a guide to takeovers in australia

8/10/2019 A Guide to Takeovers in Australia

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A GUIDE TO

TAKEOVERS INAUSTRALIAMARCH 2012

KING & WOOD MALLESONS


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OURREPUTATION

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KING & WOOD MALLESONS

International Law Firm of the Year Legal Business Awards 2012

Best Large Law Firm BRW Client Choice Awards 2010, 2009

Regional Law Firm of the YearIFLR Asia Awards 2010, 2009, 2007, 2006, 2005, 2004

National Law Firm of the Year (Australia) IFLR Asia Awards 2011, 2009, 2008, 2007, 2006, 2005, 2004, 2003

Best Large Professional Services Firm BRW Client Choice Awards 2009

M&A Deal of the Year ALB Australasian Law Awards 2010, China Law & Practice Awards 2009, IFLR Asia Awards 2009

Regional Law Firm of the Year IFLR Asian Awards 2010, 2009, 2007, 2006, 2005, 2004

Aus tralian Deal Team o f the Year - M&A ALB Australasian Law Awards 2011, 2009, 2008

Law Firm of the Year (Australia) PLC Which lawyer? Global Awards 2010, 2009

Corporate Legal Services Firm of the Year CFO Awards 2011, 2010, 2009, 2008, 2007

Corporate/M&A first-tier rankings

Chambers Global Guide 2012

IFLR 1000 2012

Asia Pacific Legal 500 2012

PLC Which lawyer? 2012


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CONTENTS

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THE KING & WOOD MALLESONS DIFFERENCE

1 Introduction

2 Regulatory background

3 Methods of acquiring control

4 Planning an acquisition5 Implementing an off-market

takeover bid

6 Responding to a takeover approach

Glossary

Our experience

Our contacts

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Sources say: Our experiences with the firm have been excellent the lawyers are knowledgeable and excellent in negotiations.We would without a doubt use them for similar work in the future.Chambers Global Guide, 2012

"They are long established and their big advantages are theirbench strength and good people at all levels.Chambers Global Guide, 2012

excellent service in terms of timeliness, quality of advice,commercial outcomes and industry knowledge.Asia Pacific Legal 500, 2012


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WHO THIS GUIDE WILL ASSIST

The guide should be of general assistance to:

investment bankers, financial advisers and otherprofessional advisers to participants involved intakeovers or other control transactions;

directors, executives and in-house counsel ofpublic-listed companies and other Australian andinternational businesses considering public

acquisitions in Australia; and

foreign advisers and investors.

1. INTRODUCTION

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OVERVIEW OF WHAT THIS GUIDEPROVIDES

This guide provides a general introduction to keylegal issues and considerations involved in making,or responding to, a bid to acquire control of apublicly-listed entity in Australia.

The guide covers the:

general laws and regulatory bodies governingacquisitions of interests in public companies;

most common methods of acquiring control:

off-market takeover bids,

on-market takeover bids; and

schemes of arrangement;

and their relative merits;

key factors and strategic considerations relevantto planning an acquisition;

steps, documentation and timing involved inimplementing an off-market bid; and

key issues for companies anticipating (orresponding to) a takeover.

FURTHER ASSISTANCE

The guide provides general commentary on thelegal and practical issues involved in conducting atakeover in Australia as at June 2011.

Public takeovers in Australia are complex andhighly regulated. This guide does not provide anexhaustive analysis of the issues involved.Anyone involved in any takeover activity should

obtain detailed professional advice before takingaction and should not rely on this guide insubstitution for that advice.

If you require specific advice in the context of atransaction, or a possible or proposed transaction,please contact any of the King & Wood Mallesonspartners listed on page 37 of this guide.


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4. PLANNING ANACQUISITION

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KEY ROLES AND ADVISERS

In embarking upon an acquisition for control,whether by a takeover bid or a scheme ofarrangement, a bidder will need to dedicatesignificant internal resources to the planning andexecution stage, and will also often need toassemble a team of advisers to assist with thetakeover process.

Depending upon the size and complexity of a bid,and the resources of a bidder, a bidder mayappoint some or all of the following advisers toassist with various elements of a takeover:

Legal adviser responsibilities include:

assisting with bid structuring and strategy

conducting legal due diligence on the target

advising on legal compliance

liaising with regulators (e.g. ASIC, ASX, Panel,ACCC and FIRB)

preparing transaction documentation

negotiations with the target and other parties

general transaction management

Financial adviser responsibilities include:

assisting with bid structuring and strategy

general transaction management

assisting with valuations of the target

assisting with raising finance for the bidder

providing brokerage and market services

managing communications with the target,

investors, analysts and other market participants

soliciting offer support and acceptances

Accounting adviser responsibilities include:

conducting financial due diligence on the target

preparing any specialist transaction reportsrequired

assisting with valuations of the targetTax adviser responsibilities include:

advising on tax efficient transaction structuringand financing

conducting tax due diligence on the target

Security registry responsibilities include:

general administration of a takeover:

processing and reporting acceptances

securityholder mailings

other logistics

registry analysis

Public relations advisers may be appointed in

relation to the following areas:

Corporate / media responsibilities includemanaging corporate communications strategyand liaising with the media

Retail responsibilities include managingcommunications with a broad publicsecurityholder base (e.g. phone help-lines and

proxy solicitation services) Government / regulatory responsibilities

include managing communications with other keystakeholders, such as governmental andregulatory bodies


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Cleansing statements

If a takeover or other acquisition is to proceed andthe bidder is in possession of non-public price-sensitive information, the information needs to becleansed via disclosure to the market in order forthe bidder to acquire securities in the target legally.

A bidders ability to disclose such information willdepend upon the precise terms of theconfidentiality obligations owed to the target, and abidder therefore needs to consider the drafting ofthe those obligations carefully in order to preserveits flexibility to disclose relevant confidentialinformation to the market.

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Standstill agreements

In receiving non-public due diligence informationfrom a target, a bidder will usually be required toenter into some form of confidentiality agreementrestricting its usage and disclosure of theinformation which it receives.

A target will usually seek to insert a standstillprovision into such an agreement under which thebidder undertakes not to acquire securities in thetarget for a specified period other than pursuant toan agreed offer for the company.

Standstill provisions serve a dual purpose for atarget. They achieve a strategic goal for a target byrestricting a bidder from acquiring or increasing astrategic stake prior to making a bid (which couldotherwise reduce the likelihood of counter-biddersemerging), and also limit the risks of the target and

its officers committing a tipping insider tradingoffence by disclosing non-public price-sensitiveinformation to persons who they believe mayacquire securities in the target.

In relation to insider trading concerns, even in theabsence of any specific contractual standstillprovisions, a bidder needs to refrain from acquiringor agreeing to acquire any securities in the target

while in receipt of non-public price-sensitiveinformation to avoid committing an insider tradingoffence.


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STRUCTURING CONSIDERATIONSA bidder, with assistance from its advisers, willneed to carefully consider its commercial objectivesin planning any acquisition, as the ultimate goalsand strategic rationale for a transaction willnecessarily shape its structure.

Whilst a bidder is unsure of a targets likelyresponse to an approach, it is often prudent toprepare for a number of different scenarios, so that,for example, if a target is unwilling to consider aconfidential approach for a friendly scheme orrecommended bid, the bidder has a Plan B inreserve to acquire a strategic stake swiftly beforedetails of the approach are made public or tolaunch an alternative hostile bid.

Amongst various other individual considerations,bidders will often need to consider the followingfactors in selecting their preferred method ofacquisition:

FINANCING &CONSIDERATION

A bidder needs to considerwhether it can offer scrip

or has available orcommitted financing to

offer cash, and the relativemerits of each for the

bidder and targetsecurityholders

TAX

A takeover should bestructured in a way whichoptimises tax efficiency

both for the bidder and thetarget and its

securityholders

STRATEGIC STAKE

A bidder will have moreflexibility in structuring

acquisitions of strategicstakes under a scheme,

but such stakes canincrease the relative voting

power of schemedissenters

TIMING

While the potentiallyshorter timeframes of onand off-market bids mayappeal to some, otherbidders may find the

potentially more certaintimeframe of a scheme

more attractive

REGISTER

An analysis of the targetsregister for supportive /dissenting / apathetic

securityholders will informthe likelihood of reachingthe required thresholdsunder a scheme and bid

FLEXIBILITY

The initial flexible structureof a scheme needs to bebalanced against the on-

going flexibility under a bidto vary an offer in

response to delays,opposition and interloper

activity

STRUCTURING

CONSIDERATIONSOUTCOME

Whether a bidder needs100% control or is happyto settle for 50 to 90 (oreven below 50%) will

inform choice of a scheme/ bid and/or conditionality


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INDICATIVE TIMETABLE FOR AN OFF-MARKET BID

No later than 15 days

AnnouncementBidders statementlodged with ASIC

Complete sending biddersstatement to target securityholders

On same day

or within 21days

Earliest day for

close of offer4

Earliest date fordispatch ofcompulsoryacquisition notices5

Earliest day forcompulsoryacquisition totake effect6

Day 1 Day 17

Bidders statementserved on targetand lodged with ASX2

Day 15 Day 32 Day 38 Day 46 Day 47 Day 79

At least one calendar month (offer period)

At least 7

daysNo later than 15 days

Earliest date for dispatch ofbidders statement and offers totarget securityholders (unless targetboard consents to early dispatch)3

On same day

or within 21days

Final date for declaringa conditional bid unconditionalor extending a conditional bid

At least one calendar month (offer period)

Latest date for dispatch of targetsstatement, service on the bidderand lodgment with ASIC and ASX

Begin preparation1

1. Action items during this period include: preparing the bidders statement, preparing and lodging FIRB and/or ACCC applications (if required), making an ASX announcement and holding a boardmeeting to approve the bidders statement.

2. Bidder can serve the bidders statement on the target on same day as it lodges with ASIC or within 21 days. The last day permitted for making offers is two months after the bid is announced.

3. Bidders statement must be sent to target securityholders within a three-day period, which itself is within 1428 days from service of the bidders statement on the target unless the target waives

the 14 day period.4. Offer cannot close earlier than one month after the offer opens, and cannot remain open for more than 12 months.

5. Compulsory acquisition notices must be lodged and dispatched during or within one month after the end of the offer period.

6. Assumes no requests for lists of securityholders or other action taken by non-accepting securityholders. Compulsory acquisition must be completed within a 14 day period at the end of one monthafter the date the compulsory acquisition notice was lodged.


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OUREXPERIENCE

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DONE DEALS

King & Wood Mallesons has a strong track recordof acting on some of the Asia Pacific regions mostcomplex and innovative public M&A transactions.

on its A$3.4bn acquisitionby the Canada Pension

Plan Investment Board byway of a scheme ofarrangement

INTOLL

on bids by AMP andNational Australia Bank and

its eventual A$14.6bnscheme of arrangement tosell its Australian and NewZealand businesses to AMPand its Asian businesses toAXA SA

AXA ASIA

PACIFIC

on its successful A$5.6bnon-market takeover of

Queensland Gas Companyand attempted A$13.8bnscheme of arrangement andoff-market takeover bid forOrigin Energy

BG

GROUP

on the acquisition of itsA$20bn stake in Rio Tinto

and subsequent proposal toinvest a further A$20 billionthrough an acquisition of anadditional stake andinterests in Rio Tintosunderlying assets

CHINALCO

on numerous public M&Atransactions in Australia

worth in excess of A$10bn,including successfultakeover bids for ResourcePacific, Jubilee Mines andSphere Minerals

XSTRATAon its initial 40% investmentin Prime Infrastructure

Group and subsequentscheme of arrangement andcombined takeover bid forthe remaining 60% of Prime

BROOKFIELD

INFRASTR-UCTUREPARTNERS

on its A$6bn scheme ofarrangement for the

privatisation by KirinHoldings and on takeoverbids for Coca-Cola Amatiland Coopers BreweryLimited

LIONNATHAN

on its successful A$3.5bncontested acquisition of

healthcare operatorSymbion Health by way ofan off-market takeover withan associated capitalraising

PRIMARYHEALTHCARE


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a guide to takeovers in australia

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