Associated Dairies Ltd (ACN 004 124 118) v Central Western Dairy Ltd (ACN 002 336 192)
[1993] FCA 601
•30 AUGUST 1993
ASSOCIATED DAIRIES LIMITED v. CENTRAL WESTERN DAIRY LIMITED; ALAN RICHARD
TOOTH; IAN ALAN LANGDON; P J DOYLE and P J BRUEM
No. VG3230 of 1993
FED No. 601
Number of pages - 9
Corporations Law
(1993) 11 ACLC 827
(1993) 11 ACSR 234
(1993) 117 ALR 433
(1993) 44 FCR 335
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
RYAN J
CATCHWORDS
Corporations Law - take-over offers - application to restrain despatch of Part A Statement - whether sufficient particulars of provision of cash consideration required for take-over - need to identify source of funds and the amount to be derived from each source - current intentions of offeror concerning business, assets and employees of target company - ambiguity in expression of intention by offeror to integrate its operations with those of the target - whether financial position of parent company of offeror required to be disclosed - balance of convenience - facility for remedial orders - whether shareholders should be denied opportunity of considering offer. Corporations Law: s.613, 729, 750.
Australian Consolidated Investments Ltd v Rossington Holdings Pty Ltd (1992) 7 ACSR 341 applied.
Cumberland Credit Corporation Ltd v TNT Australia Ltd (1988) 13 ACLR 371 distinguished.
Ical Ltd v County Natwest Securities Aust Ltd (1988) 13 ACLR 129 referred to.
QIW Retailers Ltd v Davids Holdings Pty Ltd (1992) 8 ACSR 245 distinguished.
Samic Ltd v Metal Exploration Ltd (Full Court, South Australian Supreme Court, 11 August 1993) referred to.
Trade Practices Commission v Santos Ltd (1992) 14 ATPR 41-194; (1992) 110 ALR 517 applied.
HEARING
MELBOURNE
#DATE 30:8:1993
Counsel for applicant: Mr A Goldberg QC and Mr K Hargrave
Solicitor for applicant: Clayton Utz
Counsel for respondents: Mr A Myers QC and Mr C Scerri
Solicitors for respondents: Arthur Robinson and Hedderwicks
ORDER
THE COURT ORDERS:
1. That the application for interlocutory relief be refused.
2. That the costs of all parties of the application be costs in the cause.
3. That the directions hearing herein be adjourned to a date to be fixed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
RYAN J Associated Dairies Limited ("Associated") seeks an interlocutory injunction to restrain the respondent Central Western Diary Limited ("Central") from despatching a Part A Statement and offers to shareholders of Associated. The following facts pertaining to Associated and its operations are revealed by an affidavit sworn by Mr Marks of its solicitors on 20 August 1993:
"2. Associated was established in 1926. It became a listed public
company in 1935. Presently Associated has a turnover of approximately $128 million and employs approximately 320 people.
3. Associated is predominantly a processor, distributor and marketeer of fresh dairy products. It is recognised as a major supplier of dairy products to markets in Victoria, New South Wales, Tasmania and South Australia. Associated exports products to South East Asia. It despatches fresh milk to Singapore on a daily basis and intends expanding in the South East Asian area.
4. For the financial year ended 30 June 1992 the total operating revenue of Associated reached $128 million. The net amount of consolidated profit of Associated for that period after extraordinary items and income tax was $3,398,000.
5. The current issued ordinary share capital of Associated is 24,270,650 ordinary shares of 50 cents each fully paid. The present market capitalisation of the company is approximately $72 million and there are approximately 700 members of the company."
Central's Part A Statement dated 10 August 1993 has been furnished to Associated and, unless an interlocutory injunction had been granted, offers based on it could have been despatched on 27 August to shareholders of Associated. The offer is one to acquire "all or any" of each shareholder's sharehold in Associated for a cash price of $2.65 a share. It is expressed to be conditional upon Central becoming, during the period of the offer (one month), entitled to not less than 50.1% of the shares in Associated. The present application raises first the relatively narrow issue of the existence of a serious question to be tried as to whether the Part A Statement complies with the following clauses of s.750 of the Corporations Law:
"11 If the consideration for the acquisition of the shares to which the takeover offers relate or for the acquisition of any shares, renounceable options or convertible notes referred to in clause 9 is to be satisfied in whole or in part by the payment of cash, the statement shall set out:
...
(b) if the offeror is not to provide all of the cash, or is not to provide any of it, from the offeror's own funds:
(i) particulars sufficient to identify the other person who is, or each of the other persons who are, to provide, whether directly or indirectly, some or all of the cash from that person's or those persons' own funds; and
(ii) particulars of the arrangements by which that cash will be provided by that other person or those other persons."
...
17 The statement shall set out any other information material to the making of a decision by an offeree whether or not to accept an offer, being information that is known to the offeror and has not previously been disclosed to the holders of shares in the target company.
...
20 (1) The statement shall set out particulars of the offeror's intentions regarding:
(a) the continuation of the business of the target company;
(b) any major changes to be made to the business of the target company, including any redeployment of the fixed assets of the target company; and
(c) the future employment of the present employees of the target company.
20 (2) Without limiting the generality of subclause (1), if the offeror has not made a decision on a matter referred to in paragraph
(1)(a), (b) or (c) but is considering a possible course of action, or 2 or more possible courses of action, in relation to that matter, the statement shall set out that fact and specify the course of action or courses of action concerned and the reason why the offeror has not made a decision on the matter."
The Part A Statement which is the subject of these proceedings identifies Central as a wholly-owned subsidiary of Australian Co-operative Foods Limited ("Australian Co-operative"). The Statement also provides the following information about Australian Co-operative:
"5.1 Background
Australian Co-operative Foods was formed in 1900 under the name The Dairy Farmers Co-op Milk Company Limited. It was formed to handle the distribution of milk and other dairy products for its dairy farmer shareholders. It remains today an organisation owned almost entirely by dairy farmers. In the 1920s it became a Co-operative Society incorporated under the New South Wales Co-operation Act of 1923.
In the late 1980s, it adopted active membership rules pursuant to which only persons who continue to supply product to the Co-operative either directly or indirectly (e.g. through another milk intake depot) may remain members. On 8th December 1989 the Co-operative changed its name to Australian Co-operative Foods when the Hunter Valley Co-operative Dairy Company Limited and Shoalhaven Dairy Co-op Limited transferred their engagements and members to Australian Co-operative Foods. The issued shares of Australian Co-operative are not and cannot under present law be listed on any stock exchange.
5.2 Principal Activities
The principal activities of Australian Co-operative Foods are:
A. The Milk Division
The Milk Division is the largest processor, distributor and marketer of white and flavoured milk products in New South Wales having over 55% of the New South Wales market. It processes over 360 million litres of milk per annum sourced from dairy farmers mostly located in New South Wales. It is a processor for the New South Wales and ACT Milk Authorities. It has strong brand names including "Dairy Farmers", "Oak" and "Farmers Best".
B. The General Products Division
The General Products Division manufactures and markets nationally a wide range of dairy foods with a turnover of approximately 135 million dollars per annum. The product range includes: yogurts, ice creams, custards, dairy desserts and dips under various brand names including "Ski", "Dairy Farmers" and "Oak".
C. The Rural Trading Division
The Rural Trading Division has Rural Trading stores merchandising products for the farming and rural community."
PARTICULARS OF PROVISION OF CASH CONSIDERATION
5. The first deficiency or omission in the Part A Statement to which Mr Goldberg QC, who appears with Mr Hargrave for Associated, pointed, was said to arise from the description of how the cash consideration for the offer is to be provided. That is contained in cl. 10 which recites:
"10.1 The consideration for the acquisition of shares to which the Offers relate and under the offers for Associated Dairies Preference Shares is to be satisfied in whole by the payment of cash. The maximum amount of cash which could be required under the Offers and under the offers for Associated Dairies Preference Shares is $52,975,393.
10.2 (a) The source for the cash consideration for the acquisition of the Associated Dairies Shares and the source for the cash consideration for the foreshadowed offer for Associated Dairies Preference Shares and the Share Scheme Shares referred to in paragraphs 8.1 and 8.2 will be provided to Central Western Dairy by Australian Co-operative Foods either by way of loans or by capital subscription (or a combination of both of them).
(b) Australian Co-operative Foods has in place undrawn credit facilities for $52,876,000 being the maximum amount of the cash consideration which could be required for the acquisition of the Associated Dairies Shares. These credit facilities have been provided by Australia and New Zealand Banking Group Limited (as to $31,895,000) and Commonwealth Bank of Australia (as to $20,981,000) under Loan Agreements dated 9th August, 1993.
(c) Australian Co-operative Foods has on deposit with Australia and New Zealand Banking Group Limited the sum of $99,799 being the amount of the cash consideration for the foreshadowed offers for Associated Dairies Preference Shares referred to in paragraph 8.1.
(d) The cash consideration for the foreshadowed offers referred to in paragraph 8.2 for Share Scheme Shares (other than those acquired pursuant to the Offers for Associated Dairies Shares) will be funded out of internal cash resources of Australian Co-operative Foods.
(e) All preconditions to the availability of the funds referred to above have been fully satisfied."
It is true that those clauses do not identify the term of the loan from each of the respective banks or the circumstances in which each loan might become repayable. Nor do they indicate the extent (if any) to which the loans are to be secured over the assets to be controlled by Central if the offer becomes unconditional. Since Central will be attracting a liability of up to $50m to acquire control of assets presently valued by the market at about $72m, these are all said to be material considerations to be weighed by a shareholder in Associated considering whether to sell for $2.65 a share or remain on the register as a minority shareholder with a highly-geared majority shareholder. In QIW Retailers Ltd v David's Holdings Pty Ltd (1992) 8 ACSR 245, Heerey J pointed out at 252:
"Counsel for Davids stressed the clear distinction drawn in s 750 between cash and scrip offers. Only in the latter case is there a requirement for the material which would appear in a prospectus. There is much force in this and in his point that a straight 90% conditional acceptance cash offer may also leave minority shareholders. However, for present purposes I think there is a triable issue. The primary intention of Davids is that QIW will remain listed but minority shareholders will retain 45%. The financial standing of the majority shareholder in such circumstances may well affect the share price of QIW. In this regard I would add that an answer which Davids quite effectively made to many of QIW's complaints - namely, that criticism could be made in the Part B statement - does not apply here because this information will still not be available at that stage. I should also add that QIW did not argue that the relevant information was necessarily as extensive as would be required for a prospectus."
The present is also a cash, not a scrip, offer. There is no requirement in s.750 for details to be provided of the financial position of a cash offeror but it is only in the light of those details that the impact on the offeror, and indirectly on post-takeover the price of shares in the target company can be assessed.
Counsel for Associated relied heavily in this context on some observations of Sheppard J as a member of a Full Court of this Court in Australian Consolidated Investments Ltd v Rossington Holdings Pty Ltd (1992) 7 ACSR 341 where his Honour observed, at 343:
"With respect to the primary judge, I do not think it sufficient when an offeror purports to give particulars of arrangements by which the cash is to be provided, to refer generally to two loan agreements. I think that offerees are entitled to be told of the essential provisions of the loan agreements. The only loan agreement in evidence is that between BILAF and the offeror. A reading of it discloses that it is a facility whereby BILAF agrees to make advances to the respondent from time to time at the respondent's request. The agreement is apparently unlimited in amount but BILAF retains control of the situation because of cl 3.1 which provides that the borrower agrees to repay to the lender the total amount outstanding on demand. That would always enable BILAF to maintain control of the amount which it advanced and could lead to a situation in which, in practical terms, it was not obliged to advance anything. The terms of the GPG agreement were said to be similar. That agreement is not in evidence nor is the agreement which is said to exist between Brierley Investments and BILAF. The fact that the advances may be in the discretion of the company making them does not in any way mean that the facilities to which I have referred may not properly be relied upon for the purposes of cl 11 of s 750. But offerees are entitled to know what the facts are. In one sense it might have been right to say, as cl 9 of the Part A statement said, that there were no fetters or conditions precedent to draw down. But that does not tell the whole story."
However, Davies and Beaumont JJ, the other members of the Full Court in Rossington, decided that case on a narrower ground. Davies J, at 342, observed that cl 11 had a wider object than merely to require disclosure of the identity of the persons who were directly to supply the funds. His Honour continued:
"It seeks to ensure that the offerees will obtain sufficient information so that they may make an informed judgment as to whether the necessary cash is or will be available to carry through the offer. Therefore, cl 11 uses the terms "directly or indirectly" and "own funds". The clause requires a statement of the identity of the person or persons out of whose own funds the cash will be provided. The Part A statement did not do that for it referred only to anticipated borrowings by the offeror from BIL (Australia Finance) Ltd and GPG plc, not to the source from which those companies would derive the cash. It appears from counsel's submissions that Brierley Investments Ltd and GPG plc will fund the takeover using their own funds and without recourse to external borrowings. But the Part A statement did not say so.
The Part A statement did not disclose the proportions in which each of the companies would provide the cash and the description of the particulars of the arrangements was extremely brief. However, as the overall financing arrangements are unknown to the court I express no view as to whether material information was thereby omitted."
To similar effect Beaumont J said, at 347:
"As Lockhart J also said: "Clause 11(b) is designed to ensure that offerees know the identity of the person or persons who are to provide the cash to the offeror to enable the shares to be acquired by it, and in broad terms how the funds are to pass from that person or those persons to the offeror."
I agree with this statement, but it must follow that the explanation given by the respondent in the Part A statement and, in particular, in cl 9 is insufficient for the purposes of cl 11(b) of s 750. No distinction is made in the statement between the respective contributions of the two lenders. The respondent is a subsidiary of BIL, as is BIL (Australia Finance) Ltd. But GPG is an associate of BIL and not its subsidiary. In my view, it would be material for shareholders considering the bid to know how much each of the lenders had agreed to advance. This has not been stated. That is to say, the Part A statement did not, relevantly, identify the lender qua the amount to be advanced in each case."
The purpose of cl 11 of s.750, in my opinion, is to allow offeree shareholders to assess how likely it is that the offeror can pay them if a cash offer is accepted up to the maximum number of shares which the offeror has undertaken to purchase. To that end, the clause requires the Part A Statement to identify each source of the funds and the amount to be derived from each source. I do not understand Sheppard J's reference in Rossington to "the essential provisions of the loan agreements" to go beyond those terms which are capable of making it more or less likely that the requisite funds will become available to complete the purchase. Particulars only of those provisions operating as conditions precedent or subsequent to the availability of the funds are required by cl 11(b)(ii). It is sufficient if the loan is, at the time of despatch of the Part A Statement, unconditionally available and will remain so long enough for the purchase to be completed. I do not regard cl 11 as requiring that the Part A Statement should set out, even in a summary way, terms of the agreement or arrangement pursuant to which the funds are to be made available, like those going to interest rates, principal or collateral securities or the date of repayment. That some details of arrangements for the provision of a cash consideration which a recipient of an offer needs to know must be disclosed, and that other details are immaterial, is provided by Ical Ltd v County Natwest Securities Aust Ltd (1988) 13 ACLR 129 where Bryson J observed, at 138:
"The terms of para 3(b) of Pt C seem to mean that even if the arrangements are the usual arrangements there ought to be an express statement that the arrangements are the usual arrangements but this I would think is what the ordinary and reasonable reader would assume if not told otherwise. However, that the reduction arrangements required full clearance by 30 April 1988 was of striking significance as that date was earlier than the expiry of the offer period, so this part of the finance would have to be repaid in full when there were still three trading days before expiry of the offer. No one would really understand the arrangements with the Commonwealth Bank unless he understood that they were only to last until 30 April. In a statement of the arrangements on which finance was available this was a very striking omission.
On the other hand, the knowledge that another bank's approval was for a period of 6 months, or 12 months, should not seem important to a shareholder: the periods are long enough for the details to be immaterial. The reasonable response would be: "Well, they have enough finance" and paying the money back in 6 months' time would not concern the shareholder. If the second defendant had arrangements, or had no arrangements, or had well-based hopes for getting other finance on and after 30 April, that matter ought to have been stated."
In the light of these principles, I consider that cl 10 of the present Part A Statement contains enough information to serve the purpose which governs the construction of cl 11 of s.750.
CENTRAL'S INTENTIONS ABOUT BUSINESS, ASSETS AND EMPLOYEES OF ASSOCIATED
13. The next area in which Central's Part A Statement is said to be deficient is in respect of the offeror's intentions if it succeeds in gaining control of Associated. Clause 16 of the Statement is in these terms:
"16. CENTRAL WESTERN DAIRY'S INTENTIONS REGARDING ASSOCIATED DAIRIES' BUSINESS
In the event of its offer becoming unconditional, Central Western Dairy intends to conduct a review of the businesses of Associated Dairies in conjunction with existing management to examine whether opportunities exist to improve operating and organisational efficiencies and increase overall profitability. Pending the results of this review, it is the present intention of Central Western Dairy, on the basis of the facts and information concerning Associated Dairies known to it:
(a) to continue the businesses of Associated Dairies as currently constituted;
(b) not to make any major changes to the businesses of Associated Dairies nor to redeploy any of Associated Dairies' fixed assets; and
(c) to continue the employment of Associated Dairies' present employees.
In the event that Central Western Dairy becomes entitled to all the Associated Dairies Shares its current intention is to proceed to delist Associated Dairies and to integrate its operations with those currently conducted by Australian Co-operative Foods. In those circumstances, Associated Dairies would continue as a wholly owned subsidiary of Australian Co-operative Foods responsible for developing Australian Co-operative Foods' presence in the Victorian market.
It is also the intention of Central Western Dairy that, in the event of its offer becoming unconditional, its nominees should form a majority on the Board of Associated Dairies."
Clause 20 of s.750 requires the offeror to set out its current intentions regarding the three matters specified in sub-cl. (1). In my view, the first two paragraphs of cl.16 of the Part A Statement inform the reader that Central has a present intention to continue the existing businesses of Associated, not to make any major changes thereto, and not to redeploy any of Associated's fixed assets. Those intentions, it is indicated, may change in the light of a review to be undertaken if the take-over is successful. Identical wording appeared in the relevant part of a Part A Statement considered by Beach J in Cumberland Credit Corporation Ltd v TNT Australia Ltd (1988) 13 ACLR 371. His Honour expressed the view, at 376, that the wording to which I have just referred:
"... does not amount to an expression of intention as to what TNT proposes to do concerning the matters specified in cl 5A. It amounts to nothing more than a statement that, until such time as TNT forms its intentions, something it will not be able to do until its take-over offer is successful and its review and evaluation complete, the status quo will be preserved."
However, his Honour, regarded himself as relieved of the need to express a concluded view on a third argument by counsel for the plaintiff in that case that if the offeror "has not formed any intentions concerning the future of the take-over company and its assets, then it must form such intentions before it can make a take-over offer for the target company in the first place." That relief was afforded by extrinsic evidence that the managing director of TNT had made a public statement four days before the Part A Statement was served that "we know what we will do with the (target) company." That, together with evidence elicited by cross-examination in the course of the hearing, enabled his Honour to find that TNT had formed alternative intentions which should have been disclosed in its Part A Statement. I have no evidence before me of that kind, and would be inclined to refuse interlocutory relief on the basis of non-compliance with cl. 20 if the relevant part of the statement had been confined to the words considered by Beach J in Cumberland.
I was invited by Mr Goldberg to draw the inference, strengthened by the failure of the respondents to call evidence from any of the directors of Australian Co-operative, that those sponsoring the takeover must have formed intentions or considered options as to what is to happen in the event of acceptance for less than 100% of the shares in Associated. That inference is much more compelling where the target company is a "cash box" or investment vehicle and not, as here, an active trading company with substantial core businesses. In the present case, the inference is at least equally open that those responsible for the offer, perceiving Associated as a profitable company with activities and assets complementary to those of Australian Co-operative, intend, at present, only to continue Associated's businesses using its existing assets and employees until there is an opportunity, after review, to consider ways in which they might be made even more profitable. That is the expression of intention in the first two paragraphs of cl 16 of the Part A Statement and, in the absence of evidence tending to show it to be incomplete or otherwise misleading, I cannot regard it as inadequate. For these reasons, I decline to draw the inference suggested on behalf of Associated.
However, the present case is complicated by the presence in the Part A Statement of the Statement that:
"In the event that Central Western Dairy becomes entitled to all the Associated Dairies Shares its current intention is to proceed to delist Associated Dairies and to integrate its operations with those currently conducted by Australian Co-operative Foods. In those circumstances, Associated Dairies would continue as a wholly-owned subsidiary of Australian Co-operative Foods responsible for developing Australian Co-operative Foods' presence in the Victorian market."
If all that is meant by that passage is that, in the event of Central's acquiring all the shares in Associated, the latter company would become an on-balance sheet asset of Australian Co-operative, that part of the statement may well be unexceptionable. However, the statement of intention to "integrate its (Associated's) operations with those currently conducted by Australian Co-operative" is far from clear. It may connote, for example, the amalgamation of some head office functions of the two enterprises with consequential redundancies of some employees of Associated. The ambiguities inherent in the concept of "integration" are analogous to those imported by the word "rationalise" as to which Bryson J in Ical v County Natwest (supra) observed, at 142:
"Rationalise" is a word of vague import; on its face it appears to mean to make reasonable or to make rational duplicated operations but the reader must, when he sees a word in a document like this be left with a doubtful suspicion that what is indicated is an intention to close down or sell off some unidentified aspects of ICAL's operations and that "rationalise" which does not mean these things is used as an euphemism to indicate them. The words used are not capable of indicating what the intention held is in terms what is to be done to ICAL operations. There is no indication whatever of which are the operations to which this exercise is to be applied; the meaning of "operations" is not particularly clear but an endeavour to understand it can be made only by those with a fairly good understanding of the business of ICAL and of the business of the Transfield Group, and in that endeavour they would not be assisted by any part of the Part C statement."
Mr Myers QC who appeared with Mr Scerri for the respondents suggested that "the process of integration will necessarily involve the risk that any employee might be dismissed". I do not regard that as axiomatic. Clause 20(1) of s.750 does not relieve an offeror of the need to state intentions regarding the future employment of the present employees of the target company in the event of the offeror's succeeding in acquiring all the issued shares. That aspect of the legislation perhaps impliedly acknowledges that offeree shareholders may be motivated by considerations other than economic self-interest, including the target company. A similar acknowledgment was made by Bryson J in Ical v County Natwest (supra) when he said, at 148:
"The existence in other persons of interest in prospective dealings with the assets of a take-over target is additional to what I regard as the obvious materiality of intentions and prospects of carrying out such exercises to shareholders who are considering whether to accept or reject a take-over offer. Such shareholders would not necessarily act solely on economically rational grounds: a shareholder might regard it as important that a particular operation should continue and might make a decision about disposal or retention of his shares with a view to affecting that matter and I regard those considerations as material.
The choices open to a shareholder are not to remain in or wholly give up membership of a target company: a shareholder can also dispose of part of his shares to an offeror with a view, for example, to facilitating the offeror's gaining control so as to join in the expected resulting prosperity. Shareholders do exist (and this case furnishes examples of them) who are interested wholly and solely in the price offered to them and care nothing for what the offeror is going to do; such shareholders act well within the range of reasonable conduct but they do not take the only reasonable course."
For these reasons, I regard it as strongly arguable that the Part A Statement does not comply with cl 20 because of its failure to give any or sufficient particulars of Central's intentions regarding the deployment of the fixed assets of Associated and the future employment of its present employees in the event that Central becomes entitled to all the shares in Associated.
INFORMATION ABOUT PROPOSED ACQUISITION BY AUSTRALIAN CO-OPERATIVE OF CERTAIN ASSETS OF NATIONAL FOODS LIMITED
21. Associated's complaint about the Part A Statement under this head is encapsulated in the following paragraphs of a letter from its solicitors to the solicitors for Central dated 19 August 1993:
"4.6 According to press reports, Australian Co-Op has agreed to purchase from National Foods Limited ("National Foods") various assets in the event that National Foods' current take-over bid for United Dairies is successful. The consideration for such purchase is $21,600,000.
4.7 This proposed purchase is materially relevant to Associated Dairies' shareholders in determining whether to accept the intended take-over for their shares. The incurring of such further significant debt (which would increase Australian Co-Op borrowing commitment levels to more than $89,000,000) will (to use the words of Heerey J in QIW Retailers Limited v Davids Holdings Pty Ltd - p 253) "affect the share price of" Associated Dairies. As your client must realise, if Associated Dairies becomes a non-wholly owned subsidiary of Australian Co-Op, its share price will be affected by the financial strength or weakness of its parent. The failure of the purported Part A statement to mention the National Foods purchase, let alone deal with its effect on the financial position of Australian Co-Op and its group of corporations (including Central Western), invalidates such statement, especially when one considers that the proposed purchase of Associated Dairies is also to be totally funded by debt."
That letter elicited a reply dated 20 August 1993 which included the following passage:
"... we are instructed Central Western proposes to provide the information set out below to shareholders of Associated Dairies to whom the offer is made.
(a) Financial information in connection with Central Western and Australian Co-operative Foods Limited ("Australian Co-operative") and its subsidiaries. It is envisaged this information would include audited financial statements and directors' reports of Australian Co-operative.
(b) Information concerning the intention of Australian Co-operative to purchase the Kempsey and Wyong business of United Dairies Limited ("United Dairies") and the Orange milk and dairy business of National Dairies Limited ("National Dairies"), in the event that National Dairies gains control of United Dairies. It is envisaged this information would include details of the understanding between Australian Co-operative and National Dairies in relation to the intended purchase and of the financial accommodation which would be provided by ANZ and CBA to fund the intended purchase.
Central Western considers that the Part A statement contains all information material to enable shareholders of Associated Dairies to make a fully informed decision whether or not to accept the offer. Central Western wishes, however, also to avoid unnecessary, protracted and costly litigation which might delay the dispatch of the offer. Accordingly, if Associated Dairies believes that information in addition to that described in sub-paragraphs (a) and
(b) above should be included in the Part A statement would you please provide us with full particulars of any such information so that Central Western can give further consideration to the matter."
I can discern nothing in s.750 to suggest that matters concerning the financial affairs of the offeror or its parent or any associated company have to be disclosed in the Part A Statement. (I except from this observation, of course, the need to identify the source and mode of provision of funds to finance the proposed acquisition which I have already discussed). If there were a wider obligation having universal application of the kind contended for by Associated it would subsume the narrower, specific, obligation imposed by cl 11 of s.750.
In QIW Retailers Ltd v Davids Holdings Pty Ltd (1992) 8 ACSR 245, Heerey J regarded the financial position of the offeror as material information within the meaning of cl 17. However his Honour was clearly influenced by the considerations that any shares in QIW in excess of 55% which Davids might acquire would be "sold down" so that a substantial body of minority shareholders would exist after the proposed acquisition and by the proposal that the target company should purchase the Queensland business of Davids. In my view there are no similar features in the present case which make information about future activities of Australian Co-operative Foods, unrelated to the proposed takeover of Associated, material to be provided to Associated's shareholders.
If I be wrong in the approach which I have taken to the construction of s.750 in the present context, I would still refuse relief to Associated under this head for discretionary reasons grounded in the offer by Central's solicitors to provide further, albeit limited, financial information concerning Australian Co-operative Foods and its subsidiaries.
BALANCE OF CONVENIENCE
26. The statutory provisions governing the despatch of Part A Statement are manifestly designed to protect offeree shareholders by ensuring that they make their decision to accept or reject an offer in the light of information which is as full and accurate as practicable about the effect of the takeover on matters which may affect the value of those shares or otherwise touch on the future management of the target company. Accordingly, the convenience which has to be balanced in a case like the present is that of the shareholders in having a prospect that identified deficiencies in the provision of information will be corrected against the convenience of the same shareholders and the offeror in having the offers despatched without delay. A countervailing detriment to the shareholders is the prospect that if an interlocutory injunction goes, the offer may not proceed at all.
By s.637 the offeror must, not later than fourteen days, and not earlier than twenty eight days, before despatching the offer to shareholders, have served on the target company a copy of the Part A Statement and a statement that it has been registered by the Commission. On the facts of the present case that means that the offers must be despatched between 27 August and 10 September unless the Commission modifies that requirement. The need to resolve complex matters of discovery and probable questions of fact, allied with the strained resources of the Court, makes it certain that Associated's substantive application cannot be heard and determined before mid-September. It is not disputed that there is no means of compelling Central to seek from the Commission an extension of time in which to despatch its offers to shareholders or to revive its offer after the present litigation has concluded. Accordingly, to grant an interlocutory injunction now would incur the risk of depriving Associated's shareholders altogether of the offer which Central has foreshadowed. If that risk were to materialise, it necessarily could not be compensated by enforcing Associated's undertaking as to damages in favour of its own shareholders.
Moreover, the Court has a wide discretion by virtue of s.729 and the wide definition of "remedial order" in s.613 to afford other remedies if it eventually concludes that a contravention of the Corporations Law has occurred. Those remedies include an order for divestiture of shares acquired by Central like that made by a Full Court of the Supreme Court of South Australia in Samic Ltd v Metals Exploration Ltd (unreported 11 August 1993). Further or alternatively, the order could be moulded to require each affected shareholder to be given an opportunity to reverse his or her decision to sell or to retain shares in Associated.
These considerations have weighed heavily with me in deciding to refuse the present application, as they did with Heerey J at first instance in Trade Practices Commission v Santos Ltd (1992) 14 ATPR 41-194 and a Full Court of this Court in the same case (1992) 110 ALR 517 where Hill J, with whom Sweeney J agreed, observed at 532:
"While due weight should be given to the fact that the failure to grant an interlocutory injunction would permit a respondent, in a case such as the present, to proceed to acquire, through its takeover offer, shares and thereby may possibly result in a breach of s.50, it, in my view, gives too much emphasis to form and not enough to substance to say that because the grant of the injunction could put an end to the subject matter of the litigation, therefore, in the ordinary case at least, interim injunctive relief should be granted. The remedy of divestiture is in reality an alternative remedy open to the Commission, albeit that it is one which could not be sought by the Commission until at least there had been an acquisition of the shares. In my view, a court considering whether to grant an interim injunction, in a case such as the present, must weigh up the real consequences to each party, taking in mind not only the public interest but also the private interests involved. There is, in my view, no presumption that an interim injunction should be granted, nor is there a presumption that an interim injunction should not be granted. The matter is one for a judicial exercise of discretion, taking into account all relevant matters. As I said earlier, the question of whether there is a serious issue to be tried and the balance of convenience in granting an injunction are not two mutually exclusive matters. The one reacts upon the other. The stronger the case the Commission has on the merits, that is to say in the present case of a breach of s.50 in the event of an acquisition, the more the balance of convenience would, without the interaction of other factors, be weighted in favour of the Commission. Likewise, where the Commission's case appears weak, the more the balance of convenience may be weighed in favour of the respondent to the proceedings, all other factors being equal."
I have also been influenced by the fact that the presumptive deficiency of information which I have identified in the Part A Statement goes to the intentions of Central and its parent company as to what is to occur only in the event of the offeror's acquiring all the shares in Associated. On the present state of the evidence that is unlikely to happen. As well, the evidence indicates that shares in Associated are relatively tightly held so that the deficiency to which I have just referred, and any other valid criticisms of the Part A Statement, can be pointed up by the directors of Associated in their Part B Statement with some certainty that their strictures will come to the attention of an overwhelming majority of shareholders before they decide whether to accept or reject the offer.
For all of these reasons, I consider that a proper exercise of the Court's discretion requires me to refuse the application for interlocutory relief. As indicated on 27 August, the costs of the application shall be costs in the cause and the directions hearing herein is adjourned to a date to be fixed.
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