Re Alchemia Ltd

Case [2012] FCA 927

FEDERAL COURT OF AUSTRALIA

Alchemia Limited, in the matter of Alchemia Limited [2012] FCA 927

Citation: Alchemia Limited, in the matter of Alchemia Limited [2012] FCA 927
Parties: ALCHEMIA LIMITED (ACN 071 666 334)
File number: NSD 1132 of 2012
Judge: YATES J
Date of judgment: 24 August 2012
Catchwords: CORPORATIONS – scheme of arrangement – demerger – application for order that company convene meeting of members
Legislation: Corporations Act 2001 (Cth)
Cases cited: Aston Resources Limited, in the matter of Aston Resources Limited [2012] FCA 229
Centrebet International Limited, in the matter of Centrebet International Limited [2011] FCA 870
FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69
Re ETRADE Australia Ltd (1999) 30 ACSR 516
Re Foundation Healthcare Ltd (2002) 42 ACSR 252
Re Hills Motorway Ltd (2002) 43 ACSR 101
Re MIA Group Ltd (2004) 50 ACSR 29
Re NRMA Ltd (2000) 33 ACSR 595
Re Opes Prime Stockbroking Ltd (No 2) (2009) 179 FCR 20
Re Permanent Trustee Co Ltd (2002) 43 ACSR 601
Re Sino Gold Mining Ltd (2009) 74 ACSR 647
Re Westfield Holdings Ltd (2004) 49 ACSR 741
Date of hearing: 24 August 2012
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 56
Counsel for the Plaintiff: Mr F Gleeson SC
Solicitor for the Plaintiff: Corrs Chambers Westgarth

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1132 of 2012

IN THE MATTER OF ALCHEMIA LIMITED (ACN 071 666 334)

BETWEEN:

ALCHEMIA LIMITED (ACN 071 666 334)
Plaintiff

JUDGE:

YATES J

DATE OF ORDER:

24 AUGUST 2012

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Pursuant to subsection 411(1) of the Corporations Act 2001 (Cth) (Corporations Act):

(a)the Plaintiff, Alchemia Limited (ACN 071 666 334) (Alchemia), convene a meeting (Scheme Meeting) of the holders of ordinary shares in Alchemia (Shareholders) for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement proposed to be made between Alchemia and its Shareholders (Scheme), being the scheme substantially in the form of the draft contained in the scheme booklet containing the explanatory statement in relation to the Scheme, being Exhibit “1” in these proceedings (Scheme Booklet);

(b)the Scheme Meeting be held at 10.00 am (Brisbane time) on 5 October 2012 at the Brisbane Convention and Exhibition Centre, Cnr Merivale and Glenelg Streets, South Bank, Brisbane, Queensland;

(c)the Chairperson of the Scheme Meeting be Melvyn Bridges and in his absence Nerolie Withnall;

(d)the Chairperson appointed to the Scheme Meeting has the power to adjourn the Scheme Meeting in his/her absolute discretion;

(e)all voting at the Scheme Meeting be by poll as declared by the Chairperson;

(f)the explanatory statement in the Scheme Booklet for the Scheme be approved for distribution to Alchemia Shareholders;

(g)there be dispatched to each Alchemia Shareholder:

(i)a document substantially in the form of the Scheme Booklet;

(ii)a proxy…

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Re Alchemia Ltd [2012] FCA 927
Case
[2012] FCA 927
Decision Date

CaseChat Overview and Summary

In Re Alchemia Ltd, the applicant, Alchemia Limited, sought orders convening a meeting of its members to consider a proposed demerger. The demerger involved the separation of Audeo Oncology Inc (AO) from Alchemia, with AO being listed on the NASDAQ and the ASX. Alchemia would retain its Fondaparinux business while AO would fund the development and commercialisation of VAST technology. The legal issues before the court included whether the scheme of arrangement was properly disclosed and whether it was likely to benefit the shareholders.

The court found that Alchemia was a Pt 5.1 body and the scheme was an "arrangement" within s 411(1) of the Corporations Act 2001. The explanatory statement in the scheme booklet adequately disclosed the advantages, disadvantages, and risks associated with the demerger. The court was satisfied that the scheme was likely to be of benefit to the shareholders and that it was appropriate for the court to convene the meeting. The court also noted the condition that the scheme's implementation was dependent on AO successfully raising funds by 31 December 2012, including the uncertainty over the IPO price and potential dilution of shareholders' interests in AO.

The court made several orders, including convening the meeting, exempting Alchemia from certain Federal Court rules, and standing over the proceedings for the approval of the scheme. The meeting was to be held on 5 October 2012, with voting by poll and distribution of the scheme booklet to shareholders. The court also granted leave for Alchemia to amend its Australian Company Number and restored the case to the list.

Orders

Orders of the court

1. Pursuant to subsection 411(1) of the Corporations Act 2001 (Cth) (Corporations Act):

(a) the Plaintiff, Alchemia Limited (ACN 071 666 334) (Alchemia), convene a meeting (Scheme Meeting) of the holders of ordinary shares in Alchemia (Shareholders) for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement proposed to be made between Alchemia and its Shareholders (Scheme), being the scheme substantially in the form of the draft contained in the scheme booklet containing the explanatory statement in relation to the Scheme, being Exhibit “1” in these proceedings (Scheme Booklet);

(b) the Scheme Meeting be held at 10.00 am (Brisbane time) on 5 October 2012 at the Brisbane Convention and Exhibition Centre, Cnr Merivale and Glenelg Streets, South Bank, Brisbane, Queensland;

(c) the Chairperson of the Scheme Meeting be Melvyn Bridges and in his absence Nerolie Withnall;

(d) the Chairperson appointed to the Scheme Meeting has the power to adjourn the Scheme Meeting in his/her absolute discretion;

(e) all voting at the Scheme Meeting be by poll as declared by the Chairperson;

(f) the explanatory statement in the Scheme Booklet for the Scheme be approved for distribution to Alchemia Shareholders;

(g) there be dispatched to each Alchemia Shareholder:

(i) a document substantially in the form of the Scheme Booklet;

(ii) a proxy form substantially in the form of the document at tab 15 of Exhibit PS1;

(iii) an election form substantially in the form of the document at tab 16 of Exhibit PS1; and

(iv) a reply paid (for use in Australia only) envelope addressed to Link Market Services Limited for the return of the proxy form and election form,

in the case of each Alchemia Shareholder who has a registered address in Australia, by prepaid post and, in the case of each Alchemia Shareholder who has a registered address outside Australia, by prepaid airmail or air courier, in each case addressed to the relevant address set out in the Alchemia register of members;

(h) Alchemia place an advertisement in The Australian newspaper, substantially in the form of “Annexure A” to these Orders, on or before 4 October 2012 and Alchemia shall otherwise be exempted from compliance with the requirement to publish such notice following the Scheme Meeting and prior to the second court hearing for approval of the Scheme pursuant to Rule 3.4(3)(a) of the Federal Court (Corporations) Rules 2000 (Cth).

2. Pursuant to section 1319 of the Corporations Act, Alchemia be exempted from compliance with the requirements of rule 2.15 of the Federal Court (Corporations) Rules 2000 save that regulation 5.6.13 of the Corporations Regulations 2001 shall apply to the Scheme Meeting.

3. The proceedings be stood over to 10.15 am on 9 October 2012 before Justice Yates for the hearing of any application to approve the Scheme.

4. Leave be granted to Alchemia pursuant to Federal Court Rule 8.21(1)(c) to amend its originating process by changing its Australian Company Number from 056 601 417 to 071 666 334.

5. Liberty to restore to the list.

6. These orders to be entered forthwith.

Background

Background to the litigation

These are my reasons for making those orders.Background Alchemia is a diversified biotechnology company that is listed on the ASX. It has on issue 280,617,096 ordinary shares and 3,463,000 unlisted options to acquire ordinary shares. Alchemia has the following businesses:(a)a business which sells Fondaparinux in the United States of America. Fondaparinux is a late stage generic drug that is approved for the treatment of deep vein thrombosis (DVT), pulmonary embolism and the prophylaxis of DVT in orthopaedic and abdominal surgery. This business is expected to generate cash-flow in the first half of the financial year ending 30 June 2013 (the Fondaparinux business);(b)a drug development business, which is currently cash-consuming, that is focussed on the use of certain technology that is designed to improve existing drugs that are used to treat and manage cancer (the oncology business); and(c)a drug discovery business, which is also cash-consuming, that is focussed on the exploitation of certain small molecule drug discovery technology (referred to as the VAST technology) (the drug discovery business). The present corporate structure in relation to these businesses is as follows. Alchemia owns all the shares issued by Audeo Oncology Inc (AO). AO is a Delaware corporation and is thus domiciled in the United States of America. AO, in turn, owns all the shares issued by Alchemia Oncology Pty Ltd (Alchemia Oncology). Alchemia Oncology conducts the oncology business. AO also owns all the shares in Audeo Discovery Pty Ltd (Audeo Discovery). Audeo Discovery is a licensee (from Alchemia) of the VAST technology. In essence the proposed demerger will effect the separation of AO from Alchemia. It is proposed that, subject to the receipt of regulatory approvals, AO will be listed on the NASDAQ and the ASX. AO will hold the oncology business indirectly through Alchemia Oncology and Audeo Discovery will continue to hold its licence of the VAST technology. AO will be responsible for funding the development and commercialisation of that technology. The Fondaparinux business will remain with Alchemia. That separation will be effected by Alchemia. Alchemia shareholders will continue to hold their shares in Alchemia. However, in the case of Eligible Shareholders, Alchemia will transfer its shares in AO to either (a) those Eligible Shareholders who elect to receive those shares or (b) CHESS Depository Nominees Pty Limited (CDN) in the case of those Eligible Shareholders who elect to receive Audeo Oncology CDIs (CHESS depository interests) as such consideration. Each Audeo Oncology CDI represents an interest in a fully paid share in the common stock of AO and will allow the holder effectively to trade AO shares on the ASX. In the case of Ineligible Foreign Shareholders (to whom further reference will be made below), Alchemia will transfer its shares in AO to a Sales Facility Agent to be sold, with the proceeds to be remitted to those shareholders. In each case, the Alchemia shareholders will be entitled to one AO share or Audeo Oncology CDI for every 37 Alchemia shares held by them on the Record Date. In the end result, Alchemia will not own any shares in AO following implementation of the demerger.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

The plaintiff has indicated that, if the Court ultimately approves the scheme, both it and AO intend to rely on that approval to seek exemption under s 3(a)(10) of the US Securities Act 1933. One of the conditions of the exemption to be sought is that the Court must be advised, before any hearing at which the scheme is approved, that reliance will be placed on the Court’s approval for the purpose of seeking the relevant exemption. This matter is dealt with in the plaintiff’s written submissions advanced in support of the convening of the scheme meeting. Those submissions have been marked for identification as MFI 2. The matter was also raised in the course of oral submissions.Consideration I am satisfied that Alchemia is a Pt 5.1 body and that the scheme of arrangement is an “arrangement” for the purposes of s 411(1) of the Act: see Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at [39]; Re MIA Group Ltd (2004) 50 ACSR 29 at [2]-[9]; Re Sino Gold Mining Ltd (2009) 74 ACSR 647 at [4]. I have been taken to the Scheme Booklet which incorporates the required explanatory statement. The disadvantages and risks associated with the scheme of arrangement, as well as its advantages, are disclosed and discussed – most prominently in a section entitled “Overview of the Demerger” which contains a series of questions and answers as well as references to other parts of the Scheme Booklet to enable a more detailed study of the scheme to be undertaken for those wishing to do so. The Scheme Booklet appears to sufficiently and adequately disclose the various matters to which I have referred above. I note in particular that the fact that the implementation of the scheme is conditional upon AO undertaking successful fundraising by means of the IPO by 31 December 2012 is made clear. This includes a disclosure of the reasons why the price at which the AO shares are to be offered under the IPO is not presently known and that the IPO will dilute the shareholders’ interests in AO. The same section makes clear that, although the exact dilution is not presently known, Alchemia will not consent to AO proceeding with the IPO if investors in that fundraising were to hold more than a third of AO immediately after the IPO. The Court will not ordinarily summon a meeting of members unless the scheme of arrangement that is proposed is of such a nature and cast in such terms that, if it receives the statutory majority at the meeting, the Court would be likely to approve it on the hearing of an application that is unopposed. The question is whether it is reasonable to suppose that sensible business people might consider the arrangement proposed to be of benefit to members: Centrebet International Limited, in the matter of Centrebet International Limited [2011] FCA 870 at [29]; FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72; Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [8]-[10]. I am satisfied that the proposed scheme of arrangement is of that nature and that it is appropriate in all the circumstances that the orders, as sought, be made.