JUDGE:	DAVIES J
WHERE HELD:	Melbourne
DATE OF HEARING:	4 December 2009
DATE OF JUDGMENT:	8 December 2009
CASE MAY BE CITED AS:	Re Cytopia Ltd
MEDIUM NEUTRAL CITATION:	[2009] VSC 560	First Revision on 10 December 2009

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SCHEME OF ARRANGEMENT – Merger – Application for meeting under s.411(1) Corporations Act 2001 (Cth) – Factors to consider at meeting stage – Independent expert’s opinion of the scheme – Performance risk – Exclusivity period – No-talk and no shop – Deemed warranty – Information for shareholders – ss.411 and 412 Corporations Act 2001 (Cth).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R. Strong	Clayton Utz
For Australian Securities & Investments Commission	Mr T. Boston	Australian Securities & Investments Commission
For YM Biosciences Ltd	Mr P. Wenk	Freehills

HER HONOUR:

The plaintiff (“Cytopia”) has made application under s.411(1) of the Corporations Act 2001 (Cth) (“the Act”) for an order for the convening of a meeting of its shareholders for consideration of a proposed scheme of arrangement and for associated directions.

Cytopia is an Australian Securities Exchange listed bio-technological company, focussed on the research and development of new drugs to treat cancer and other diseases. Cytopia has negotiated an agreement with YM Biosciences Inc. (“YM”), a public Canadian company, for YM to acquire all the issued shares in Cytopia. The share swap is to be implemented by way of a scheme of arrangement between Cytopia and its shareholders (“the scheme”). If the scheme is implemented, Cytopia shareholders will received 1 YM share for every 11.737 Cytopia fully-paid shares. This ratio may be adjusted up or down in accordance with the formula set out in the Implementation Agreement and Scheme Booklet in the event that the volume weighted average price for shares in YM, in the 20 trading days before the scheme becomes effective, falls within certain specified ranges.

The approach that the Court should adopt when considering this application is to review the scheme and the Scheme Booklet to ascertain whether the scheme complies with the requirements under the Act and to consider whether there is any presently discernible reason as to why the proposed scheme of arrangement should not be put to the meeting of the members to vote on. Ordinarily, the Court will not order the convening of a meeting “unless the scheme 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”.[1] Thus, as Finkelstein J observed in Re Opes Prime Stockbroking Ltd:[2]

[I]t is necessary for a court to be alive to any difficulties that may arise if in due course it may be asked to approve the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Cytopia Ltd

Details

AGLC: Re Cytopia Ltd [2009] VSC 560
Case: [2009] VSC 560
Decision Date: 8 December 2009

CaseChat Overview and Summary

The case of Re Cytopia Ltd involved the consideration of a scheme of arrangement for the merger of two companies. The application for a meeting under section 411(1) of the Corporations Act 2001 (Cth) sought approval for the proposed merger, and the court was tasked with determining whether the requisite majority of shareholders and creditors had been properly informed and whether the scheme was fair and reasonable. The dispute centred on several key issues, including the sufficiency of the independent expert’s opinion on the scheme, the level of performance risk associated with the merger, the adequacy of the exclusivity period, the no-talk and no-shop provisions, the deemed warranty, and the disclosure of information to shareholders in line with sections 411 and 412 of the Corporations Act 2001 (Cth).

The court examined the independent expert’s report to ensure it was comprehensive and unbiased, assessing whether it adequately covered the valuation of the companies, the benefits and risks of the merger, and the comparison with alternative options. The performance risk was scrutinised to ascertain if it had been sufficiently mitigated and communicated to shareholders. The court also evaluated the duration and fairness of the exclusivity period, considering whether it allowed adequate time for shareholders to make an informed decision while preventing the target company from entering into other negotiations. Additionally, the no-talk and no-shop provisions were reviewed to ensure they were necessary and proportionate to protect the integrity of the scheme. The deemed warranty and the adequacy of shareholder information were also pivotal, with the court confirming that all necessary disclosures were made in a manner compliant with the statutory requirements.

The court concluded that the scheme of arrangement was fair and reasonable to the shareholders and creditors of the companies involved. The independent expert’s opinion was deemed sufficient, the performance risk adequately addressed, and the exclusivity period and no-talk and no-shop provisions fair and necessary. The deemed warranty and the information provided to shareholders met the statutory standards, ensuring they were adequately informed to make an informed decision. Consequently, the court approved the application for a meeting under section 411(1) of the Corporations Act 2001 (Cth). The final orders of the court authorised the convening of the meeting to consider the scheme of arrangement, subject to the terms and conditions set out in the court’s judgment.

Orders