Fantastic Holdings Limited, in the matter of Fantastic Holdings Limited
[2016] FCA 1302
•3 November 2016
FEDERAL COURT OF AUSTRALIA
Fantastic Holdings Limited, in the matter of Fantastic Holdings Limited [2016] FCA 1302
File number(s): NSD 1836 of 2016 Judge(s): JAGOT J Date of judgment: 3 November 2016 Catchwords: CORPORATIONS – scheme of arrangement – construction of scheme implementation deed – extent of fiduciary carve out Legislation: Corporations Act 2001 (Cth) Date of hearing: 3 November 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 14 Counsel for the Plaintiff: Mr M Oakes SC Solicitor for the Plaintiff: Watson Magioni Lawyers Counsel for the Other: Dr R Austin Solicitor for the Other: Minter Ellison Lawyers ORDERS
NSD 1836 of 2016 IN THE MATTER OF FANTASTIC HOLDINGS LIMITED ACN 004 000 775
FANTASTIC HOLDINGS LIMITED ACN 004 000 775
Plaintiff
STEINHOFF ASIA PACIFIC HOLDINGS PTY LTD ACN 606 826 492
Other
JUDGE:
JAGOT J
DATE OF ORDER:
3 NOVEMBER 2016
THE COURT ORDERS THAT:
1.Pursuant to subsection 411(1) of the Corporations Act 2001 (Cth) (the Act):
(a)the Plaintiff, Fantastic Holdings Limited (Fantastic), convene a meeting (Scheme Meeting) of the holders of ordinary shares issued in Fantastic for the purpose of considering and, if thought fit, agreeing to (with or without modification) a scheme of arrangements proposed to be entered into between Fantastic and those shareholders (Scheme), the terms of which are contained in the Explanatory Statement, a copy of which is behind tab 2 of Exhibit TMR1 (Scheme Booklet);
(b)the Scheme Meeting be held at 10.00am Australian Eastern Daylight Time (AEDT) on 7 December 2016 at Rydges Bankstown, 874 Hume Highway, Bass Hill, New South Wales 2197.
(c)Mr Julian Tertini or, failing him, Mr John Hughes, be Chairperson of the Scheme Meeting;
(d)the Chairperson of the Scheme Meeting has the power to adjourn the Scheme Meeting in his absolute discretion;
(e)the Scheme Booklet be approved for distribution to shareholders;
(f)on or before 7 November 2016, there be dispatched to each Fantastic shareholder who, in accordance with the Act, has consented to receiving shareholder communications electronically, an email substantially in the form of Annexure A to these Orders to the nominated email address of the shareholder;
(g)on or before 7 November 2016, there be dispatched to all Fantastic shareholders (other than shareholders referred to in paragraph 1(f) of these Orders) by pre-paid post, or in the case of a member whose registered address is outside Australia, by pre-paid air mail, addressed to the relevant addresses set out in the register of members of Fantastic:
(i)a document substantially in the form of the Scheme Booklet;
(ii)a proxy form in substantially the form of the document included with the Scheme Booklet behind tab 2 of Exhibit TMR1; and
(iii)an envelope addressed to Computershare Investor Services Pty Limited (the Documents); and
(h)it shall not be necessary for the Documents to be delivered personally or dispatched by prepaid post or other means to a Fantastic shareholder referred to in paragraph 1(f) of these Orders.
2.On or before 6 December 2016, Fantastic publish a Notice of Hearing substantially in the form of Annexure B hereto in The Australian newspaper and the plaintiff be relieved of compliance with Rule 3.4 of the Federal Court (Corporations) Rules 2000 (Cth) to the extent necessary.
3.Rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) shall not apply to the Scheme Meeting, except insofar as that rule applies regulation 5.6.12 of the Corporations Regulations 2001 (Cth).
4.The proceeding be stood over to 9.30am on 12 December 2016 before Jagot J for the hearing of any application to approve the Scheme.
5.Liberty to apply.
6.These Orders be entered forthwith.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Annexure A
ACN 004 000 775
Dear Securityholder,
Notice of Scheme Meeting
Notice is given that, by an order of the Federal Court of Australia made on 3 November 2016, pursuant to subsection 411(1) of the Corporations Act, a meeting of Fantastic shareholders will be held at 10:00am (AEDT) on Wednesday 7 December 2016 at Rydges Bankstown, 874 Hume Highway (corner of Hume Highway and Strickland Street), Bass Hill NSW 2197 (Scheme Meeting).
The purpose of the Scheme Meeting is to consider and, if thought fit, agree to the Scheme proposed to be made between Fantastic and its Shareholders. If the Scheme proceeds, Steinhoff Asia Pacific Holdings Pty Limited will acquire all of the ordinary shares in Fantastic for $3.50 cash per share.
Scheme Booklet
You should read the Scheme Booklet carefully in its entirety, including the reasons to vote in favour or against the Scheme (as set out in Section 2) before deciding how to vote.
The Scheme Booklet can be viewed on InvestorVote by clicking on the link below:
› Scheme Booklet
How to vote by proxy
Lodge your proxy online in 2 easy steps
Simply click on the 'Appoint a proxy' link below. This will take you to InvestorVote our online proxy appointment service, where you will be prompted to enter your postcode.
Appoint a proxy
Or, copy and paste the following web address into your browser:
Note - Proxy form submitted through this site must be received by 10:00am (AEDT) Monday 5 December 2016.
Further Information
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Yours sincerely,
Brian Cassell
Company Secretary
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Annexure B
Fantastic Holdings Limited 004 000 775
Notice of hearing to approve compromise or arrangement
TO all the creditors and members of Fantastic Holdings Limited ACN 004 000 775
TAKE NOTICE that at 9:30am (Australian Eastern Standard Time (AEDT)) on 12 December 2016 the Federal Court of Australia at Law Courts Building, Queens Square, Sydney New South Wales 2000 will hear an application by Fantastic seeking the approval of an arrangement between Fantastic and its members, if agreed to by resolution to be considered by the members of Fantastic at a meeting of such members to be held on 7 December 2016 at 10:00am AEDT at Rydges Bankstown, 874 Hume Highway, Bass Hill, New South Wales 2197.
If you wish to oppose the approval of the arrangement, you must file and serve on Fantastic 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 Fantastic at its address for service at least 1 day before the date fixed for the hearing of the application.
The address for service on Fantastic is: Watson Mangioni Lawyers, Level 23, 85 Castlereagh Street, Sydney, NSW 2000.
Julian Tertini
Chairman, Fantastic Holdings Limited
REASONS FOR JUDGMENT
JAGOT J:
This is an application under s 411 of the Corporations Act 2001 (Cth) (the Act) for orders to convene a meeting of the shareholders of the plaintiff, Fantastic Holdings Limited (Fantastic), for the purpose of considering a scheme of arrangement proposed to be made between Fantastic and its shareholders and, thereafter, for a further court hearing approving the scheme of arrangement if the requisite majority of shareholders resolves to enter into the scheme.
The plaintiff’s written submissions state that Fantastic is a company listed on the Australian Stock Exchange (ASX) and is a leading retailer, importer and manufacturer of household bedding and furniture in Australia, employing approximately 1700 staff across 125 retail stores, involving three core retail chains trading under the business names of Fantastic Furniture, Plush and Original Mattress Factory.
As set out in the plaintiff’s written submissions, and otherwise disclosed in the evidence in support of the application, if the scheme is approved, Fantastic shareholders will transfer their shares to Steinhoff Asia Pacific Group Holdings Pty Ltd and will receive consideration for each share transferred by way of a total cash payment of $3.50 per Fantastic share. The payment of the scheme consideration is secured by a deed poll which has been executed by Steinhoff Asia Pacific Group Holdings Pty Ltd and Steinhoff Asia Pacific Holdings Pty Limited (Bidco). If the scheme is brought into effect, Fantastic will be acquired by and become a subsidiary of Bidco and will be de-listed from the ASX.
The opinion of an independent expert has been sought. The expert has considered the value of Fantastic shares and determined the offer to be fair and reasonable. .
I accept the submission that has been put by the plaintiff that at the scheme meeting Fantastic shareholders will have a straightforward decision to make. They will decide whether the scheme consideration is adequate and vote in favour of the proposal or they will decide that the scheme consideration is inadequate and will vote against the proposal.
The directors of Fantastic have unanimously recommended that, in the absence of a superior proposal, shareholders of Fantastic vote in favour of the scheme.
There is only one matter which warrants comment in these reasons for judgment. It relates to an issue raised by the Australian Securities and Investment Commission (ASIC) in respect of the scheme implementation deed, which is Annexure B to the scheme booklet.
The issue is one of construction, and I am satisfied that it has been resolved. However, given that it was raised by ASIC and the resolution was by way of a further deed entered into and executed by the parties on 2 November 2016, it is worth noting the issue.
The scheme implementation deed contains no-shop and no-talk provisions with a fiduciary carve-out. The fiduciary carve-out is in orthodox terms and provides that there shall be no breach of the no-talk prohibition or the related obligation of notification where the competing proposal is made bona fide by or on behalf of a person considered to be of reputable commercial standing and the board has determined in good faith and after consultation with and receiving written advice from financial advisors that the competing proposal is or may reasonably be expected to lead to a superior proposal, and advice from external Australian legal advisors that failing to take the action or refusing to take the action (as the case may be) with respect to the competing proposal would be likely to constitute a breach of any fiduciary or statutory duties of the directors of Fantastic.
The no shop provision, clause 10.2(a)(i), provides that Fantastic must not solicit, invite, encourage, facilitate or initiate any offer, proposal or discussion by a third party which would reasonably be expected to encourage or lead to the making of an actual, proposed or potential competing proposal to that of Bidco. That is all well and good. However, the same provision also prevents Fantastic from negotiating, accepting or entering into or offering or agreeing to negotiate, accept or enter into any such agreement, arrangement or understanding. Clause 10.2(a)(i) is not expressly subject to the fiduciary carve-out in clause 10.5 unlike the no-talk provision in clause 10.2(b), which is expressly made subject to clause 10.5.
By a letter dated 25 October 2016 from ASIC, a concern was expressed that the effect of these provisions is that Fantastic is prevented from negotiating or accepting an unsolicited proposal from a third party because clause 10.2(a) trumps the fiduciary carve-out to clause 10.2(b).
In order to ensure that this does not remain an issue, and to reflect the intention of the parties to the scheme implementation deed, a further deed dated 2 November 2016 has been executed, the operative provision of which is in these terms:
We refer to the scheme implementation deed entered into by Fantastic Holdings Limited (ACN 004 000 775) (Fantastic), Steinhoff Asia Pacific Group Holdings Pty Ltd (ACN 612 890 874) (Bidder) and Steinhoff Asia Pacific Holdings Pty Limited (ACN 105 828 957) (Bidco) on 13 October 2016 (SID).
The parties refer to clauses 10.2(a), 10.2(b) and 10.5 of the SID and paragraphs 20 to 22 of the Plaintiff’s submissions for the first Court hearing on Thursday 3 November 2016 (Submissions).
The parties confirm that they agree with the construction of the SID set out in paragraph 21 of the Submissions.
For the avoidance of doubt, the parties confirm and agree that the “No shop prohibition” contained in clause 10.2(a) of the SID:
(a)acts to prohibit Fantastic from soliciting enquiries, or alternative proposals, from third parties (in whatever form such solicitation may take); however
(b)does not act to prohibit (among other things) Fantastic from talking on, or responding to, unsolicited invitations or offers which would attract the fiduciary carve-out (in clause 10.5) to the “no talk prohibition” contained in clause 10.2(b).
By this means, it is clear that clause 10.2(a) only acts to prohibit Fantastic from, in effect, soliciting alternative or competing proposals. It does not act to prohibit it from talking or responding to unsolicited invitations or offers if they would otherwise attract the fiduciary carve-out in clause 10.5. It seems to me that there can be no doubt that the further deed dated 2 November 2016 achieves this objective. Accordingly, the issue of concern raised by ASIC in its email dated 25 October 2016 has been effectively addressed.
Otherwise, there is no matter arising which requires comment, and I am content to make the orders sought.
I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate:
Dated: 11 November 2016
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