Re Cellestis Limited (No 2)

[2011] VSC 329

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

LIST E
No. 2346 of 2011

IN THE MATTER of CELLESTIS LIMITED (ACN 094 962 133)

CELLESTIS LIMITED (ACN 094 962 133) Plaintiff

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JUDGE:	Davies J
WHERE HELD:	Melbourne
DATE OF HEARING:	15 July 2011
DATE OF ORDERS:	15 July 2011
DATE OF REASONS:	20 July 2011
CASE MAY BE CITED AS:	Re Cellestis Limited (No 2)
MEDIUM NEUTRAL CITATION:	[2011] VSC 329

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CORPORATIONS – Schemes of arrangement – Proposed merger – Revised proposal –
Application for adjournment of meeting of shareholders – s 1319 of the Corporations Act 2001 (Cth) – Whether class issue – Financial Assistance – Corporations Act 2001 (Cth) s 260A

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr. C M Scerri QC with Mr. G J Ahern	Baker & McKenzie
For QIAGEN N.V. and QIAGEN Australia Holding Pty Ltd	Mr. C Hanson	Freehills

HER HONOUR:

1. On 14 June 2011 I made orders under s 411(1) of the Corporations Act 2001 (Cth) (“the Act”) that Cellestis Limited (“Cellestis”) convene a meeting of its shareholders on 20 July 2011 to consider a scheme of arrangement (“the scheme”). The scheme, if implemented, would result in the acquisition for cash consideration of $3.55 per share of all of the fully paid ordinary shares in Cellestis by QIAGEN Australia Holdings Pty Ltd (“QIAGEN Australia”). QIAGEN Australia is a wholly owned subsidiary of QIAGEN N.V. (“QIAGEN NV”), a company registered in the Netherlands. On 10 July 2011 QIAGEN NV increased the consideration offered to shareholders by 25 cents per share to $3.80 per share (“the revised proposal”). QIAGEN NV has also increased the consideration that will be offered to option holders for the cancellation of their options to reflect the increased scheme consideration amount. The revised proposal was announced to the ASX on 11 July 2011. In light of the revised proposal, Cellestis seeks orders that the scheme meeting be adjourned to 3 August 2011 so that shareholders are given the opportunity to consider the revised proposal.

1. The power of the Court to adjourn the scheme meeting is contained in s 1319 of the Act which provides:

Where, under this Act, the Court orders a meeting to be convened, the Court may, subject to this Act, give such directions with respect to the convening, holding or conduct of the meeting, and such ancillary and consequential directions in relation to the meeting, as it thinks fit.

In Re Lend Lease Primelife Ltd; Re Lend Lease Village Responsible Entity Ltd,[1] Austin J stated:

… s 1319 authorises the court to adjourn the meeting, in circumstances where an adjournment is called for by events that have happened after the meeting was convened. Such events make an order having the effect of postponing the meeting a "consequential" direction under the section. Moreover, an order for the adjournment of the meeting seems to me to fall directly within the earlier part of s 1319, which speaks about giving directions with respect to, inter alia, the "holding" of the meeting. I therefore conclude that the court has the power to make an order adjourning or otherwise having the effect of postponing a scheme meeting convened under previous orders of the court.[2]

The shareholders should be provided with the proper opportunity to consider the revised proposal and an adjournment of the first meeting for that purpose is desirable. 

[1](2009) NSWSC 1340.

[2]Ibid [16]; see also CMPS & F Pty Ltd v Crooks Mitchell Ltd  (1997) 24 ACSR 367

1. A supplementary scheme booklet has been prepared to send to shareholders in relation to the revised proposal which I am satisfied adequately discloses the revised proposal.  ASIC was notified of the application to adjourn the meeting and provided with a draft of the proposed supplementary scheme booklet.  ASIC has not required any changes to the scheme booklet and did not appear at this application.

1. Mr Scerri, senior counsel for Cellestis, raised two additional matters with the Court concerning the call option.

1. The first matter is whether a class issues arises with respect to the two directors who granted call options over 19.9% of their collective 23.8% shareholding in Cellestis.  The call option deeds have been amended as the result of which QIAGEN Australia can exercise the call at any time after the scheme becomes “effective” and in those circumstances, QIAGEN Australia will be able to exercise the call option prior to the implementation date of the scheme.  In that event, the shares subject to the call would not participate in the scheme.  Moreover, the exercise price for those parcels of shares would be the original exercise price of $3.55 and not the revised scheme consideration amount of $3.80. I do not consider that any class issue arises.  The two directors each have shares that are not covered by the call option which will be participating in the scheme at the increased scheme consideration amount of $3.80. Furthermore, they have stated that their intention, in the absence of a superior proposal, is to vote their shareholding in favour of the scheme.

1. The second matter is the potential for the payment of the special dividend (which, under the revised proposal, is no longer conditional on a class ruling from the Australian Taxation Office and which Cellestis announced to the ASX that it proposed declaring) to constitute the provision of financial assistance to QIAGEN Australia to acquire shares in it, in the event that the call options are exercised between the effective date and the implementation date of the scheme. QIAGEN Australia would receive that dividend in respect of the 19.9% of the shares it will then hold in Cellestis. This has been addressed by the Cellestis board which has given consideration to the matters directed by s 260A(1) of the Act. Mr Pitcher, a non executive director and the chairman of Cellestis, deposed to the board’s determination, on 13 July 2011, that the Cellestis board had determined that the giving of this financial assistance would not materially prejudice the interests of Cellestis or the Cellestis shareholders: s 260A(1)(a)(i) or Cellestis’ ability to pay its creditors: s 260A(1)(a)(ii) and that:

Based on the awareness of the Cellestis Directors of the financial position of Cellestis as at 13 July 2011, the Cellestis Board has determined that if:

(a)the Amended Scheme of Arrangement becomes effective and is implemented;

(b) a Special Dividend of 7 cents per Cellestis share is declared and paid on or around [29 August 2011] [being the same date as the implementation deed for the scheme];

(c) the total price for the cancellation of the Employee Share Options is paid … on or around [that] date; and

(d) Cellestis pays its outstanding transaction costs incurred in connection with the implementation of the Amended Scheme;

the Board expects that Cellestis would have cash reserves of approximately $10 million immediately following payment by Cellestis of the Special Dividend, the total price for cancellation of the Employee Share Options and outstanding transaction costs incurred in connection with the implementation of the Amended Scheme and that this liquidity would be more than adequate to meet Cellestis’ cash requirements.[3] 

The potential for the special dividend to constitute the provision of financial assistance, in the event that the call options were exercised between the effective date and the implementation date of the scheme, and the determination of the board for the purposes of s 260A of the Act has been disclosed to shareholders in the supplementary booklet.[4]  The shareholders will have the opportunity to vote on the scheme with that disclosure.

[3]Second Affidavit of Ronald George Pitcher sworn 14 July 2011, 6-7 [32].

[4]Re Rural Press Limited (2007) 61 ACSR 373.

1. For the above reasons I make the orders as sought by Cellestis.

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