Coates Hire Limited (ACN 073 603 586), in the matter of Coates Hire Limited (ACN 073 603 5856)

[2007] FCA 1951

FEDERAL COURT OF AUSTRALIA

Coates Hire Limited (ACN 073 603 586), in the matter of Coates Hire Limited (ACN 073 603 5856) [2007] FCA 1951

COATES HIRE LIMITED (ACN 073 603 586)

NSD2126 OF 2007

EMMETT J

9 NOVEMBER 2007

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD2126 OF 2007

COATES HIRE LIMITED ACN 073 603 586 Plaintiff
JUDGE:	EMMETT J
DATE OF ORDER:	9 NOVEMBER 2007
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (Act), there be convened a meeting (the Coates Scheme Meeting) of all shareholders of the Plaintiff for the purpose of considering and, if thought fit, agreeing, with or without modification, to a scheme of arrangement between them and the Plaintiff (the Coates Scheme).

2.The Coates Scheme Meeting be held on Monday, 17 December 2007 at Portside Centre, Level 5, Symantec House, 207 Kent Street, Sydney commencing at 10.00 a.m. AEDT.

3.The Coates Scheme Meeting can resolve to be adjourned.

4.Mr William Sydney Cutbush or, should he be unable to attend for any reason, Mr David Simon Karpin, is to chair the Coates Scheme Meeting and any adjournment of the Coates Scheme Meeting.

5.The shareholders who are eligible to vote at the Coates Scheme Meeting are those whose names are recorded in the register of members of the Plaintiff at 7:00pm AEDT on Saturday, 15 December 2007.

6.The draft explanatory statement entitled "Coates Hire Limited (ABN 70 073 603 586) Scheme Booklet" provided to the Court on 8 November 2007 and marked "Exhibit 1" (the Explanatory Statement) be and is hereby approved.

7.The convening of the Coates Scheme Meeting be advertised once in each of The Australian and The Sydney Morning Herald newspapers in the form, or substantially in the form, of the annexure to these Orders marked "A", such advertisement to be published not less than 14 days before the date appointed for the Coates Scheme Meeting.

8.The application under subsection 411 (4) of the Act for orders approving the Coates Scheme be advertised once in each of The Australian and The Sydney Morning Herald newspapers in the form, or substantially in the form, of the annexure to these Orders marked "B", such advertisement to be published not less than 5 days before the date appointed for the hearing.

9.By no later than 16 November 2007, documents in the form, or substantially in the form, of the Explanatory Statement and Proxy Forms (and, if applicable, the Notices of Direction) be posted by pre-paid post (or, in the case of any holder of the Plaintiff's shares whose registered address is outside the country, by airmail or dispatched by air courier for postage overseas) to each of the holders of the Plaintiff's shares as recorded in the register of members of the Plaintiff on 9 November 2007.

10.The Plaintiff be dispensed from compliance with:

(a)Rule 2.15 of the Federal Court (Corporations) Rules, except in so far as that rule applies Regulation 5.6.13 of the Corporations Regulations to the meetings;

(b)Rules 3.2(b)(ii), 3.2(b)(iii) and 3.2(d) of the Federal Court (Corporations) Rules;

(c)Replaceable Rules (within the meaning of s135 of the Corporations Act) which appear in part 2G.2 of the Corporations Act, to the extent that a Replaceable Rule in that part is displaced or modified by the Plaintiff's constitution.

11.The proceeding be adjourned to 10.30 am on Thursday, 20 December 2007.

12.The Plaintiff has liberty to apply.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

NEWSPAPER ADVERTISEMENT – MEETING TO CONSIDER SCHEME OF ARRANGEMENT

COATES HIRE LIMITED

(ABN 70 073 603 586)

MEETING TO CONSIDER SCHEME OF ARRANGEMENT

NOTICE IS GIVEN THAT, in accordance with an order of the Federal Court of Australia, a meeting of all holders of shares in Coates Hire Limited (Coates) will be held at 10:00 am AEDT Monday, 17 December 2007 at Portside Centre, Level 5, Symantec House, 207 Kent Street, Sydney for the purpose of considering and, if thought fit, approving a resolution to agree (with or without any modification as approved by the Court) an arrangement proposed to be entered into between Coates and the holders of shares in Coates more particularly set out in a scheme of arrangement contained in a scheme booklet that has been sent to Coates members.

Members can obtain a copy of the scheme booklet (which includes an explanatory statement under s412 of the Corporations Act 2001 (Cth)) by collecting it personally at 250 Parramatta Road, Homebush NSW 2140 between the hours of 9 am and 5 pm on weekdays.

NOTICE IS ALSO GIVEN that if the arrangement is agreed, an application for orders to approve the arrangement will be returnable before the Court in Sydney at 10.30 am on Thursday, 20 December 2007.  Any person proposing to be heard on such motion should give prior notice to Coates's solicitors, Allens Arthur Robinson of Deutsche Bank Place, Corner of Hunter & Phillip Streets, Sydney [phone] (Attention: Messrs Stuart McCulloch and Tom Story).

BY ORDER OF THE BOARD

Geoffrey Fardell

Company Secretary

NOTICE OF HEARING TO APPROVE COMPROMISE OR ARRANGEMENT

TO all the creditors and members of:

COATES HIRE LIMITED

(ABN 70 073 603 586)

TAKE NOTICE that, in the event that a resolution proposing the approval of a compromise or arrangement between Coates Hire Limited (Coates) and its members is approved by the requisite majority of members of Coates at a meeting to be held on 17 December 2007, at 10.30 am on Thursday, 20 December 2007, the Federal Court of Australia at the Law Courts Building, Queens Square, Sydney, will hear an application by Coates seeking the approval of that compromise or arrangement between Coates and its members.

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

Address for service of Coates: Allens Arthur Robinson of Deutsche Bank Place, Corner of Hunter & Phillip Streets, Sydney NSW 2000, ph [phone], fax [phone] (Attention Messrs Stuart McCulloch and Tom Story).

Name of person giving notice or of person's legal practitioner: Messrs Stuart McCulloch and Tom Story.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD2126 OF 2007

COATES HIRE LIMITED ACN 073 603 586 Plaintiff
JUDGE:	EMMETT J
DATE:	9 NOVEMBER 2007
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. The plaintiff, Coates Hire Limited (the Company), seeks orders under s 411 of the Corporations Act 2001 (Cth) (the Act) that there be convened a meeting of its shareholders, for the purpose of considering a scheme of arrangement.

2. The Company is Australia’s largest equipment hire company, with over 120 years of experience supplying equipment to a wide variety of markets including engineering, civil construction, building construction and maintenance, mining and resources, manufacturing, industrial shutdowns and events.  The Company has over 190 branch and satellite locations and has its own maintenance and transport capability.  The Company also has overseas operations based in Aberdeen in the United Kingdom, providing specialised equipment to the offshore oil and gas industry, and an operation in Indonesia with seven locations supporting the mining resource and offshore sectors. 

3. Under the proposed scheme, all of the Company’s issued shares will be acquired by Ned Group Holdings Pty Limited (the Transferee).  The Transferee is a special purpose company, formed to acquire all of the shares of the Company.  Its shareholders will be The Carlyle Group (Carlyle) and National Hire Group Limited (National Hire).  The Carlyle Group is described as one of the world’s largest private equity firms, with more than $US75 billion worth of assets under management.  It employs more than 900 people in 21 countries, including Australia.  National Hire is one of the leading hire companies in Australia.  It is a major manufacturer and distributor of mobile lighting towers and power generation and dewatering equipment.  National Hire operates a Rental Services division and a Capital Sales division. 

4. If the proposed scheme is approved and all conditions precedent are satisfied, the shareholders of the Company will receive a payment of $6.59 in return for the transfer of their shares to the Transferee.  The effect will be that the Company will become a wholly owned subsidiary of the Transferee.  Of the sum of $6.59, $6.06 will be provided by the Transferee.  In addition, on the Implementation Date, the Company will pay a special dividend of 53 cents per share to each shareholder in the Company. 

5. Under the proposed scheme, the Transferee will deposit an amount equal to the total consideration payable to shareholders by the Transferee.  The deposit will be to a trust account operated by the Company as trustee for its shareholders as at the Record Date as defined, which is presently expected to be 2 January 2008.  On the Implementation Date, which will be five business days after the Record Date, the Company will procure the payment of the scheme consideration to each shareholder and all the shares will be transferred to the Transferee. 

6. When the scheme is complete, National Hire will be a 47% shareholder of the Transferee.  At present, National Hire holds some 2,009,986 shares in the Company.  National Hire will not vote at the proposed meeting in respect of those shares.  National Hire has entered into a subscription agreement with Elph Pty Limited (Elph), under which Elph will take a placement of up to 28.7 million new National Hire shares, at $3 per share, to raise up to $86 million.  Part of the placement proceeds will be used to fund National Hire’s cash contribution to the Transferee.  Elph holds some 13,200,000 shares in the Company, representing approximately 5.27% of the Company’s issued share capital.  Elph proposes to vote at the meeting of members.  However, the Company proposes to ensure that an appropriate record is kept of the way in which Elph votes at the meeting, so that, if it is thought relevant, those votes may be considered separately by the Court in determining whether or not to approve the scheme, assuming the shareholders agree to it.

7. The mechanism that I have briefly outlined, whereby the consideration payable by the Transferee will be deposited to a trust account operated by the Company, ensures that there ought to be no risk, so far as shareholders are concerned, in the event of some financial embarrassment on the part of the Transferee, at the time when the consideration is due to be paid. 

8. The directors of the Company have requested Lonergan Edwards & Associates Limited (Lonergan Edwards) to provide a report as to whether the proposed scheme is fair and reasonable and in the best interests of the Company’s shareholders.  Lonergan Edwards have provided a written report, which will be included in the proposed explanatory memorandum to be sent to shareholders.  In their report, they outline their opinions as to the advantages for shareholders, together with disadvantages.  In particular, they point out that if the scheme is approved, shareholders will no longer hold an interest in the Company and would, therefore, not participate in any future value created by the Company as a result of ongoing operations or the development of initiatives that may result from the acquisition. 

9. In their report, Lonergan Edwards value 100% of the shares in the Company on a controlling interest basis at between $6.27 and $6.93 per share.  They consider, therefore, that, since the total consideration to be received by the Company’s shareholders will be $6.59, the scheme is fair and reasonable and in the best interests of the shareholders of the Company, in the absence of a superior proposal.  Lonergan Edwards, therefore, recommend that shareholders vote in favour of the scheme in the absence of a superior proposal. 

10. The proposed explanatory memorandum contains a detailed section outlining the Australian taxation consequences for shareholders who hold their shares in the Company on capital account for the purposes of investment, if the scheme is implemented.  Shareholders who do not hold their shares on capital account are advised to consult their taxation advisors concerning the possible taxation consequences.

11. On 2 October 2007, the Company and the Transferee entered into a Scheme Implementation Agreement whereby the parties agreed to take all steps necessary to implement the proposed scheme.  Clause 11 of the Agreement contains exclusivity provisions.  The details of the provisions are set out in some detail in the proposed explanatory memorandum.  I am satisfied that those provisions do not impose an unreasonable restraint.  The Scheme Implementation Agreement also provides for the payment by the Company of a break fee of $10 million in circumstances that are described.  The break fee is less than 1% of the total consideration payable.  I am satisfied that the provisions in relation to the break fee do not impose an unfair restraint on the exercise of judgment by shareholders in deciding whether or not to agree to the proposed scheme. 

12. It may be arguable that the proposed special dividend of 53 cents per share would constitute the provision of financial assistance in connection with the acquisition of shares in the Company by the Transferee.  I am satisfied that there would be no prejudice to the creditors of the Company by reason of the proposed dividend. 

13. I have considered the proposed explanatory memorandum and it appears to me to make appropriate disclosure of the considerations that are relevant for the shareholders in deciding whether or not to agree to the scheme.  The Australian Securities and Investments Commission (the Commission) has, by letter of 8 November 2007 to the Company’s solicitors, indicated that it does not currently propose to appear and make submissions or to intervene to oppose the proposed scheme.  That is on the basis of the information provided in the draft explanatory memorandum that has been provided to the Commission.

14. The scheme appears to me, on the basis of the information disclosed in the explanatory memorandum, to be one that the shareholders could reasonably agree to.  The scheme is of such a nature that, if it receives the requisite majority at the proposed meeting of shareholders of the Company, the Court would be likely to approve it on the hearing of any application for approval that was not opposed.  Because it is contemplated that the Court will be asked to approve the scheme within a very short time after the meeting, it is appropriate to vary the Rules so far as advertising the proposed second court hearing is concerned.  I propose to accede to the Company’s application and to make orders for the convening of a meeting of members. 

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:       17 December 2007

Counsel for the Applicant:	Mr IM Jackman SC
Solicitor for the Applicant:	Allens Arthur Robinson
Counsel for the Respondent:	Mr F Gleeson SC
Solicitor for the Respondent:	Freehills
Date of Hearing:	9 November 2007
Date of Judgment:	9 November 2007