FEDERAL COURT OF AUSTRALIA

Oz Minerals Limited, in the matter of Oz Minerals Limited [2023] FCA 197

ORDERS

OTHER MATTERS:

A.    The Court notes that the requirement to give at least 14 days’ notice of the hearing of this application to the Australian Securities and Investments Commission (ASIC) as set out in s 411(2)(a) of the Corporations Act 2001 (Cth) (Act) has been satisfied.

B.    The Court is satisfied that ASIC has had a reasonable opportunity to:

(i)    examine the terms of the proposed scheme of arrangement to which the application relates and a draft explanatory statement relating to that arrangement; and

(ii)    make submissions to the Court in relation to the proposed scheme of arrangement and the draft explanatory statement.

C.    The Court notes the letter from ASIC to the directors of the plaintiff dated 2 March 2023 produced at the hearing.

THE COURT ORDERS THAT:

1.    Pursuant to s 411(1) and s 1319 of the Act, the plaintiff (OZ Minerals) convene and hold a meeting of its shareholders (Scheme Meeting):

(a)    for the purpose of considering and, if thought fit, approving (with or without alteration or condition), the scheme of arrangement (Scheme) proposed to be made between OZ Minerals and its shareholders (OZ Minerals Shareholders), the terms of which are set out in Annexure B to these orders; and

(b)    to be held on 13 April 2023 at 10:00am (Adelaide time) / 10:30am (Melbourne time) and to be conducted at 2 Hamra Drive, Adelaide Airport, Adelaide, South Australia and through an online platform at https://meetings.linkgroup.com.ozlscheme23.

2.    Pursuant to s 411(1) and s 1319 of the Act, the Scheme Meeting be convened by sending on or before 10 March 2023 (to those OZ Minerals Shareholders appearing on OZ Minerals’ register of members as at 3 March 2023):

(a)    an email to each OZ Minerals Shareholder who has elected to receive the Scheme materials from OZ Minerals electronically (Email Recipient) (or, in the case of joint holders, to the holder whose name appears first in OZ Minerals’ register), such email (Email Notification) to be substantially in the form which appears at pages 12 to 14 of Annexure NCP-2 to the affidavit of Neil Clarence Pathak sworn 2 March 2023 (Second Pathak Affidavit) and which contains hyperlinks to:

(i)    a website at which a copy of a document substantially in the form of the document which is at pages 100 to 595 of Annexure NCP-1 to the affidavit of Neil Clarence Pathak sworn 1 March 2023 (Scheme Booklet) (which contains, amongst other things, the Notice of Scheme Meeting at Appendix A and the proposed Scheme of Arrangement at Appendix C) and details of the Scheme Meeting can be accessed;

(ii)    an online software platform (Online Platform) accessible by the Email Recipient; and

(iii)     a website through which each Email Recipient can electronically access their personalised proxy form and lodge proxy instructions in relation to their shareholding for the Scheme Meeting online;

(b)    to each OZ Mineral Shareholder who has elected to receive the Scheme materials from OZ Minerals by pre-paid post or by prepaid airmail (Postal Recipients) a:

(i)    physical copy of the Scheme Booklet;

(ii)    personalised proxy form; and

(iii)    pro forma letter from the Chairman of OZ Minerals providing a link to a website at which the Scheme Booklet can be viewed and downloaded online, along with details of the Scheme Meeting and proxy appointment substantially in the form which appears at pages 15 to 16 of Annexure NCP-2 to the Second Pathak Affidavit (Shareholder Letter); and

(iv)    reply-paid envelope addressed to Link; and

(c)    to each OZ Mineral Shareholder who has not made a relevant election in relation to receipt of the Scheme materials and by default will be receiving by pre-paid post or by prepaid airmail to the address of that OZ Minerals Shareholder:

(i)    a personalised proxy form;

(ii)    the Shareholder Letter; and

(iii)    a reply-paid envelope addressed to Link.

3.    If OZ Minerals (through its share registry services provider, Link) receives an automatic electronic “bounce back” notification that the Email Notification was not able to be delivered to the nominated electronic address of any Email Recipient (Undelivered Email Recipient), those Email Recipients be sent:

(a)    a personalised proxy form;

(b)    the Shareholder Letter; and

(c)    a reply-paid envelope addressed to Link.

4.    The personalised proxy form referred to in Order 2(a)(iii), 2(b)(ii), 2(c)(i) and 3(a) shall be substantially in the form of Oz Minerals’ Exhibit 1 tendered in this proceeding.

5.    The documents referred to in Order 2(b), 2(c) and 3 be sent:

(a)    in the case of OZ Minerals Shareholders whose registered address is within Australia, by pre-paid ordinary post addressed to the relevant address recorded in OZ Minerals’ register; and

(b)    in the case of OZ Minerals Shareholders whose registered address is outside Australia, by pre-paid airmail addressed to the relevant address recorded in OZ Minerals' register.

6.    At various times up to and by no later than 11 April 2023, the documents referred to at Orders 2(a) to 2(c) be sent to those OZ Minerals Shareholders who come onto the OZ Minerals register of members between 4 March 2023 and 7 April 2023, in the manner described in Order 2(a) and 5 as applicable.

7.    OZ Minerals cause a copy of the Scheme Booklet to be provided to any OZ Minerals Shareholder if requested by them before the date of the Scheme Meeting.

8.    OZ Minerals may arrange to send, on a date to be determined by OZ Minerals:

(a)    to Email Recipients, a reminder to vote email, substantially in the form which appears at pages 69 to 71 of SF-1 to the affidavit of Steven Fulton sworn 1 March 2023 (Fulton Affidavit);

(b)    to Postal Recipients, a reminder to vote postcard, substantially in the form which appears at pages 17 to 18 of Annexure NCP-2 to the Second Pathak Affidavit; and

(c)    to those OZ Minerals Shareholders who have provided Link with a mobile number, a reminder to vote SMS, in substantially the same form as the text which appears at page 74 of Annexure SF-1 to the Fulton Affidavit.

9.    Compliance with r 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules) be dispensed with, except in so far as that rule applies to r 75-15(2) of the Insolvency Practice Rules (Corporations) 2016 (Cth).

10.    Subject to these orders, the Scheme Meeting be convened, held and conducted in accordance with the provisions of:

(a)    Part 2G.2 of the Act (save for any replaceable rule) that apply to a meeting of OZ Minerals’ members; and

(b)    OZ Minerals’ constitution that apply in relation to meetings of members and that are not inconsistent with Part 2G.2 of the Act.

11.    Voting on the resolution to agree to the Scheme be conducted by way of poll.

12.    As set out in the Notice of Meeting substantially in the form contained in Appendix A of the Scheme Booklet, OZ Minerals Shareholders who are eligible to vote at the Scheme Meeting will be those OZ Minerals Shareholders recorded in the register of members of OZ Minerals as at 7:00pm (Melbourne time), 11 April 2023.

13.    A proxy in respect of the Scheme Meeting will be valid and effective if, and only if, it is completed and delivered in accordance with its terms or a proxy is lodged online in accordance with its terms and received by OZ Minerals by 10:00am (Adelaide time) / 10:30am (Melbourne time) on 11 April 2023.

14.    Rebecca Joy McGrath or, failing her, Andrew Gregory Cole, be Chairman of the Scheme Meeting.

15.    The Chairman of the Scheme Meeting has the power to adjourn the Scheme Meeting to such time, date and at such place (including electronically) as the Chairman considers appropriate.

16.    OZ Minerals publish in The Australian newspaper once on or before 11 April 2023 an advertisement substantially in the form of Annexure A to these Orders and OZ Minerals otherwise be relieved from compliance with r 3.4 and Form 6 of the Rules to the extent necessary.

17.    The further hearing of the Originating Process is adjourned to the Honourable Justice Beach at 9:30am (Melbourne time) on 17 April 2023 or as soon thereafter as the business of the Court allows.

18.    OZ Minerals have liberty to apply on 3 days’ notice.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANNEXURE A

Notice of hearing to approve scheme of arrangement

TO all the members of OZ Minerals Limited (ACN 005 482 824) (OZ Minerals):

TAKE NOTICE that at 9:30am (Melbourne time) on 17 April 2023, the Federal Court of Australia (Victorian Registry) at 305 William Street, Melbourne, Victoria, 3000 will hear an application by OZ Minerals seeking the approval of a scheme of arrangement between OZ Minerals and its members (the Scheme) as proposed by a resolution to be passed by the members of OZ Minerals at the meeting to be held at 10.00am (Adelaide time) / 10:30am (Melbourne time) on 13 April 2023.

If you wish to oppose the approval of the compromise or arrangement, you must file and serve on OZ Minerals a notice of appearance, in the prescribed form, together with any affidavit upon which you wish to rely at the hearing. The notice of appearance and affidavit must be served on OZ Minerals at its address for service at least 1 day before the date fixed for the hearing of the application.

The address for service of OZ Minerals is OZ Minerals Limited, 2 Hamra Drive, Adelaide Airport, South Australia 5950, Australia (Attention: Company Secretary; Email: Julie Athanasoff@ozminerals.com)

ANNEXURE B

Scheme of Arrangement

[The order entered is available on the Commonwealth Courts Portal, which attaches the Scheme]

REASONS FOR JUDGMENT

BEACH J:

1    OZ Minerals Limited has sought an order pursuant to s 411(1) of the Corporations Act 2001 (Cth) to convene a meeting of the holders of its ordinary shares for the purposes of considering and if thought fit agreeing to a scheme of arrangement proposed to be made between them and OZ Minerals.

2    The Scheme if implemented will result in the acquisition of all OZ Minerals shares by BHP Lonsdale Investments Pty Ltd (BHP), a wholly owned subsidiary of BHP Group Limited, for $28.25 per OZ Minerals share, less the amount of any special dividend declared and paid by OZ Minerals. OZ Minerals will then be delisted.

3    OZ Minerals is a registered public company limited by shares. Its shares are admitted to the official list of the ASX. OZ Minerals is a copper and nickel focused mining company headquartered in South Australia with a portfolio of operating, development and exploration projects located primarily across Australia and Brazil. It has also flirted with farm-in arrangements in Scandinavia.

4    BHP Group Limited is the parent company of the BHP Group, a global resources business with a market capitalisation of approximately $226 billion. BHP Group’s operations are focused on the discovery, development, production and marketing of iron ore, copper, metallurgical coal, nickel and potash.

5    The aggregate amount of the scheme consideration to be payable by BHP is approximately $9.532 billion, less any special dividend to be declared and paid.

6    On 22 February 2023, OZ Minerals announced that it intended to declare before the scheme meeting a fully franked special dividend of $1.75 per OZ Minerals share payable on the implementation date of the Scheme and conditional on the Scheme becoming effective.

7    Accordingly, assuming that the special dividend is declared and paid and the Scheme becomes effective, on the implementation date BHP will pay as the scheme consideration $26.50 per OZ Minerals share held by scheme shareholders on the scheme record date and OZ Minerals will pay the special dividend on the special dividend record date. I should say here that I have taken the view that the payment of the special dividend (if made) would not constitute the giving of financial assistance for the purposes of section 260A of the Corporations Act.

8    Under the terms of the Scheme, the transfer of the OZ Minerals shares to BHP is subject to the scheme consideration having been paid to scheme shareholders. This effectively removes any performance risk. I will return to this question later.

9    Further, OZ Minerals has on issue various performance rights. The Scheme Implementation Deed (SID) sets out how these performance rights are to be addressed and provides that there are to be no outstanding performance rights as at the scheme record date. Further, the SID deals with the provision of certain employee incentives. As I will discuss later, scheme shareholders who hold performance rights or who will receive employee incentives do not constitute a separate class for the purposes of the Scheme.

10    Now the directors of OZ Minerals have unanimously recommended that OZ Minerals shareholders vote in favour of the Scheme in the absence of a superior proposal and subject to the independent expert continuing to conclude that the Scheme is in the best interests of OZ Minerals shareholders. I also note that the managing director and chief executive officer of OZ Minerals, Mr Andrew Cole, will receive certain benefits in the form of the vesting of performance rights and cash payments if the Scheme is implemented. These benefits are disclosed in the scheme booklet. In my view it is permissible for Mr Cole to join with the other directors in making a voting recommendation to OZ Minerals shareholders.

11    Further, the draft independent expert’s report is annexed to the scheme booklet, and the opinion of the expert, Grant Samuel & Associates Pty Ltd, is that the Scheme is fair and reasonable and accordingly is in the best interests of scheme shareholders in the absence of a superior proposal.

12    In Re Amcor Ltd [2019] FCA 346, I made the following observations (at [45]) regarding the role of the Court when considering an application for s 411(1) orders:

Section 411(1) confers a discretion on the Court to make an order if certain requirements are satisfied, namely:

(a)    a compromise or arrangement is proposed between a Part 5.1 body and its members (or any class of them);

(b)    application for the order is made in a summary way by the body;

(c)    14 days’ notice of the hearing of the application has been given to ASIC (or such lesser period as the Court or ASIC permits); and

(d)    the Court is satisfied that ASIC has had a reasonable opportunity to:

(i)    examine the terms of the proposed compromise or arrangement to which the application relates and a draft explanatory statement relating to the proposed compromise or arrangement; and

(ii)    make submissions to the Court in relation to the proposed compromise or arrangement and the draft explanatory booklet.

13    In the present case those requirements have been satisfied and accordingly my power under s 411(1) has been enlivened.

14    In Re Amcor Ltd, I also made the following observations regarding the nature of the Court’s discretion to make a convening order (at [47]):

My function on an application to order the convening of a meeting is supervisory. At this stage I should generally confine myself to ensuring that certain procedural and substantive requirements have been met including dealing with adequate disclosure, with limited consideration of issues of fairness. But having said that, it is appropriate to consider the merits or fairness of a proposed scheme at the convening hearing if the issue is such as would unquestionably lead to a refusal to approve a proposed scheme at the approval hearing, that is the proposed scheme appears now to be on its face “so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further” (Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at [44] per French J)…

15    And as to the question of whether a scheme should be considered fit for consideration by a proposed scheme meeting, I further observed (at [48] and [50]):

Let me elaborate on this question as to whether the Scheme is fit for consideration by the proposed meeting, in the sense that it is of such a nature and cast in such terms that, if it achieves the statutory majority at the members’ meeting, I would be likely to approve it, and then I will say something on the question of as to whether the members are to be properly informed as to the nature of the Scheme before the meeting.

…

Now the question whether to accept particular consideration for shares is a commercial matter for the members of Amcor to assess. And they ought not be prevented from having the opportunity to do so provided that I can be satisfied that they are acting on sufficient information and with time to consider what they are voting on. But of course, I am required to scrutinise the terms of the Scheme to satisfy myself that there is no element of unfairness in or other undesirable feature of those terms that would be likely to preclude the approval of the Scheme if it came before me for approval. And this is so notwithstanding the unanimous favourable recommendation and voting intention statements from all directors of Amcor and the expression of opinion in the independent expert report that the Scheme is in the best interests of Amcor shareholders.

16    I then addressed in turn two questions in the context of the scheme in that case, being “Is the Scheme fit for consideration?” and “Will shareholders be properly informed?”. It is appropriate to pose the same questions here and to apply the observations that I have just set out.

Is the Scheme fit for consideration?

17    As to the first question, various matters have been drawn to my attention with particular focus on the following:

(a)    the terms of the Scheme;

(b)    funding of the scheme consideration;

(c)    performance risk;

(d)    the exclusivity provisions;

(e)    the break fee and reverse break fee;

(f)    the deemed warranties provision;

(g)    performance rights and employee incentives;

(h)    benefits payable to Mr Cole;

(i)    the question of separate classes in terms of the treatment of performance rights and cash incentives;

(j)    the recommendation of the directors and the associated question of director benefits in the form of performance rights and cash benefits; and

(k)    the special dividend and the associated question of financial assistance.

18    I propose to only address in these reasons matters (a) to (c) and (g) to (i). As to the break fee and reverse break fee, they are just under the relevant 1% of the equity value of OZ Minerals as at the date of the SID. Further, the relevant exclusivity provisions contain the necessary fiduciary carve-outs where relevant. Further, the deemed warranties are standard. Further, I am satisfied that Mr Cole can give a recommendation notwithstanding his interest which has been adequately disclosed (see Re DWS Ltd (2020) 148 ACSR 616 at [42] to [49]). Further and as I have already touched on, I am satisfied that the special dividend does not constitute financial assistance for the purposes of s 260A; see Re Citadel Group Ltd (2020) 148 ACSR 598 at [47] to [53] and Re RXP Services Ltd [2021] FCA 38 at [49] to [57] where I discussed analogous scenarios.

19    Let me turn then to some aspects of the Scheme.

The Scheme

20    A scheme shareholder is an OZ Minerals shareholder recorded in the register as at the record date which is 7.00pm on the fourth business day after the effective date. On the current timetable, the proposed scheme record date is 24 April 2023. The implementation date is defined in the Scheme to mean the fifth business day after the record date. On the current timetable, the proposed implementation date is 2 May 2023.

21    Given the size of the transaction, it is important that I note the following mechanical terms of the Scheme as regards the provision and payment of the scheme consideration and the transfer of the scheme shares to BHP.

22    BHP’s obligation to provide the scheme consideration is to be satisfied by BHP depositing or procuring the deposit in cleared funds an amount equal to the aggregate scheme consideration (less the relevant withholding amount) into the relevant trust account before noon on the business day before the implementation date.

23    On the implementation date, and subject to BHP providing the aggregate scheme consideration, OZ Minerals must pay or procure payment to each scheme shareholder from the relevant trust account of the proportion of the scheme consideration attributable to that scheme shareholder.

24    On the implementation date and subject to BHP depositing the aggregate scheme consideration into the trust account and OZ Minerals paying the scheme consideration to the scheme shareholders out of the trust account, the scheme shares will be transferred to BHP.

25    Upon the provision of the scheme consideration to each scheme shareholder in the manner contemplated by the SID, BHP will be beneficially entitled to the scheme shares pending registration of the transfer of those shares to the relevant entity. Further, on the provision of the scheme consideration to each scheme shareholder but until BHP is registered as the holder of the scheme shares, each scheme shareholder is deemed to have irrevocably appointed BHP as attorney and agent to appoint any director, officer, secretary or agent nominated by BHP as its sole proxy to attend shareholders’ meetings and to exercise the votes attaching to the scheme shares.

26    Further, the SID provides that the reconstitution of OZ Minerals’ board of directors is to follow the implementation of the Scheme in accordance with its terms, including BHP having paid the scheme consideration.

27    Let me deal with another matter. Parts of the Scheme relate to what is known as the foreign resident capital gains withholding regime and provides, in essence, that if BHP is required under that regime to pay to the Australian Taxation Office a certain amount in respect of the acquisition of scheme shares, then BHP is permitted to withhold that amount and remit it to the ATO. The SID specifically addresses the approach to be adopted by OZ Minerals and BHP in relation to the foreign resident capital gains withholding regime, including an approach by BHP to the ATO to obtain clarification of the regime to the Scheme and the provision to BHP by relevant scheme shareholders of a declaration or variation notice.

28    Further, I note that the taxation section of the scheme booklet specifically addresses the foreign resident capital gains withholding regime and notes that the OZ Minerals directors are of the view that more than 50% of the market value of OZ Minerals’ assets is attributable to direct or indirect interests in taxable Australian real property, being the threshold requirement which triggers the potential application of the foreign resident capital gains withholding regime to shareholders. As to the other requirement for the regime to apply, being that the non-resident OZ Minerals shareholder and its associates hold a combined interest of at least 10% in OZ Minerals at relevant times, the taxation section of the scheme booklet states that the OZ Minerals’ share register indicates that no non-resident of OZ Minerals together with its associates holds a combined interest of 10% or more in OZ Minerals at the relevant times. This is to be confirmed and some OZ Minerals shareholders may be subject to the foreign resident capital gains tax withholding. The potential application of this tax regime for foreign resident scheme shareholders is also referred to in the chairman’s letter included in the scheme booklet.

29    Now in Re Kidman Resources Ltd (2019) 375 ALR 760, the relevant clause of the scheme provided that if a withholding was made, then the acquirer would provide the scheme shareholder, if requested, a receipt or other evidence of payment of the withheld amount to the ATO. But this is not part of the Scheme before me. Nevertheless the practical logistics regarding the operation of this regime in the context of the Scheme is a matter that can be addressed by me at the second Court hearing if necessary.

Funding of the scheme consideration

30    The maximum amount of cash payable by BHP in connection with the Scheme will be approximately $9.532 billion based on 337,433,342 OZ Minerals shares being on issue as the scheme record date. Now this maximum amount assumes that no special dividend is declared and paid. But as I have indicated, the OZ Minerals board has announced its intention to declare before the scheme meeting a fully franked special dividend of $1.75 per OZ Minerals share payable on the implementation date of the Scheme and conditional on the Scheme becoming effective.

31    BHP intends to fund payment of the aggregate scheme consideration using a combination of existing cash reserves of the BHP Group and the proceeds of a debt facility. The total amount available to BHP under these arrangements exceeds the maximum aggregate amount of cash payable on implementation of the Scheme.

32    Relevantly to this context, BHP Group Limited has entered into a deed poll (BHP Intragroup deed poll) under which BHP Group Limited has irrevocably and unconditionally undertaken to make available and pay, or procure the payment of, such amounts to BHP that in aggregate are equal to the aggregate scheme consideration and all costs associated with the Scheme. BHP’s rights to receive payments under the BHP Intragroup deed poll are not subject to any conditions and the funds will be provided by BHP Group Limited to BHP in whatever form and manner the latter requires.

33    Now the cash required by BHP Group Limited to discharge its obligations to BHP pursuant to the BHP Intragroup deed poll to fund the aggregate scheme consideration and all costs associated with the Scheme is to be sourced from a combination of BHP Group Limited’s existing cash reserves and cash equivalents (being approximately $14.2 billion as at 31 December 2022) and the proceeds of a new loan facility (BHP transaction facility) in the amount of $US5 billion.

34    I note that drawing under the BHP transaction facility is subject to customary funding terms and conditions precedent, including that the Scheme has become effective. As at the time of the hearing before me, BHP Group Limited was not aware of any circumstances which would prevent the satisfaction of the conditions precedent to drawing the BHP transaction facility. I also note that at the time funds are required by BHP, BHP Group Limited may elect to source a portion of those funds from the BHP cash reserves in lieu of drawing under the BHP transaction facility.

35    In my view, BHP has a reasonable basis for forming the view, which it holds, that it will have sufficient funds available to pay the aggregate scheme consideration.

Performance risk

36    Now given the size of this proposed transaction, it is appropriate that I say more than is usual concerning performance risk, which in the present context embraces completion risk.

37    In considering whether to approve a scheme involving the participation of a person other than the company and its members, it is necessary to ensure that the relevant party is bound to perform the role assigned to it and that its obligations are able to be enforced. Its obligations do not depend upon s 411, which is confined in the context before me to the obligations of OZ Minerals and its members. In this context, consideration needs to be given to the question of credit risk or performance risk as regards the obligations to be performed by the non-scheme party.

38    Now having the transfer of the OZ Minerals shares to BHP subject to the payment of the scheme consideration to the scheme shareholders effectively removes any performance risk in so far as the transfer of OZ Minerals shares in return for the scheme consideration is concerned.

39    Further, BHP has entered into a deed poll in favour of the scheme shareholders under which it has undertaken to provide or procure the provision of the scheme consideration in accordance with the terms of the Scheme. Now whilst the deed poll is in place, by reason of the terms of the Scheme, scheme shareholders will likely not need to rely on any of the covenants in the deed poll as far as the receipt of the scheme consideration in return for the transfer of their shares to BHP is concerned.

40    But two matters should be noted. First, BHP Group Limited is not a party to the deed poll; contrastingly, under other schemes the parent company of the bidder can sometimes be a party to the deed poll. Second, the BHP Intragroup deed poll is an undertaking by BHP Group Limited to BHP and is not enforceable by OZ Minerals or its shareholders; I have put to one side any possible Trident trust argument.

41    But neither of these matters are a reason for me to refrain from making a scheme meeting order particularly where the terms of the Scheme effectively remove any performance risk in so far as the transfer of OZ Minerals shares in return for the scheme consideration is concerned.

42    In Re Legend Corporation Ltd [2019] FCA 1249, which involved a private equity acquirer, consideration was given to the position of a deed poll which had been executed by the special purpose company established for the purposes of the scheme and not by any other entity within that private equity group. Now the structure of private equity transactions in a scheme context, where the funding is often a combination of equity commitments from relevant funds and debt facilities, are different from the position in the case before me where BHP Group Limited has sufficient cash reserves available to pay the scheme consideration. Contrastingly, in Re Legend the fact of the deed poll having only been given by the special purpose company was a reason to refrain from making an order convening a scheme meeting.

43    Now in Re Legend, the scheme involved a number of safeguards to address the performance risk arising from the obligation of the acquirer to pay the scheme consideration. The first was that the terms of the scheme were such as to prevent any transfer of shares to the acquirer unless and until the scheme consideration has been paid to Legend and received by scheme shareholders. Similarly in the case before me, the transfer of the OZ Minerals shares to BHP is only to take place after the scheme consideration has been paid from the trust account to the scheme shareholders and, further, the SID provides that the reconstitution of OZ Minerals’ board is to follow the implementation of the Scheme in accordance with its terms, including BHP having paid the scheme consideration.

44    Now in Re Legend, O’Bryan J also observed that the risk remained that the special purpose company (BidCo) became unable to draw down on the equity commitments and debt facilities and defaulted on its obligation to pay the scheme consideration. His Honour said if that were to occur the share transfers would not occur and the transaction would not proceed and the ability of Legend or its shareholders to require BidCo to pay the scheme consideration would be limited by practical considerations. As to these matters, his Honour said (at [39]):

There remains, though, the risk that BidCo becomes unable to draw down on the equity commitments and debt facilities and defaults on its obligation to pay the Scheme consideration. If that were to occur, the share transfers would not occur and the transaction would not proceed. In that event, the ability of Legend or its shareholders to require BidCo to pay the Scheme consideration is limited by practical and legal considerations. Although, as note[d] earlier, BidCo has executed a Deed Poll under which it covenants, in favour of Scheme shareholders, to pay the Scheme consideration to Scheme shareholders, the commercial value of the Deed Poll is reduced by the fact that BidCo is a newly incorporated company and is reliant on equity commitments and debt facilities to meet its obligation to pay the Scheme consideration. Any enforcement of the Deed Poll by Scheme shareholders would be dependent on the ability to enforce the equity commitments and debt facilities held by BidCo…

45    Following reference to evidence about the risk of BidCo defaulting on its obligation to pay the scheme consideration, including the private equity acquirer resisting, by reason of the private equity structure the guarantor request by Legend, his Honour considered that the arrangements negotiated were commercially reasonable. His Honour observed that those arrangements did not provide absolute certainty that BidCo would be able to complete the transaction but the funding arrangements provided a suitable commercial basis for the scheme to be considered by shareholders and that there was no risk that shareholders would be required to transfer their shares without receiving the promised consideration. In those circumstances, his Honour did not consider that performance risk was a reason to refrain from making a scheme meeting order.

46    I agree with counsel for OZ Minerals that these observations apply equally, if not more so, to the present case. The agreed transaction between OZ Minerals and BHP is one in circumstances where BHP is not relying upon equity commitments from private equity funds but upon cash from either or both of the BHP cash reserves, which exceed the maximum scheme consideration amount, and the BHP transaction facility. Further, whilst the BHP Intragroup deed poll is not enforceable by OZ Minerals, under that deed BHP Group Limited has irrevocably and unconditionally undertaken to make available and pay or procure the payment of such amounts to BHP that in aggregate are equal to the aggregate scheme consideration and all costs associated with the Scheme. Further, BHP’s rights to receive payments under the BHP Intragroup deed poll are not subject to any conditions and the funds will be provided by BHP Group Limited to BHP in whatever form and manner BHP requires. Moreover, as I have indicated, BHP Group Limited has a market capitalisation of some $226 billion with sufficient cash reserves of its own to fund the acquisition of the OZ Minerals shares through its wholly owned subsidiary, BHP.

47    In those circumstances and given that the terms of the Scheme effectively remove any performance risk in so far as the transfer of OZ Minerals shares in return for the scheme consideration is concerned, in my view the proposed funding arrangements provide a suitable commercial basis for the scheme to be considered by OZ Mineral shareholders.

48    Now the question of performance risk in the context of private equity or consortium transactions, including the enforcement of equity commitment letters and by whom and whether funding conditions exist post approval of the scheme, has been considered in several recent cases such as Re Spark Infrastructure RE Ltd (2021) 156 ACSR 257, Re Sydney Airport Ltd and Trust Co (Sydney Airport) Ltd as responsible entity for Sydney Airport Trust 1 [2022] NSWSC 25, Re ELMO Software Pty Ltd [2023] NSWSC 12 and Re Nitro Software Ltd [2023] NSWSC 13. The question of performance risk was also considered in Re Kyckr Ltd [2022] NSWSC 1316 where the scheme consideration was to be funded by a $43.5 million loan through a commitment letter from a company associated with the acquirer, which were controlled by the same person, and where Kyckr Limited could enforce the commitment letter and had undertaken to its shareholders to do so if required.

49    But as I have indicated, the commercial context of the OZ Minerals/BHP transaction significantly differs from the private equity/consortium funding cases and from the idiosyncratic debt funding arrangements in Re Kyckr Ltd. Further, as to funding conditions, the BHP transaction facility as I have said is subject to customary funding terms and conditions precedent and BHP Group Limited is not aware of any circumstances which would prevent the satisfaction of the conditions precedent under that facility.

Performance Rights

50    The SID addresses how performance rights are to be treated and provides that by the scheme record date there are to be no outstanding performance rights.

51    OZ Minerals has 2,203,488 performance rights on issue which have been issued under the incentive plans and incentive offers referred to in the evidence before me. The OZ Minerals board has exercised its discretion such that all unvested performance rights, other than those set out in the next paragraph, will vest and one OZ Minerals share for each performance right will be issued to the holders of the OZ Minerals performance rights, subject to the Scheme becoming effective.

52    Now the only exception to this is in relation to the 284,757 OZ Minerals performance rights granted under the 2023 long term incentive offer. All of those performance rights will lapse on the effective date subject to the Scheme becoming effective. And in consideration for this, BHP has agreed to pay the relevant executives a cash amount equivalent to $28.25 per lapsed OZ Minerals performance right, if the relevant holder remains employed in the OZ Minerals/BHP Group for at least 3 months from the implementation date, or is made redundant by OZ Minerals/BHP.

53    In summary, the effect of these arrangements is that if the Scheme becomes effective, at the implementation date OZ Minerals will have no performance rights on issue and the number of OZ Minerals shares on issue is expected to be 337,433,342 which is the number of OZ Minerals shares upon which the maximum scheme consideration has been calculated.

Employee incentives

54    As to employee incentives for 2023, the SID contemplates that OZ Minerals may pay or issue in the absolute discretion of the OZ Minerals board certain cash or other incentives on the terms set out therein.

55    Pursuant to the SID and subject to the Scheme becoming effective, OZ Minerals:

(a)    will pay cash amounts in lieu of performance rights to Mr Cole;

(b)    has issued performance rights to Australian OZ Minerals executives other than Mr Cole under the 2023 long term incentive offer, which will lapse;

(c)    has issued performance rights to Australian OZ Minerals employees other than Mr Cole under the 2022 short term incentive offer; and

(d)    will pay short term incentives under the relevant incentive plans to Brazilian OZ Minerals employees up to a maximum of R$12,000,000 BRL, which is approximately AU$3,412,762.

56    Further, in accordance with the SID, BHP will provide an additional short-term incentive to relevant employees of OZ Minerals for the period between the effective date and 30 June 2023, with the assessment of performance to be determined by BHP. This payment reflects that the OZ Minerals incentive plans operate on a calendar year basis compared to BHP, which operates its incentive plans on a financial year basis ending (relevantly) 30 June 2023. Should the Scheme be approved, it is anticipated that the effective date will be 18 April 2023. OZ Minerals sought BHP’s agreement to fund the additional short-term incentives to 30 June 2023 to ensure that OZ Minerals’ employees were not prejudiced during the period between the effective date and 1 July 2023.

57    Further, there are other cash payments to be made to eligible executives in respect of 2023 short term incentives and the performance rights granted to them under the deferred equity component of their 2021 short term incentive awards. The final cash amount remains dependent on an assessment of performance for the period but is expected to be approximately $2 million in aggregate assuming the effective date is 18 April 2023.

58    None of this is of any concern to me in the present context.

Benefits payable to Mr Cole

59    The OZ Minerals board has exercised its discretion under the relevant incentive rules to vest the performance rights held by Mr Cole such that, subject to the Scheme becoming effective, Mr Cole will receive a cash payment equal to the total cash consideration for each performance right held by him that vests and converts into an OZ Mineral share, totalling $4.065 million in aggregate. Further, if the Scheme becomes effective, OZ Minerals will not grant or issue any performance rights to Mr Cole in connection with the 2023 long term incentive offer or issue any performance rights to Mr Cole under the deferred equity component of his 2022 short term incentive offer. Instead, the OZ Minerals board has exercised its discretion under the relevant incentive rules to pay Mr Cole $1,869,525 in lieu of the issue of performance rights, and an amount equivalent to the grossed up value of dividend payments made by OZ Minerals in 2022 to OZ Minerals shareholders, calculated in respect of 9,971 performance rights granted to him under the deferred equity component of his 2021 short term incentive offer. As to the amount of $1,869,535, this is to be distinguished from the scenario in Re ERM Power Ltd [2019] NSWSC 1502 where if the relevant performance rights to be issued to the managing director were not approved at a general meeting to be held associated with the scheme meeting, then the board had determined to pay a cash amount in lieu of those performance rights which appeared to be unusual, although it was disclosed in the scheme booklet and could be taken into account at the second hearing.

60    Again, none of this is of concern to me at the present time.

Class considerations

61    In Re Healthscope Ltd (2019) 139 ACSR 608, I observed (at [107]) that the relevant question in that context was whether the rights were:

…so dissimilar from the rights of the other Healthscope shareholders as to make it impossible for them to consult together with a view to their common interest. Or put another way, do the differences in rights between NWH AssetCo (or its affiliates) and the other Healthscope shareholders mean that any community of interest between them has been displaced for the purposes of them considering and voting upon the proposed Scheme…

62    Generally speaking, the holders of performance rights who are also shareholders of the scheme company do not constitute a separate class for the purposes of s 411(1). In Re Healthscope Ltd, when addressing the proposed treatment of performance rights in that transaction in the context of the class question, I observed (at [166] and [167]):

In my view these arrangements do not require any of those shareholders who hold such incentives to meet separately as a separate class from those shareholders who do not hold such incentives in order to consider and vote on the proposed Scheme.

I agree with what Robson J said in Re Skilled Group Ltd (2015) 113 ACSR 525 … at [82], which observations apply with equal force before me:

I am satisfied that the performance rights or options held by some employees do not rise to a separate class of members. It is worth noting at the outset that the rights will not vest until after the meeting to approve the scheme is held. Accordingly, the issue of additional shares will not influence the voting at the meeting directly. The question is whether the rights or options themselves (and the prospect of additional shares upon their vesting) gives rise to a divergence of interests with other shareholders. I do not consider that it does. The shares to be issued if the rights or options vest are not of a different type than those of other shareholders. Moreover, it appears to me that the employees with performance rights or options are in no different position from any other employee of the company who would be impacted by the scheme’s implementation in different ways on the basis of various interests extraneous to their status as members.

63    In the present case, no separate class or classes need to be constituted. Further, cash payments or incentives in connection with a Scheme do not require the recipient of those payments or incentives to meet as a separate class.

Will OZ Minerals shareholders be properly informed?

64    In Re Amcor Ltd, I said (at [90]) that the second principal aspect relevant to the exercise of the Court’s discretion was the adequacy of information to be provided to shareholders. In this regard, I noted that there were various matters that should be addressed, being:

(a)    information for shareholders;

(b)    the independent expert’s report;

(c)    verification of the draft scheme booklet;

(d)    ASIC’s role and any approval of the explanatory booklet.

65    First, in Re Amcor Ltd, I said that there were three aspects to the requirements of section 412(1). As to those three aspects, I said (at [91]):

There are three aspects to the requirements of s 412(1):

(a)    First, the explanatory statement must explain the effect of the compromise or arrangement, and in particular state any material interest of the directors and the effect of those interests on the compromise or arrangement so far as it is different from the effect of the like interests of other persons. Now these matters are addressed in the draft Scheme Booklet. And the information makes it clear that that the effect of the arrangement on the directors’ interests is the same as on the like interests of others.

(b)    Second, the explanatory statement must set out the prescribed information. That prescription is in reg 5.1.01 and Schedule 8 (part 3) of the Regulations. Now a helpful table has been provided showing the specific requirements of the Act and the Regulations and the location in the draft Scheme Booklet of the statements by which those requirements are complied with. I am satisfied as to both its accuracy and its comprehensiveness.

(c)    Third, the explanatory statement must set out any other information that is material to the making of a decision whether to agree with the compromise or arrangement, being information which is within the knowledge of the directors and has not previously been disclosed. In my view the draft Scheme Booklet on its face seems to satisfy that requirement.

66    As to these matters, the scheme booklet sets out the features and effects of the Scheme and includes the explanatory statement as required by s 412(1)(a), and as far as the prescribed information is concerned, a relevant compliance statement has been provided.

67    Second, the opinion of the independent expert is that the Scheme is fair and reasonable and that accordingly the Scheme is in the best interests of OZ Minerals shareholders in the absence of a superior proposal.

68    Third, the evidence before me demonstrates that there has been verification of the scheme booklet by OZ Minerals and also verification undertaken by BHP.

69    Fourth, as to the requirement for the scheme booklet to be registered under section 412(6) it is noted that under section 412(8), ASIC must not register the copy of the explanatory statement unless the statement appears to comply with the Corporations Act and ASIC is of the opinion that the statement does not contain any matter that is false in a material particular or materially misleading in the form or context in which it appears. I do not propose to make a separate approval order.

Prospects of final approval

70    I am satisfied that the Scheme is of such a nature and cast in such terms that, if it achieves the statutory majorities at the scheme meeting, I would be likely to approve it. First, the conclusion of the independent expert is that the Scheme is fair and reasonable and in the best interests of OZ Minerals’ shareholders. Second, relevant disclosures have been made and necessary information included in the scheme booklet. Third, an adequate verification process has been undertaken in respect of the scheme booklet. Fourth, one has the unanimous Board recommendation in respect of the Scheme. Fifth, the terms of the Scheme are in a plain vanilla form for a share transfer scheme for cash. Finally, it could not be said that the Scheme appears on its face so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further.

71    Further, the operation of s 411(17) is a matter for me at the second hearing. In Re Amcor Ltd I observed (at [88]):

In my view, s 411(17) does not prevent a bar to a meeting now being ordered to be convened if it seems likely that ASIC will produce the relevant statement at the second Court hearing. Given that ASIC does not oppose the application for convening the meeting, it is appropriate for me to proceed at this stage on the basis that an application for approval would be unopposed by ASIC, and that ASIC will in due course provide a statement in the form contemplated by s 411(17)(b)…

72    I have a similar position before me.

73    My power to approve a scheme is restricted by s 411(17). At the approval stage, I must be satisfied that there is no proscribed purpose as described in s 411(17)(a) or there must be provided to me a statement in writing by ASIC that it has no objection to the arrangement (s 411(17)(b)). But if such a statement is provided by ASIC, it will not be provided until the second hearing.

74    In my view, s 411(17) does not present a bar to a meeting now being ordered to be convened as it seems likely that ASIC will produce the relevant statement at the second hearing. Given that ASIC does not oppose the application for convening the meeting, it is appropriate for me to proceed at this stage on the basis that an application for approval would be unopposed by ASIC, and that ASIC will in due course provide a statement in the form contemplated by s 411(17)(b). I have taken comfort from ASIC’s letter dated 2 March 2023 to the directors of OZ Minerals in this respect.

75    Accordingly, in circumstances where it is likely that ASIC will produce a statement under s 411(17)(b) and there are presently no matters supporting an inference that there is any proscribed purpose, the requirements of s 411(17) do not present a bar to me ordering that a meeting be now convened.

76    For all these reasons I made the convening orders requested.

Associate:

Dated:    9 March 2023