Azure Mineral Limited [No 2]
[2024] WASC 154
•1 MAY 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE AZURE MINERALS LIMITED [No 2] [2024] WASC 154
CORAM: LUNDBERG J
HEARD: 1 MAY 2024
DELIVERED : 1 MAY 2024
FILE NO/S: COR 192 of 2023
BETWEEN: AZURE MINERALS LIMITED
Plaintiff
S H MINING PTY LTD
Interested Party
Catchwords:
Corporations Law - Scheme of arrangement under s 411 of the Corporations Act 2001 (Cth) - Plaintiff lithium company to be wholly acquired by two large mining groups - Scheme forms part of a dual scheme and takeover process - Second court hearing - Whether appropriate to approve scheme - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 411
Result:
Orders made approving the Scheme
Category: B
Representation:
Counsel:
| Plaintiff | : | A J Papamatheos and K A Sleiman |
| Interested Party | : | S K Dharmananda SC |
Solicitors:
| Plaintiff | : | Corrs Chambers Westgarth |
| Interested Party | : | King & Wood Mallesons and Herbert Smith Freehills |
Case(s) referred to in decision(s):
Re Azure Minerals Limited [2024] WASC 58
Re Wesfarmers Ltd (No 2) [2018] WASC 357
LUNDBERG J:
(This judgment was delivered ex temporaneously on 1 May 2024 and has been edited from the transcript to correct matters of grammar, add headings, and include complete footnotes and references.)
A. Introduction
This is the plaintiff's application pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) for approval of the Scheme which was the subject of orders made by the Court on 1 March 2024. By those earlier orders, the convening of the Scheme Meeting was ordered and the Transaction Booklet was approved for despatch to Shareholders. I refer to my reasons delivered on 6 March 2024 and, for convenience, will continue to use the definitions which appear in those reasons: Re Azure Minerals Limited.[1]
[1] Re Azure Minerals Limited [2024] WASC 58.
To summarise the Scheme, Azure is an ASX listed entity which controls various mineral projects in Western Australia, including the Andover Lithium Project which is located in the Pilbara region of this State. In mid-December 2023, the transaction which underlies the presently formulated Scheme was announced by Azure. The arrangement which was announced involved two alternative transaction structures, intended to run concurrently, being a scheme of arrangement process under chpt 5 of the Act and an off-market takeover offer under chpt 6.
Both structures involve the proposed joint acquisition of Azure by the group of companies headed by the Chilean-based company SQM, and the group of companies headed by the Australian mining company, Hancock Prospecting. Pursuant to the Scheme, which on its own is relatively conventional, Shareholders will be offered cash consideration for each Share they own. Pursuant to the off-market takeover offer, Shareholders will be offered a slightly lower cash consideration for each Share they own. The bid is conditional, amongst other matters, on the Scheme not becoming effective.
The hearing of this application for approval was originally listed for 10 April 2024. The hearing date was moved as a result of unanticipated delays in securing approval for the transaction from the Foreign Investment Review Board (FIRB).[2] That approval has now been obtained and there are no remaining obstacles for the plaintiff to move for the approval of the Scheme.
[2] As further explained in the Fourth Sleiman Affidavit.
I record at the outset that the plaintiff's application for orders approving the Scheme is now unopposed, and I have received in evidence the customary letter from ASIC pursuant to s 411(17) which confirms the regulator has no objection to the approval of the Scheme.
Prior to the hearing this afternoon, no notice of opposition to the Scheme had been received by the parties or the Court. The matter was formally called on at 4.00pm today and I record there was no appearance from any party, other than counsel who appeared for the plaintiff and the interested party, all of whom obviously support the approval of the Scheme.
B. Materials
I will briefly outline the materials which have been relied upon by the plaintiff at today's hearing, which counsel for the plaintiff has taken me to. The plaintiff has filed a minute of proposed orders dated 1 May 2024 and a concise outline of submissions dated 30 April 2024.
As to the evidence, the plaintiff relies upon the following affidavits for the purposes of supporting the orders which are sought:
(a)the affidavit of Lisa Nicole Ahwan affirmed 26 March 2024 (Ahwan Affidavit) - Ms Ahwan is a Senior Relationship Manager with Computershare Investor Services, the entity which provides the share registry services for Azure;
(b)the fourth, fifth and sixth affidavits of Katrina Anne Sleiman affirmed 4 April 2024, 30 April 2024 and 1 May 2024 (respectively, the Fourth Sleiman Affidavit, the Fifth Sleiman Affidavit, and the Sixth Sleiman Affidavit) - Ms Sleiman is a partner of the law firm representing the plaintiff in these proceedings (Corrs Chambers Westgarth);
(c)the affidavit of Brian David Thomas sworn 11 April 2024 (Thomas Affidavit) - Mr Thomas is the chairperson of Azure and the person appointed by the Court to act as the chairperson of the Scheme Meeting;
(d)the affidavit of Rodney Rex Somes affirmed 11 April 2024 (Somes Affidavit) - like Ms Ahwan, Mr Somes is a Senior Relationship Manager with Computershare Investor Services; and
(e)lastly, I refer to the affidavit of Benjamin Noel Horne affirmed 30 April 2024 (Horne Affidavit) - he is an Account Director with Georgeson Shareholder Communications, a business which provides shareholder engagement, proxy solicitation and governance consulting services, which has been engaged by the plaintiff to conduct a shareholder engagement campaign for this transaction, to which I will return in due course.
C. Court's jurisdiction
As the plaintiff has submitted, an arrangement such as the one proposed by the plaintiff is binding upon members of a company if it is approved by order of the Court, which involves the exercise of a discretion: s 411(4)(b). The court is not bound to approve a scheme merely because the court has previously made orders for the convening of a meeting or because the statutory majorities have been achieved. But it is at least necessary that there be satisfaction of the requirements expressed in s 411(4)(a)(ii) (being the applicable provision in the current circumstances) and compliance with certain other statutory and procedural matters.
The discretion to approve a scheme is to be exercised judicially and having regard to well settled considerations. By way of example only, those considerations were set out by Vaughan J in his decision in Re Wesfarmers Ltd (No 2).[3]I will address those considerations below.
[3] Re Wesfarmers Ltd (No 2) [2018] WASC 357 [13] ‑ [14].
D. Statutory and procedural requirements
I am satisfied the plaintiff has demonstrated compliance with the orders made by the Court on 1 March 2024 and with the statutory requirements applicable to the Scheme.
Those orders required that the Transaction Booklet approved by the Court be registered with ASIC, the orders of the Court be lodged with ASIC, and the approval hearing be advertised through an announcement to the ASX.[4] As to the advertising of the approval hearing, I made orders varying the requirements in this regard, on 7 April 2024, as a result of the delays in obtaining FIRB approval.[5] I am satisfied the plaintiff has complied with those orders to ensure the fresh date for the approval hearing was also announced to the ASX.
[4] Orders made 1 March 2024, [4], [10], [12].
[5] Orders made 7 April 2024, [2] and [3].
The orders made on 1 March 2024 authorised the despatch of the Transaction Booklet to the plaintiff's members.[6] I also made orders permitting evidence of the despatch to be given on information and belief. I have reviewed the Ahwan Affidavit and am satisfied the necessary materials were despatched as ordered and thus it can be safely concluded by the court that the members of the plaintiff have received appropriate information and disclosures ahead of the Scheme Meeting and the EGM which were both held on 8 April 2024.
[6] Orders made 1 March 2024, [1(c)], [2], 4], [5], [6] and [7].
As to the Scheme Meeting and the EGM, Mr Thomas has deposed to the circumstances of those meetings in his affidavit.[7] I am satisfied the Scheme Meeting was held in compliance with the orders made on 1 March 2024, and there were no irregularities in the process.[8] The resolution put to the members was in the following terms:
That, pursuant to and in accordance with section 411 of the Corporations Act, the Scheme (as defined in the Transaction Booklet incorporating this notice), the terms of which are contained in and more particularly described in the Transaction Booklet (of which this notice forms part) is agreed to (with or without alterations or conditions as approved by the Court to which Azure and SH Mining agree), and the Directors of Azure are authorised, subject to the terms of the Transaction Implementation Deed to agree to such alterations or conditions, and subject to approval by the Court, to implement the Scheme with any such alterations or conditions.
[7] Thomas Affidavit, [5] - [23].
[8] Orders made 1 March 2024, [1], [2], [3] and [9].
Voting on the resolution was undertaken by a poll, conducted by Mr Somes of Computershare. The summary of the voting results confirms the resolution was passed with the necessary statutory majorities. Indeed, strong majorities were achieved. That is, 86.89% of the number of Scheme Shareholders present and voting (in person or by proxy) voted in favour of the Scheme Resolution, and 98.44% of the votes cast were in favour of the Scheme Resolution. For convenience, the table below is drawn from the affidavit sworn by the chairperson of the meeting, Mr Thomas:
I should also record that the scheduled EGM was held following the Scheme Meeting. The resolution put to the members at the EGM was as follows:
That, for the purposes of section 611, item 7, of the Corporations Act, and as outlined in the Transaction Booklet accompanying this notice of meeting, approval is given for the acquisition by SH Mining, SQM and Hancock (and their respective Associates) of a Relevant Interest in each other's Azure Shares arising out of entry into the Joint Bidding Arrangements as more particularly summarised in the Transaction Booklet of which this notice of meeting forms part.
Mr Thomas has deposed that this resolution was also approved by the members.
As to the turnout at the Scheme Meeting, there is evidence before the Court that around 13% of the total shareholders attended the meeting either in person or by proxy or otherwise, and around 46% of the shares were voted on the resolution.[9] In general terms, these figures compare favourably to recent AGM's held by the plaintiff in terms of shareholder turnout (although more shares in number were voted at the most recent AGM). I am comfortable that the shareholder turnout and percentage of shares voted raise no issues of significance adverse to the approval of the Scheme itself.
[9] Plaintiff's Submissions, [29].
E. Discretionary considerations
Turning then to the discretionary considerations, I should briefly pause to reflect on the process which the plaintiff and the interested party, and those who stand behind that vehicle, have initiated under the Corporations Act.
The scheme of arrangement process is a corporate restructuring tool which has been in existence in some form since at least the Companies Act of 1862. Insofar as members' restructures are concerned, for which the process is more commonly employed in modern commerce, in contrast to creditors' schemes, the process has become a flexible device to implement a range of transactions, from internal restructures, demergers and spin-offs, to whole-of-company acquisitions such as in the present circumstances.
A significant aspect of the scheme process is that it frequently seeks to achieve the expropriation of shares and the valuable rights attached to them.[10] That is, the procedure sanctioned by s 411 can in effect authorise the acquisition of shares of a group of minority shareholders. The legislation incorporates a range of protective mechanisms to ensure this acquisition is undertaken fairly, including the requirements associated with appropriate disclosure of scheme materials and the ability of all shareholders to voice their concerns at either the scheme meeting or at the final court hearing.
[10] Ford, Austin and Ramsay's Principles of Corporations Law (Loose Leaf Edition), [24.036].
The court's ultimate approval of a scheme at the final hearing is one of the mechanisms by which the fairness and propriety of the scheme can be adjudged, and the interests of all shareholders considered. It is well accepted, though, that the Court generally takes the view that the members are the best judges of whether an arrangement is to their commercial advantage, and the Court will be reluctant to make a decision contrary to the views expressed by the members.
The plaintiff submits that the court should have no difficulty in being satisfied the Scheme in question is fair and reasonable, that there has been no improper purpose behind the Scheme, that there has been full and fair disclosure, and there is no evidence that any minority has been oppressed.[11] I agree with those submissions. I need only make specific reference to the following matters which demonstrate that the submission should be accepted:
(a)the Scheme involves an acquisition transaction of a kind ordinarily approved by courts and does not involve any novel or exotic treatment of rights;
(b)I should observe, as I noted in my earlier reasons, that the scheme has been promulgated as a dual scheme-takeover transaction, but that gives rise to no particular issue of public policy, at least in the context of this Scheme - indeed, the plaintiff correctly submits in my view that, far from undermining the statutory policies which underlie the Act, this type of dual transaction structure involves compliance with the statutory regimes for the proposal of a regulated change of control transaction in both chpt 5 and in chpt 6;
(c)the independent expert (Deloitte) has opined that in the absence of any other relevant information or superior proposal (and none has been forthcoming), the Scheme is in the best interests of Shareholders;
(d)the resolution to approve the Scheme was passed with significant majorities, with a reasonably strong turn-out from shareholders, at least in a relative sense;
(e)there is no evidence of any shareholder coercion arising, and indeed I note the proposal inherent in the Scheme involved a premium being paid for the acquisition of the shares, and an increased bid price was offered as part of the amended transaction process; and
(f)the Transaction Booklet provides proper and adequate disclosure to the Shareholders, as set out in my earlier reasons, which included a very detailed verification process; and
(g)in an objective sense, the Scheme is intended to produce a commercial benefit for the Shareholders of the plaintiff, offering them value in return for the acquisition of their shares.[12]
[11] Plaintiff's submissions [31] - [52].
[12] Re Azure Minerals Limited [32] - [46].
F. Additional matters
That leaves me to comment on only four specific matters raised by the plaintiff in its submissions.
First, my attention has been drawn to the conditions precedent to which the Scheme is subject. Those conditions precedent must be satisfied or waived before the Scheme becomes effective in accordance with its terms. I have received Ms Sleiman's latest affidavit which provides the necessary evidence in this regard and I am satisfied the conditions precedent, including the FIRB approval, have been satisfied or waived.[13]
[13] Sixth Sleiman Affidavit, [5] - [8] and Attachments KS-15 and KS-16; and Plaintiff's Submissions [42] ‑ [43].
Second, I am satisfied an order should be made to exempt the plaintiff from compliance with s 411(11). That is, I see no utility in having the Court’s orders annexed to Azure’s constitution given the orders do not effect any change to the constitution, and given the acquisition nature of the transaction.[14]
[14] Plaintiff's Submissions [54] - [55].
Third, as already noted, the plaintiff has produced a copy of the letter from ASIC under s 411(17), confirming the regulator does not object to the Scheme.[15] Section 411(17) provides:
The Court must not approve a compromise or arrangement under this section unless:
(a) it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6; or
(b) there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement;
but the Court need not approve a compromise or arrangement merely because a statement by ASIC stating that ASIC has no objection to the compromise or arrangement has been produced to the Court as mentioned in paragraph (b).
[15] Sixth Sleiman Affidavit, Attachment KS-17.
By the production of the 'no objection' letter from ASIC, the terms of s 411(17)(b) of the Act are satisfied, leaving the court to consider the exercise of its residual discretion. In my view, this is not a case which calls for that residual discretion to be exercised to deny approval to the Scheme.
I say this because it cannot be said that the Scheme enables the plaintiff (or indeed any other person) to avoid the regime and the processes of chpt 6 in any way, nor could that be inferred to be the purpose behind the Scheme. Indeed, it is apparent that a takeover offer has been made as part of this dual transaction structure such that chpt 6 has been engaged, albeit as an alternative to the Scheme process.
Fourth, and finally, my attention has been drawn to the outbound call campaign implemented by the plaintiff in relation to the Scheme. I had been informed at the first hearing that the plaintiff had determined not to undertake such a campaign. The force of that determination obviously melted away at some point after the first hearing and, indeed, a marker was laid down at the hearing of the possibility of a change in approach in this regard. Counsel for the plaintiff made brief oral submissions at the hearing this afternoon to explain this aspect of the matter.
An outbound shareholder campaign was thus implemented after the first hearing, using an experienced and well-known external provider, Georgeson Shareholder Communications.
I have reviewed the affidavit of Mr Horne, the account director at Georgeson, who has deposed to the process undertaken including the script employed by the call operators as part of the process. The evidence discloses that the outbound call campaign scripts were drafted by Georgeson to be consistent with the Transaction Booklet, the scripts were reviewed and amended by Corrs and Barrenjoey (the plaintiff's legal and financial advisers respectively), and the scripts were ultimately followed.[16]
[16] Horne Affidavit, [8] and [10] - [13].
I am comfortably satisfied no issues adverse to the approval of the Scheme arise in this regard.
G. Conclusion and orders
For these reasons I am satisfied the orders set out in the plaintiff's minute of proposed orders dated 1 May 2024 should be made. I will attach the final orders to these reasons when published.
ATTACHMENT A
Orders made by the Court on 1 May 2024
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TL
Associate to the Honourable Justice Lundberg
1 MAY 2024
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