of the fixed price points on the election form will be above, and some below, the market price at or around the date on which those prices are set. However, the lowest price on the election form will not be more than 15 percent below the volume-weighted average price of BIL shares for the five trading days prior to the date on which the prices are determined.
14 Shareholders may submit a “Final Price Tender” for all or part of their shareholding, one or more “Fixed Price Tenders” for all or part of their shareholding, or a combination of both kinds of tender.
15 A Final Price Tender is a tender of a specified number of shares in BIL to Brambles Limited at whatever price is ultimately determined by the Board of Brambles Limited to be the “Final Cash Alternative Price” (that price will be within the range of prices shown on the election form).
16 A Fixed Price Tender, on the other hand, is a tender of a specified number of shares to Brambles Limited at one of the prices set out on the election form. Of course, a shareholder submitting a Fixed Price Tender cannot receive less than the price at which the shares are tendered.
17 Under the Cash Alternative, election forms must be returned by 16 November 2006, one week after the BIL Scheme Meeting. The Final Cash Alternative Price will be announced on 20 November 2006. Shareholders who have tendered into the Cash Alternative will be able to determine on that date whether their tender has been accepted or not.
18 BIL has drawn the following particular matters to the Court’s attention:
(a) The maximum aggregate amount that Brambles Limited will make available under the Cash Alternative is US$2.2 billion. The actual amount will depend on the number of BIL and BIP shares tendered into the Cash Alternative, the prices at which they are tendered and the Final Cash Alternative Price as determined by the Board of Brambles Limited. Brambles Limited also reserves the right not to acquire any shares under the Cash Alternative. If it should so decide, its decision will be announced to the ASX and the LSE on 20 November 2006, and posted on the Brambles website. In such an event, all BIL and BIP Scheme shareholders (other than Ineligible Overseas Shareholders) will receive shares in Brambles Limited as consideration under the Schemes.
(b) The Final Cash Alternative Price will be determined in both Australian dollars (AUD) and United Kingdom pounds (GBP), using a Nominated Exchange Rate. The expression “Nominated Exchange Rate” is defined in the Information Memorandum as the closing mid-point spot rate on the Cash Alternative Record Date, unless a member of the Brambles Group has entered into any hedging arrangements under which it acquires or has the right to acquire any GBP or AUD which may be payable under the Cash Alternative, in which case the exchange rate is the volume weighted average of the exchange rates under those arrangements. The object is to ensure that Brambles Limited will have an entitlement to sufficient GBP at a known exchange rate to enable it to determine the Final Cash Alternative Price in both AUD and GBP, without subsequently being exposed to foreign exchange rate movements.
(c) It is possible that the Final Cash Alternative Price may be below the market price of shares in BIL and BIP at the time when the Final Cash Alternative Price is determined. Thus, shareholders could receive via the Cash Alternative less than the market price of their shares. However, as senior counsel for BIL points out:
(i) If that should prove to be the case, that is no more than a reflection of the demand for the Cash Alternative, being a demand expressed on a Final Price Tender basis or a Fixed Price Tender basis, or both, at known price point(s) at the time of tender;
(ii) The possibility that the Final Cash Alternative Price may be below the market price at the time the Final Cash Alternative Price is determined is made clear to shareholders at the time of their choosing to participate in the Cash Alternative;
(iii) A shareholder submitting a Fixed Price Tender cannot receive a cash consideration less than the price stipulated in that tender.
It should also be noted that shareholders are able to withdraw or amend their tenders by following certain procedures set out in the BIL Cash Alternative Booklet by 7:00 pm AEDT on the “record date” for the Cash Alternative (16 November 2006).
19 The Cash Alternative process is in many respects similar to the off-market share buy-back process which has been used in recent years in Australia, by corporations such as Coles Myer Limited, BHP Billiton Limited, Westpac Banking Corporation, Rio Tinto Limited, Telstra Corporation Limited, Commonwealth Bank of Australia, Woolworths Limited and Mayne Group Limited. There are in evidence copies of the “Off-market buy-back booklets” in the cases of Coles Myer Ltd, BHP Billiton Ltd, Westpac Banking Corporation, Rio Tinto Ltd and Mayne Group Ltd. The similarities include the following:
(a) The steps required to be taken by shareholders when submitting their tender into the Cash Alternative are similar to those of a typical off-market share buy-back.
(b) The company has an absolute discretion to accept or reject tenders, just as BIL shareholders tendering in to the Cash Alternative are not assured that their tenders will be accepted or that the Cash Alternative will proceed at all.
(c) The Cash Alternative election forms are generally similar in structure and presentation, to the tender forms typically used in off-market share buy-backs.
(d) The option of tendering on either a Final Price Tender or Fixed Price Tender basis is similar to the process in typical off-market share buy backs.
20 A difference between the two processes is that under the Cash Alternative, a company will not be buying back its own shares: rather, it is Brambles Limited that will acquire and pay for the shares in BIL (and BIP) pursuant to a tender by the holders of those shares.
21 Other differences include differences in relation to taxation, and the fact that an off-market buy-back of less than 10 percent of the company’s voting shares would not be conditional on a shareholder vote or Court approval.
22 The similarities and differences between the Cash Alternative and an off-market buy-back are dealt with in an affidavit of Karen Phin, a Managing Director and Head of Capital Management at UBS AG’s Australian branch.
INELIGIBLE OVERSEAS SHAREHOLDERS
23 Ineligible Overseas Shareholders will not receive shares in Brambles Limited or participate in the Cash Alternative under the Schemes, unless Brambles Limited is satisfied that it is lawful for them to do so. The reason for this exclusion is that an investigation of, and compliance with, the securities law restrictions in every country in which there are BIL shareholders would be prohibitively costly. For their shares in BIL, Ineligible Overseas Shareholders will receive the proceeds of sale of their Brambles Limited share entitlement. The Brambles Limited shares which would otherwise be issued to them under the BIL Scheme will be issued to a nominee who will sell them on the ASX. The proceeds will then be paid to Brambles Limited and forwarded by it to the Ineligible Overseas Shareholders (who will not be charged any brokerage costs).
24 In Re James Hardie Industries Ltd [2001] NSWSC 741 at [4], Santow J accepted that foreign shareholders who received cash consideration in lieu of shares were not a separate class of shareholders for the purposes of voting on a scheme. A similar approach was taken by Conti J in Re CSR Ltd (2003) 45 ACSR 34 at [5] and by Barrett J in Hills Motorway [2002] NSWSC 897 at [10].
FINANCIAL ASSISTANCE
25 It is proposed that BIL will provide financial assistance to Brambles Limited to acquire the shares in BIL and BIP, (a) by lending to Brambles Limited the amount payable under the Cash Alternative; (b) by lending to Brambles Limited for Brambles Limited to pay, or by itself paying, certain costs and expenses associated with the unification; and (c) by agreeing that Brambles Finance Limited (“BFL”) and Brambles Finance plc (“BFP”), both of which are wholly owned subsidiaries of BIL, may draw down on existing committed bank credit facilities guaranteed by BIL and BIP in order to fund the loans to BIL which will then be on-lent to Brambles Limited as described in (a) and (b) above.
26 It is also proposed that BFL will provide financial assistance to Brambles Limited by drawing down on the existing committed bank credit facilities referred to above, and by using amounts it holds on deposit with banks, in order to fund the loans to BIL which will then be on-lent to Brambles Limited as described in (a) and (b) above.
27 There is an exception to the limitation on financial assistance under the Act where the assistance is approved by special resolution at a meeting of shareholders of the company (and, where that company is a subsidiary of a listed Australian company, shareholders in the listed company): ss 260A, 260B. Approval of the provision of the financial assistance by BIL and its subsidiaries will be sought at an extraordinary general meeting of BIL.
SECTION 3(a)(10) OF THE US SECURITIES ACT 1933
28 Section 3(a)(10) of the United States Securities Act of 1933, 15 USC § 77(c)(a)(10), provides an exemption from that Act, for registration for offers and sales of securities in “exchange transactions”.
29 One of the conditions of the exemption is that the court must be informed, before any hearing at which a scheme is approved, that the exemption is intended to be relied on. Section 3(a)(10) provides:
“Except with respect to a security exchanged in a case under Title 11 [of the United States Code], any security which is issued in exchange for one or more bona fide outstanding securities, claims or property interests, or partly in such exchange and partly for cash, where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court, or by any official or agency of the United States, or by any State or Territorial banking or insurance commission or other governmental authority expressly authorized by law to grant such approval.”
30 BIL has informed the Court that if the Court makes an order approving the BIL Scheme, that order will be relied upon for the purposes of this exemption.
EVIDENCE RELATING TO DISCRETION
31 I will not summarise all of the affidavit evidence that is before the Court. The Information Memorandum for BIL shareholders is in evidence, as is evidence supporting its correctness, in particular, as to taxation matters. There is evidence of a “due diligence” process that has been carried out directed to checking the correctness of the Information Memorandum.
32 Importantly, there is an independent expert’s report by Grant Samuel & Associates Pty Ltd, verified by an affidavit of Jaye Louise Gardner, a director of that company, which concludes that in its opinion, “the proposed unification is in the interests of BIL shareholders”, and “BIL shareholders are likely to be better off if the proposed unification is implemented than if it is not” (Information Memorandum, Pt 19 at 48).
33 Finally, the Australian Securities and Investments Commission has been supplied with a copy of the draft Information Memorandum and has advised that it does not currently propose to appear to make submissions or to intervene to oppose approval of the proposed BIL scheme.
CONCLUSION
34 There should be an order that BIL convene a meeting of its shareholders in order that they have an opportunity to consider and vote upon the BIL Scheme.
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I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. |
Associate:
Dated: 26 September 2006
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Counsel for the Plaintiff: |
Mr T F Bathurst QC |
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Solicitor for the Plaintiff: |
Allens Arthur Robinson |
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Dates of Hearing: |
12, 13 September 2006 |
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Date of Judgment: |
13 September 2006 |
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Date of publication of Reasons: |
26 September 2006 |
