Federal Court of Australia

Symbio Holdings Limited, in the matter of Symbio Holdings Limited [2023] FCA 1676

ORDERS

THE COURT ORDERS THAT:

Scheme meeting

1.    Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Act), Symbio Holdings Limited (Symbio) convene a meeting (Scheme Meeting) of the holders of fully paid ordinary shares in the capital of Symbio (Symbio Shareholders) for the purpose of considering and if thought fit approving (with or without modification) a scheme of arrangement proposed to be made between Symbio and Symbio Shareholders (Scheme), the terms of which are set out in Annexure B of the “Scheme Booklet” which is Exhibit 1 in this proceeding.

2.    The Scheme Meeting be held as a virtual meeting on Wednesday, 7 February 2024 commencing at 11 am (Sydney time) through the online meeting platform at https://meetings.linkgroup.com/SYMScheme24 (Online Meeting Platform) (the meeting to be accessed substantially in accordance with the instructions contained in the Notice of Scheme Meeting set out in Annexure E of the Scheme Booklet).

3.    The Scheme Meeting be convened, held and conducted in accordance with the provisions of Pt 2G.2 of the Act that apply to members of a company and the provisions of Symbio’s constitution that are not inconsistent therewith and that apply to meetings of members.

4.    Pursuant to s 411(1) and s 1319 of the Act, the Scheme Meeting be convened by sending on or before 28 December 2023 to each Symbio Shareholder whose name is recorded on Symbio’s register of members as being Symbio Shareholders as at the date of the Scheme Booklet:

(a)    in the case of each Symbio Shareholder who has made an election to receive shareholder communications electronically (Electronic Preferred Shareholder), a personalised email substantially in the form of the pro forma version at Tab 28 of Exhibit HMF-1 of the Affidavit of Helen Mary Fraser sworn on 20 December 2023 containing links which allow the recipient to:

(i)    view and download a copy of the Scheme Booklet substantially in the form of Exhibit 1 in the proceedings;

(ii)    lodge a proxy vote for the Scheme Meeting online; and

(iii)    access the Online Meeting Platform to view, listen to and participate in the Scheme Meeting online;

(b)    in the case of each Symbio Shareholder who has made an election to receive certain shareholder communications in hard copy (Non-Electronic Preferred Shareholder), the following documents to be sent by prepaid post:

(i)    a copy of the Scheme Booklet substantially in the form of Exhibit 1 in the proceedings;

(ii)    a personalised proxy form substantially in the form of the pro forma version at Annexure G of the Scheme Booklet;

(iii)    a personalised election form substantially in the form of the pro forma version at Annexure H of the Scheme Booklet;

(iv)    a personalised question form substantially in the form of the pro forma version at Tab 29 of Exhibit HMF-1; and

(v)    a reply-paid envelope addressed to Link Market Services;

(c)    in the case of each Symbio Shareholder who has not made an election as to how to receive shareholder communications (Non-Election Shareholder), the following documents to be sent by prepaid post:

(i)    a personalised letter substantially in the form of the pro forma version at Tab 30 of Exhibit HMF-1 containing links which allow the recipient to do the things referred to in Orders 4(a)(i) and 4(a)(iii) above;

(ii)    a personalised proxy form substantially in the form of the pro forma version at Annexure G of the Scheme Booklet;

(iii)    a personalised election form substantially in the form of the pro forma version at Annexure H of the Scheme Booklet;

(iv)    a personalised question form substantially in the form of the pro forma version at Tab 29 of Exhibit HMF-1; and

(v)    a reply-paid envelope addressed to Link Market Services.

5.    If Symbio receives (through its share register provider, Link Market Services) a “bounce back” notification that the email sent to the Electronic Preferred Recipient (as referred to in Order 4(a) above) was not delivered to the nominated email address of the Electronic Preferred Recipient, Symbio send to those Electronic Preferred Recipients the documents referred to in Order 4(c)(i) to Order 4(c)(v) above by prepaid post.

6.    Pursuant to s 1319 of the Act:

(a)    Symbio may determine that, for the purposes of the Scheme Meeting, all the shares in Symbio be taken to be held by the person, persons or bodies corporate who held them as at 7 pm on Monday, 5 February 2024 (Sydney time) as recorded in the Register;

(b)    Symbio may determine that only the proxy forms in relation to the Scheme Meeting that are received by Symbio by no later than 11 am on Monday, 5 February 2024 (Sydney time) are valid;

(c)    the Chairperson of the Scheme Meeting be Anne Ward or, failing her, Leanne Heywood OAM;

(d)    the Chairperson of the Scheme Meeting shall have the power to adjourn the meeting in their absolute discretion to such time, date and place as they consider appropriate; and

(e)    a poll must be taken to decide the resolutions put to the vote at the Scheme Meeting, except for procedural motions.

Dispensation from Federal Court (Corporations) Rules 2000 (Cth)

7.    Pursuant to r 1.3 of the Federal Court (Corporations) Rules 2000 (Cth) (FCR), compliance with r 2.4(1) of the FCR be dispensed with to the extent that the rule requires the affidavit filed with the Originating Process, being the Affidavit of Alexander Basil Morris sworn 10 November 2023, to state all the facts in support of the Originating Process.

8.    Pursuant to r 1.3 of the FCR, r 2.15 of the FCR not apply to the Scheme Meeting save in respect of the application of r 75-15(2) of the Insolvency Practice Rules (Corporations) 2016 (Cth).

9.    Pursuant to r 3.4(2) of the FCR, Symbio be relieved from compliance with r 3.4 of the FCR, conditional on Symbio publishing on or before Thursday, 8 February 2024 an announcement via the ASX Market Announcements Platform substantially in the form of Tab 27 of Exhibit PS-1 to the Affidavit of Paul Schroder sworn on 20 December 2023.

Second Court Hearing

10.    The proceeding be stood over until 10.15 am on Friday, 16 February 2024 before Yates J for the hearing of any application to approve the Scheme.

Other

11.    Symbio be granted liberty to apply.

12.    These orders be entered forthwith.

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

REASONS FOR JUDGMENT

YATES J:

Introduction

1    The plaintiff, Symbio Holdings Limited (Symbio), seeks an order pursuant to s 411(1) of the Corporations Act 2001 (Cth) (the Act) that it convene a meeting of its shareholders holding fully paid ordinary shares to consider, and if thought fit approve (with or without modification), a scheme of arrangement (the scheme) in respect of the acquisition of those shares by Aussie Broadband Limited (Aussie Broadband).

2    Symbio is an Australian public company limited by shares. It is listed on the Australian Securities Exchange (ASX). As at close of business on 15 December 2023, it had 86,010,170 ordinary shares on issue, held by 3,760 shareholders.

3    If the scheme is implemented, Symbio will become a wholly-owned subsidiary of Aussie Broadband, and will be delisted from the ASX.

4    Symbio is a global telecommunications service provider offering Tier 1 voice, messaging and cloud-based communications. It has its headquarters in Sydney, and operates in Australia, New Zealand, Singapore, and Malaysia.

5    On 1 November 2023, Symbio and Aussie Broadband entered into a Scheme Implementation Agreement (SIA) providing for Aussie Broadband’s acquisition of the shares in Symbio under a scheme of arrangement. On the same date, Symbio and Aussie Broadband entered into a side letter in relation to the SIA. On 19 December 2023, the SIA and side letter were amended in respects which need not be detailed for the purpose of these reasons.

6    The scheme document, setting out the terms of the scheme, is Annexure B to the scheme booklet, which will stand as the explanatory statement required under s 412(1)(a) of the Act.

The scheme consideration

7    Under the scheme, Symbio’s shareholders (at the record date for the scheme) will receive consideration in one of three forms:

(a)    a mix of approximately 75% cash consideration and 25% scrip consideration, equating to $2.26 (minus an agreed dividend amount, if any) in cash and 0.192 new ordinary fully-paid shares in Aussie Broadband for each Symbio share;

(b)    100% cash consideration (subject to certain scale back arrangements), equating to $3.01264 (minus the agreed dividend amount, if any) for each Symbio share; or

(c)    100% scrip consideration (subject to certain scale back arrangements) equating to a number of Aussie Broadband shares determined by a formula.

8    Subject to certain exceptions, Symbio’s shareholders can elect to receive the consideration in one of these three forms. Their election must be made 5 business days before the date of the proposed scheme meeting. If a shareholder does not make a valid election by that date, that shareholder will be deemed to have elected to receive the mixed consideration.

9    With regard to the agreed dividend amount, Symbio’s directors intend to pay a fully-franked cash dividend of $0.35 per Symbio share, conditional on the scheme becoming effective. The dividend will be paid prior to implementation of the scheme. To be eligible to receive the dividend, a shareholder must hold the Symbio shares on the record dates for both the scheme and the agreed dividend. If the agreed dividend is paid, those shareholders who are able to obtain the full benefit of franking credits attaching to the agreed dividend will be able to realise additional value of up to $0.15 per Symbio share (implying a total value of $3.16264 per Symbio share when combined with the scheme consideration).

10    The arrangements with respect to the availability and determination of the scheme consideration are detailed. I am satisfied, however, that those arrangements are adequately and sufficiently explained in the scheme booklet (see, in particular, sections 3.6 and 3.12 – 3.14). There is, nevertheless, one matter which I will record with respect to the scale back arrangements in relation to those who elect to receive the 100% cash consideration (the maximum cash consideration) or the 100% scrip consideration (the maximum scrip consideration).

11    At the time of the proposed scheme meeting, those shareholders who elect to receive one of these forms of consideration will not know if (and if so, the extent to which) those forms of consideration will be subject to scale back. Although Symbio proposes to announce the outcome of the elections made for the three forms of consideration before the holding of the scheme meeting, the announcement will be indicative only. The final outcome of the elections, and the final implications of the scale back arrangements, will not be known until the record date for the scheme, because the buying and selling of Symbio shares can continue until the scheme becomes effective. However, the scheme booklet (in section 3.12 (c)) provides worked examples of the outcomes for those participating in the scheme under a range of election and scale back arrangements scenarios.

12    I should also record that, at the time of the scheme meeting, the shareholders will not know the actual value of the scrip component of the consideration they will receive. This is because the value of Aussie Broadband shares traded on the ASX will vary over time up until the implementation of the scheme.

Expert report

13    Symbio has engaged an independent expert, Leadenhall Corporate Advisory Pty Ltd (Leadenhall), to evaluate, and to provide an opinion on, whether the scheme is in the best interests of its shareholders. A report, prepared by two of Leadenhall’s directors, is included in the scheme booklet.

14    Leadenhall has assessed the value of a Symbio share to be in the range of $3.00 to $3.45 on a control basis. It has compared this range against its assessed value of the scrip consideration and concluded that the proposed transaction is not fair because the low end of its assessed value of the consideration is below the low end of its assessed value for a Symbio share, and the high-end of its assessed value of the consideration is significantly below the high-end of its assessed value for a Symbio share.

15    Nevertheless, Leadenhall has expressed the opinion that the proposed transaction is reasonable because the advantages of the transaction to shareholders outweigh its disadvantages. Leadenhall’s analysis is set out in detail in its report. Having found that the proposed transaction is reasonable, Leadenhall concluded that it is in the best interests of shareholders.

Directors’ recommendation

16    Symbio’s directors have recommended unanimously that shareholders vote in favour of the scheme in the absence of a superior proposal, subject to the independent expert continuing to hold the view that the scheme is in the best interests of the shareholders.

17    Each director who holds Symbio shares intends to vote in favour of the scheme in relation to all the shares held or controlled by him or her 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 Symbio shareholders.

The scheme meeting

18    The scheme meeting will be conducted as a virtual meeting, with shareholders (and their proxies, attorneys, or corporate representatives) able to attend, participate in, and vote at the meeting via an online meeting platform provided by Link. A Virtual Meeting Online Guide has been prepared which sets out the functionality of the online meeting platform. This guide is Annexure G to the scheme booklet. Symbio’s shareholders will be able to submit questions in advance of the proposed meeting, for response at the meeting, by various means. They will also be able to ask questions during the scheme meeting.

19    Ms Ward, who is the chairperson and a non-executive director of Symbio, has consented to act as chairperson of the proposed scheme meeting. In her absence, Ms Heywood, who is also a non-executive director of Symbio, has consented to act as chairperson of the meeting. The disclosures required by r 3.2(b) of the Federal Court (Corporations) Rules 2000 (Cth) have been made.

Performance risk

20    In the case of the cash consideration, performance risk under the scheme is managed by requiring Aussie Broadband to deposit (or to procure the deposit of) the aggregate amount of the consideration in immediately available funds into a trust account by no later than the business day (as defined in the ASX Listing Rules) before the implementation date of the scheme (when the shares will be transferred to Aussie Broadband): see clauses 5.2 and 6.8 of the scheme document.

21    In the case of the scrip consideration, Aussie Broadband must, before 12.00 pm on the implementation date, issue fully paid ordinary shares in its capital to each entitled Symbio shareholder participating in the scheme. As with the cash consideration, this step must be taken before the Symbio shares are transferred to Aussie Broadband: see clauses 5.2 and 6.9 of the scheme document.

22    Aussie Broadband has also entered into a deed poll dated 18 December 2023 in which it undertakes in favour of each Symbio shareholder participating in the scheme to observe and perform all obligations contemplated of it under the scheme document to provide or procure the provision of the scheme consideration, in accordance with the scheme document. The deed poll provides that New South Wales law governs the document and, in that regard, Aussie Broadband has submitted to the non-exclusive jurisdiction of the courts in New South Wales.

Shareholder warranties

23    The scheme document imposes warranties on each Symbio shareholder participating in the scheme to the effect that that each shareholder’s shares are fully paid and free from all encumbrances, third-party interests, or restrictions on transfer, and that the shareholder has full power and capacity to sell and transfer the shares to Aussie Broadband: clause 5.5. The existence of these warranties is referred to, and adequately and sufficiently explained, in section 3.11(j) of the scheme booklet.

Conditions precedent

24    The scheme is conditional on, and will have no force or effect until, the satisfaction or waiver (where applicable) of a number of conditions precedent set out in clause 3.1 of the scheme document. These are referred to, and adequately and sufficiently explained, in section 9.11(b) of the scheme booklet.

Other matters

The management of rights and incentives

25    Symbio operates equity incentive programs which provide incentive awards in the form of options to acquire Symbio shares (options) and rights to acquire Symbio shares (performance rights). There is a long-term incentive plan and a short-term incentive plan. The manner in which these awards will be treated, subject to the scheme becoming effective, is adequately and sufficiently explained in section 9.3(e) of the scheme booklet.

26    Symbio’s Group Chief Executive Officer, Mr Sugo, holds options and performance rights under arrangements which have been approved by Symbio’s shareholders in general meeting. The manner in which these are to be dealt with in the event that the scheme is implemented is adequately and sufficiently explained in section 9.3(d) of the scheme booklet.

27    Certain overseas employees of the Symbio Group (comprising Symbio and its subsidiary companies) participate in certain “phantom” equity plans. The manner in which awards under these plans are to be dealt with, subject to the scheme becoming effective, is adequately and sufficiently explained in section 9.3(f) of the scheme booklet.

28    Symbio operates an Employee Share Gift Plan under which eligible employees can receive shares (subject to restrictions on dealing) for free up to a maximum value of $1000 per offer (gift shares). Symbio’s directors have resolved that, with effect from the date on which the scheme becomes effective, this plan will be terminated, the gift shares will be released from restrictions, and those employees who hold gift shares under the plan will be entitled to make an election with respect to the scheme consideration. Therefore, if the scheme is implemented, the gift shares will be acquired by Aussie Broadband in the ordinary course for the scheme consideration. The treatment of gift shares is adequately and sufficiently explained in section 9.3(g) of the scheme booklet.

29    A selected number of eligible Symbio employees whose roles have been determined to be critical to the conduct of Symbio’s business until the implementation of the scheme, including certain executive officers, will be entitled to receive a retention amount in the form of a one-off cash payment. Payment of these amounts is conditional on the terms of the individual employee’s offer documentation, including that the employee remain as such until an agreed date. Importantly, there is no requirement for the employee to vote in favour of the scheme at the proposed meeting (if they are a shareholder). Symbio’s intention to make retention payments is adequately and sufficiently explained in section 9.3(h) of the scheme booklet.

30    Symbio’s directors have resolved that special exertion fees be paid to their chairperson, Ms Ward, and to the chairperson of the due diligence committee which oversaw preparation of the scheme booklet, Ms Heyward, in recognition of their significant time and effort in connection with the scheme. It is important to note that these fees are payable regardless of whether or not the scheme is ultimately approved and implemented. The intended payment of these fees is adequately and sufficiently explained in section 9.3(i) of the scheme booklet.

Exclusivity provisions

31    The SIA contains exclusivity provisions (“termination of existing discussions”, “no-shop”, “no-talk”, and “no due diligence” obligations): clause 9. The SIA is not included in the scheme booklet, although it is in evidence. Section 9.11(c) of the scheme booklet adequately and sufficiently explains these provisions. There is a fiduciary carveout in respect of the “no existing discussions”, “no talk”, and “no due diligence” obligations and also in relation to obligations imposed on Symbio in relation to “unsolicited approaches”. The obligations imposed on Symbio are for an exclusivity period from 1 November 2023 (the date of the SIA) until the earlier of the termination of the SIA or an end date defined as 5.00 pm on 30 April 2024 or such other date as might be agreed between Symbio and Aussie Broadband. This period is not unreasonable in the circumstances.

Break fee

32    The SIA imposes an obligation on Symbio to pay a break fee of $2.6 million (excluding GST) in certain circumstances. This amount is approximately 1% of the equity value of Symbio as at 1 November 2023. The evidence before me is that the break fee was included in the SIA after arms length negotiations and in circumstances where Symbio was advised by independent legal and financial advisors. Aussie Broadband indicated during those negotiations that it would not enter into the SIA in the absence of (amongst other things) the break fee provision being included. I observe that payment of the break fee is not triggered should the proposed scheme not be approved by Symbio’s shareholders. The break fee is disclosed, and adequately and sufficiently explained, in sections 1.3(d) and 9.11(d) of the scheme booklet.

Verification of information in the scheme booklet

33    There is evidence before the Court of the verification procedures that were undertaken to ensure that the information given in the scheme booklet is complete and accurate in all material respects.

34    On 20 December 2023, Symbio’s directors approved the scheme booklet (in its near final form) for distribution to Symbio’s shareholders, subject to any amendments approved by any two members of the Due Diligence Committee that has been convened to coordinate and oversee the implementation of the due diligence process for the scheme booklet, or required by the Court. Subsequent to that approval, some changes to the scheme booklet were made which have been approved by two members of the Due Diligence Committee.

Outbound call campaign

35    Symbio has engaged Orient Capital Pty Ltd (Orient Capital) to conduct an outbound call campaign to Symbio’s shareholders in relation to the scheme. This will involve telephone operators seeking to call approximately 2000 shareholders to provide information about the scheme and to encourage them to exercise their right to vote on the scheme. A script has been prepared for use in making those calls. This is a step-by-step guide for operators which also sets out answers to frequently asked questions. Telephone operators will be instructed to follow the script in all instances when making calls as part of the campaign. Symbio has instructed Orient Capital that, if a telephone operator deviates from the script at any time, the operator is to inform his or her supervisor of that fact. Further, Orient Capital is required to maintain records of all instances of this occurring.

Information line

36    Symbio has engaged Link Market Services Limited (Link) to provide an information telephone hotline to respond to queries from Symbio’s shareholders in relation to the scheme. A script has been prepared for use by operators staffing the hotline. Operators will be instructed by Link to follow the script in all instances when answering incoming calls. Symbio has instructed Link that, if a caller asks a question that is not dealt with in the script, the operator is to take a note of that question and inform the caller that they will call back with Symbio’s response or have someone from Symbio call them back.

ASIC

37    The Australian Securities and Investments Commission (ASIC) was provided with a draft copy of the scheme booklet on 4 December 2023. At that time, it was also provided with notice of the first court hearing date.

38    By letter dated 21 December 2023 to Symbio’s directors, ASIC has confirmed that the requirements of s 411(2)(a) of the Act (concerning notice to ASIC of the first court hearing) has been satisfied. In that letter, ASIC has also confirmed that, in accordance with s 411(2)(b) of the Act, it has been given a reasonable opportunity to examine the terms of the scheme and the draft explanatory statement, and to make submissions to the Court in relation to the scheme and the draft explanatory statement.

Generally

39    I am satisfied that Symbio is a Part 5.1 body and that the proposed scheme is an “arrangement” for the purposes of s 411(1) of the Act.

40    The formal requirements that are preliminary to the Court ordering that the meeting of Symbio’s shareholders be convened have been satisfied.

41    I am satisfied that the proposed scheme is of such a nature and is cast in such terms that, if it receives the requisite statutory majorities at the proposed meeting, the Court is likely to approve it on an unopposed application.

42    Subject to my consideration of any matter that might be raised at a second court hearing, I am satisfied that the scheme booklet sufficiently discloses the detail and effect of the proposed scheme to enable Symbio’s shareholders to make an informed decision on how to vote. I am satisfied that the scheme booklet, standing as the explanatory statement, should be approved.

Postscript

43    Since the first court hearing on 22 December 2023 and the making of orders on that day (to which these reasons relate), Goodman J, as the presiding Commercial and Corporations Duty Judge in New South Wales, made orders on 30 January 2024 providing for the making, by Symbio, of a supplementary announcement on the ASX market announcements platform, on or by 31 January 2024: Symbio Holdings Limited, in the matter of Symbio Holdings Limited (No 2) [2024] FCA 40. The effect of the announcement is that Symbio and the bidder have agreed to amend cl 6.1(b)(i), and the definition of “Available Cash Consideration” in cl 1.1, of the proposed scheme.

Associate:

Dated:    1 February 2024