In the matter of Mad Paws Holdings Limited

[2025] NSWSC 1104

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

In the matter of Mad Paws Holdings Limited [2025] NSWSC 1104

Hearing dates:

17 September 2025

Date of orders:

17 September 2025

Decision date:

24 September 2025

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Order convening scheme meeting and associated orders made.

Catchwords:

CORPORATIONS — arrangements and reconstructions — schemes of arrangement or compromise — application under s 411 of the Corporations Act 2001 (Cth) for orders convening meeting of members to consider and, if thought fit, to agree to proposed scheme of arrangement — whether requirements to order scheme meeting are satisfied

Legislation Cited:

- Corporations Act 2001 (Cth), ss 411 and 1319

- Supreme Court (Corporations) Rules 1999 (NSW), r 3.4

Cases Cited:

- Konekt Ltd v Advanced Personnel Management International Pty Ltd (No 2) [2019] FCA 1997

- Re Afterpay Ltd [2021] NSWSC 1435

- Re Ansarada Group Ltd [2024] NSWSC 411

- Re APM Human Services International Ltd [2024] NSWSC 1095

- Re Bigtincan Holdings Ltd [2025] NSWSC 140

- Re Coca-Cola Amatil Ltd [2021] NSWSC 270

- Re Cytopia Ltd [2009] VSC 560

- Re Donaco International Ltd [2025] NSWSC 662

- Re DWS Ltd [2020] FCA 1590

- Re Ellerston Global Investments Ltd [2020] NSWSC 879

- Re ELMO Software Pty Ltd [2023] NSWSC 12

- Re Intega Group Ltd [2021] NSWSC 1434

- Re Invocare Ltd [2023] NSWSC 1180

- Re Isentia Group Ltd [2021] NSWSC 910

- Re Kidman Resources Ltd [2019] FCA 1226

- Re Oz Minerals Ltd [2023] FCA 197

- Re Pacific Smiles Group Ltd [2024] NSWSC 812

- Re Vocus Group Ltd [2021] NSWSC 630

Category:

Principal judgment

Parties:

Mad Paws Holdings Limited (Plaintiff)
Rover Group Inc (Bidder)

Representation:

Counsel:
J Hutton / B Ng (Plaintiff)
DFC Thomas (Bidder)

Solicitors:
Talbot Sayer (Plaintiff)
Herbert Smith Freehills Kramer (Bidder)

File Number(s):

2025/308627

JUDGMENT

Nature of the application and background

1. By Originating Process filed on 12 August 2025, the Plaintiff, Mad Paws Holdings Ltd (“MPH”) seeks orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) (“Act”) in respect of a proposed scheme of arrangement between MPH and its shareholders.

2. By way of background, MPH is an Australian public company limited by shares and admitted to the official list of the financial market operated by ASX Limited (“ASX”) where its ordinary shares are quoted for trading. MPH operates an online marketplace for pet owners to book pet sitting, walking, day care and grooming services, with approximately 70,000 registered pet carers Australia wide. Prior to 29 August 2025, Mad Paws also operated an online only e-Commerce division offering pet healthcare, pet nutrition, pet medication, pet treats and speciality items, which has been partly divested and partly closed as a condition precedent to this transaction.

3. On 22 July 2025, MPH announced to ASX that it had entered a Scheme Implementation Deed (“SID”) with Rover Group, Inc (“Rover”) in respect of the proposed scheme. Under the terms of the SID, and subject to the satisfaction or waiver of various conditions precedent, Rover has agreed to acquire, by way of the scheme, all of the shares in MPH for $0.14 cash per scheme share. The total aggregate scheme consideration payable to scheme shareholders is approximately $61,498,498. The effect of the proposed scheme will be to make MPH a wholly owned subsidiary of Rover and it is proposed that MPH will delist from the ASX following implementation of the scheme.

4. I made the orders sought by MPH at the conclusion of the hearing on 17 September 2025. These are my reasons for doing so. I have drawn on the helpful submissions of Mr Hutton, with whom Ms Ng appeared for MPH, in this judgment.

Affidavit and other evidence

5. MPH reads the affidavit dated 12 August 2025 of Ms Di Bella which exhibits an Australian Securities and Investments Commission (“ASIC”) company search for MPH and a copy of the announcement made on 22 July 2025 by MPH to ASX in respect of the proposed scheme.

6. MPH also reads the affidavit dated 16 September 2025 of Mr Justus Hammer, the Chief Executive Officer and Managing Director of MPH, Mr Hammer there addresses MPH’s business, its capital structure and the shares held by its directors; he outlines the scheme and the scheme consideration; he refers to a reimbursement fee, reverse reimbursement fee and exclusivity provisions contemplated by the transaction, the recommendation made by MPH’s board and the interests of MPH Directors. He also addresses, inter alia, the conduct of the proposed scheme meeting and consents to act as chairperson or alternate chairperson of that meeting; the manner of despatch of the scheme materials, which are in conventional form; MPH’s proposed communications with shareholders including the operation of a shareholder information line and a proposed outbound call campaign; MPH’s verification of the scheme booklet; the provision of the draft scheme booklet to ASIC; and the MPH board’s approval of the scheme booklet.

7. By her affidavit dated 15 September 2025, Ms Melissa Weiland, who is the General Counsel of Rover, addresses the verification of the “Rover Information” in the scheme booklet, the reimbursement fee, a deed poll executed by Rover and its funding of the scheme consideration.

8. Mr Hutton took me through the proposed scheme booklet in the course of submissions. MPH also tendered a letter dated 17 September 2025 from the Australian Securities and Investments Commission (“ASIC”) in customary form, which reserved its position as to s 411(17)(b) of the Act; indicated that it considered that it had had a reasonable opportunity to examine the terms of the scheme and draft explanatory statement and to make submissions to the Court; and indicated that it did not propose to appear to make submissions or to oppose the scheme at the first Court hearing.

Role of the Court at the first Court hearing

9. It is well-established that the Court’s role at a first Court hearing in respect of a scheme is primarily to determine, in the exercise of its discretion, whether to convene a scheme meeting and approve the explanatory statement if it is satisfied of several matters, namely that the plaintiff is a “Part 5.1 body”; the proposed scheme is an “arrangement” within the meaning of s 411 of the Act; there has been proper disclosure to members (or creditors if a creditors’ scheme); the scheme is bona fide and properly proposed; ASIC has had reasonable opportunity to examine the proposed scheme and explanatory statement, to make submissions and has had 14 days’ notice of the proposed hearing date of the first Court hearing; the procedural requirements of the Supreme Court (Corporations) Rules 1999 (NSW) (“Rules”) have been met; and there is no apparent reason why the scheme should not, in due course, receive the Court’s approval if the necessary majority of votes is achieved: Re Ellerston Global Investments Ltd [2020] NSWSC 879 at [25]–[26]; Re Vocus Group Ltd [2021] NSWSC 630 at [12]; Re Invocare Ltd [2023] NSWSC 1180 at [16]; Re Pacific Smiles Group Ltd [2024] NSWSC 812 at [9]; Re APM Human Services International Ltd [2024] NSWSC 1095 at [11] (“APM”).

10. Each of the preconditions to the exercise of s 411(1) of the Act is met here. MPH is registered under the Act and is a Part 5.1 body and the proposed scheme is an “arrangement” between MPH and its shareholders. There is evidence that the draft scheme booklet has been the subject of a verification process. The procedural requirements under the Rules have been met, on the basis that I will dispense with r 3.4 where MPH proposes to give notice of the second Court hearing by way of ASX announcement in accordance with common practice.

11. Where the preconditions to the exercise of power under s 411(1) of the Act are satisfied, then it is necessary for the Court to consider whether the Court should, in its discretion, exercise its power under s 411(1) of the Act. The Court will then consider whether the proposed scheme is fit for consideration at the proposed scheme meeting, in the sense that it is of such a nature and cast in such terms that, if it achieves the statutory majority at the meeting, the Court would be likely to approve it on the hearing of a petition which is unopposed and that members (or creditors) are to be properly informed as to the nature of the scheme before the scheme meeting.

12. MPH’s directors here recommend that MPH’s shareholders vote in favour of the scheme at the scheme meeting, in the absence of a superior proposal and subject to the independent expert continuing to conclude that the scheme is in the best interests of MPH shareholders. The independent expert here assessed the value of an MPH ordinary share on a control basis to be between A$0.0833 (8.3 cents) and A$0.1097 (10.97 cents), with a preferred value of A$0.0965 (9.65 cents), in a valuation of a multiple of future maintainable revenue basis. The scheme consideration of $0.14 (14 cents) is above that valuation range and that preferred value; the independent expert has expressed the view that that the scheme is therefore “fair” and “reasonable” and in the best interest of the MPH’s shareholders, in the absence of a superior proposal. No apparent difficulty otherwise arises with the disclosure in the scheme booklet and the verification process adopted in respect of the scheme booklet.

13. Subject to the particular matters addressed below, I am satisfied that there is nothing in the terms of the scheme or in its effect on scheme shareholders that would otherwise warrant the Court declining to approve the scheme at the second Court hearing, if it receives the statutory majorities required by s 411(4)(a)(ii) of the Act at the scheme meeting.

Particular matters

14. Mr Hutton draws attention to several other matters in respect of the scheme. First, Mr Hutton points out that two major shareholders of MPH, Bombora Special Investments Growth and Mr Howard Humphreys (who is a former executive director of MPH) (“Major Shareholders”) together hold or control the votes in relation to 94,354,547 MPH shares representing 22.91% of the MPH shares on issue. The Major Shareholders have notified the MPH board that they intend to vote all their shares in favour of the scheme in the absence of a superior proposal and subject to the Independent expert continuing to conclude that the scheme is in the best interests of MPH shareholders, and that matter is disclosed in the Chair’s letter contained in the scheme booklet. Each Major Shareholder has also confirmed that they do not intend to sell, transfer or otherwise dispose of any Major Shareholder Shares prior to the Scheme Meeting (Ex 1, p 9).

15. Second, Mr Hutton addresses the questions of funding of the scheme consideration, the deed poll and performance risk. Mr Hutton points out that the maximum aggregate scheme consideration is approximately A$61,498,498, calculated on the basis that there will be a maximum of 439,274,986 MPH shares on issue as at the scheme record date (as defined in the scheme booklet) and assumes that all conditions precedent have been satisfied or waived. Rover intends to fund payment of the scheme consideration using existing cash and credit facilities, as disclosed in section 6.4 of the scheme booklet. There is evidence that, as at 31 August 2025, Rover’s cash and cash equivalents were in excess of USD$50 million, equivalent to approximately AUD$75 million and exceeding the maximum consideration payable under the scheme, and the available undrawn amount under its existing credit facilities was USD$172 million. On 14 September 2025, Rover executed a deed poll in favour of scheme shareholders by which it covenants in favour of scheme shareholders to perform the obligations attributed to Rover under the scheme. This matter gives rise to no reason not to convene the scheme meetings and make the other orders sought.

16. I am satisfied that there is sufficient evidence of Rover’s capacity to fund the scheme consideration and Rover is not a special purpose vehicle, where that question has heightened significance. Mr Hutton also submits, and I accept, that Rover’s entry into the deed poll, together with the provision of the scheme consideration to a trust account maintained by the scheme company as set out in paragraph 8(a) above, are well-established means of managing performance risk: Re ELMO Software Pty Ltd [2023] NSWSC 12 at [27]–[28]. This matter also gives rise to no reason not to convene the scheme meetings and make the other orders sought.

17. Third, Mr Hutton addresses MPH equity incentives. Section 4.11(a) of the scheme booklet discloses, as at the Last Practicable Date (as defined) MPH had a total of 61,259,840 Mad Paws Equity Incentives (as defined in the scheme booklet) on issue, comprising vested long term options issued under Legacy Employee Option Plan Rules; partially vested long term incentive options issued under a subsequent Equity Incentive Plan, some of which have already vested and some of which are scheduled to vest in the ordinary course on 20 September 2025; and partially vested short term incentive options, some of which have already vested and others if which are scheduled to vest in the ordinary course on 30 September 2025; vested options issued under the Equity Incentive Plan (as defined in the scheme booklet) granted to directors and employees in connection with the IPO on various dates between 23 March 2021 and 15 November 2021 with an exercise price of $0.34 per option (being EIP IPO Options as defined in the Scheme Booklet). MPH had also issued 2,000,000 vested options issued to the joint lead managers in connection with its initial public offering with an exercise price of $0.30 per option. Each option entitles the holder to be allocated one MPH share, subject to the satisfaction of certain conditions.

18. Section 4.11(b) of the scheme booklet discloses that, subject to the scheme becoming effective (as defined) under the SID, MPH must take such action as is necessary to ensure that prior to 8.00am on the second Court date, the relevant equity incentives will vest and be exercised or converted into MPH shares or are cancelled, with the effect that holders of certain of those equity incentives can participate in the scheme and receive scheme consideration. Mr Hutton addresses the treatment of each category of incentive in submissions. He submits and I accept that holders of incentive rights who are (or become) shareholders are not in a separate class by reason only that they hold such rights: Re Ansarada Group Ltd [2024] NSWSC 411 at [20] (“Ansarada”). The treatment of the equity incentives is also not a reason for the Court not to make orders convening the scheme meeting.

19. Fourth, Mr Hutton addresses the interests of MPH’s directors and payments to the directors in respect of the scheme. The interests of MPH’s directors are disclosed in the Chair’s letter in the scheme booklet which cross-refers to section 9 of the scheme booklet. Several directors hold equity Incentives which will be treated in in the manner disclosed in section 4.11 of the scheme booklet, including Legacy Options (as defined) held by two directors which are exercised by a cashless exercise mechanism that reduces the number of shares issued to those directors in lieu of each of them paying the exercise price for the options in cash. Mr Hutton submits, and I accept, that the cashless exercise mechanism does not lead to a different result for those directors where their shares are acquired by Rover under the scheme on the same basis as other shareholders. MPH’s board (excluding those two directors) have resolved that the benefits of those equity incentives are not materially sufficient so as to disqualify either Mr Hammer or Mr Pacas from voting or being present for resolutions relating to the scheme in accordance with s 195(2) of the Act and cl 19.7(e) of MPH’s constitution or preclude either those directors from recommending and voting in favour of the scheme.

20. Section 9.2(c) of the scheme booklet also discloses that, if the scheme is approved at the scheme meeting and the scheme becomes effective, the board has approved special exertion bonus payments for directors and resolved to pay a one-off transaction bonus of $100,000 in aggregate to two MPH employees. If the scheme is implemented, certain employees of MPH (including the two directors noted in [19] above) are entitled to receive a one-off cash payment in connection with FY25 performance incentives that would otherwise have been payable to them. These matters are disclosed in the scheme booklet, and I accept that they do not prevent the relevant directors making a recommendation in respect of the scheme: Re Kidman Resources Ltd [2019] FCA 1226 at [115]; Re DWS Ltd [2020] FCA 1590 at [41]–[49]; Re Intega Group Ltd [2021] NSWSC 1434 at [22]; Re Oz Minerals Ltd [2023] FCA 197 at [10], [18]; APM at [27]. They are otherwise matters to be taken into account by shareholders in determining whether to vote in favour of or against the scheme and do not give reason not to call the scheme meeting.

21. Fifth, Mr Hutton addresses exclusivity provisions in respect of the scheme. Clause 11 of the SID imposes several of restrictions and obligations on MPH in relation to negotiations with third parties such as “no shop” (cl 11.2(a)), “no talk and no due diligence” (cl 11.2(b)) and a “notification of competing proposals” obligation (cl 11.4) and a “matching right” (cl 11.5). The “no talk and no due diligence” restriction is subject to the MPH directors’ fiduciary or statutory duties (SID, cl 11.3). The “End Date” for the “Exclusivity Period” and the exclusivity provisions under the SID is 31 December 2025 or such other date as agreed in writing by the parties, so the period between the date of the SID (22 July 2025) to 31 December 2025 is a period of just over 6 months, I accept this is not an unreasonable period and the exclusivity provisions are in common form and are sufficiently disclosed in the scheme booklet: Re Coca-Cola Amatil Ltd [2021] NSWSC 270 at [22]; Ansarada at [23]; Re Donaco International Ltd [2025] NSWSC 662 at [15].

22. Sixth, Mr Hutton addresses a reimbursement fee and reverse reimbursement fee which is larger, as a proportion of the value of the transaction, than would ordinarily be the case. Pursuant to cl 12.2 of the SID, MPH is required to pay a reimbursement fee of $1,225,000 to Rover in specified circumstances. MPH leads evidence (Hammer [21]) which Rover requested that provision and would not have entered into the SID or otherwise agreed to implement the scheme without it. Pursuant to cl 13.3 of the SID, Rover must pay a reverse reimbursement fee of the same amount to MPH in specified circumstances, and MPH again leads evidence (Hammer [23]) that it requested that provision and would not have entered into the SID or otherwise agreed to implement the scheme without it. Neither the reimbursement fee nor the reverse reimbursement fee is payable merely because MPH shareholders do not approve the scheme at the scheme meeting and these fees are disclosed in sections 3.3(f) and 4.10(c) of the scheme booklet. I accept that break fees are common in schemes of arrangements and will generally be permitted unless the amount of the break fee is such that it could influence voting at the meeting to be convened or if there are some other unusual circumstances: Re Afterpay Ltd [2021] NSWSC 1435 at [33]; Ansarada at [24]; Re Bigtincan Holdings Ltd [2025] NSWSC 140 at [54]. The amount of the reimbursement fee and the reverse reimbursement fee are not so large that they could realistically influence voting at the scheme meeting.

23. Mr Hutton rightly recognises that the amount of these fees is approximately 1.99% of the equity value of MPH as calculated from the scheme consideration and they exceed the Takeover Panel’s 1% guideline. I accept that, as Mr Hutton points out, there are occasions on which the Courts have ordered a meeting to consider a scheme although it included a break fee that exceeded that guideline: Re Cytopia Ltd [2009] VSC 560 at [12]–[18]; Konekt Ltd v Advanced Personnel Management International Pty Ltd (No 2) [2019] FCA 1997 at [21] and [25]; Re Isentia Group Ltd [2021] NSWSC 910 at [21] (“Isentia”). On balance, I accept that the higher percentage here is justified by higher costs incurred by the parties reflecting the relative complexity of the transaction, including a disposal or closure of part of MPH’s business to satisfy a condition precedent to the scheme, relative to the size of the transaction: Isentia at [22]. I accept this matter also does not provide reason not to convene the scheme meeting.

14. Seventh, Mr Hutton addresses the despatch of the scheme booklet which will occur in accordance with common scheme practice and proposed inbound and outbound shareholder calls. The scripts for those calls have been disclosed to the Court in the evidence and no order was sought approving them in accordance with current scheme practice. There is no issue I need to raise in respect of them. Mr Hutton also addresses MPH’s response to a question raised by a shareholder prior to the first Court hearing which also raises no matter of concern. These matters, separately and together, provide no reason not to make the orders sought by MPH.

Orders

25. For these reasons, I made the orders sought by MPH at the conclusion of the first Court hearing on 17 September 2025.

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Amendments

14 October 2025 - Correction to names of parties on page 2.

Paragraph 18 amended to change "Mad Paws" to "MPH".

Decision last updated: 14 October 2025