Re IDM International Ltd
[2025] WASC 209
•29 MAY 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE IDM INTERNATIONAL LTD; EX PARTE IDM INTERNATIONAL LTD [2025] WASC 209
CORAM: HILL J
HEARD: 6 MAY 2025
DELIVERED : 6 MAY 2025
PUBLISHED : 29 MAY 2025
FILE NO/S: COR 57 of 2025
MATTER: IN THE MATTER OF IDM INTERNATIONAL LTD
EX PARTE
IDM INTERNATIONAL LTD
Plaintiff
Catchwords:
Corporations law - Scheme of arrangement - Application for orders convening scheme meeting under s 411(1) of the Corporations Act 2001 (Cth) - Whether requirements to order scheme meeting are satisfied - Orders made convening scheme meeting
Legislation:
Corporations Act 2001 (Cth) s 411, s 1319
Corporations Regulations 2001 (Cth) sch 8
Supreme Court (Corporations) (WA) Rules 2004 (WA) r 3.2
Result:
Orders made convening scheme meeting
Category: B
Representation:
Counsel:
| Plaintiff | : | J R C Sippe |
Solicitors:
| Plaintiff | : | Johnson Winter & Slattery - Perth |
Case(s) referred to in decision(s):
Re Amcom Telecommunications Ltd [2015] FCA 341
Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400
Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358
Re Kangaroo Resources Ltd [2018] WASC 327
Re Nzuri Copper Ltd [2019] WASC 189
Re Pacific Energy Limited [2019] WASC 443
Re SRG Ltd [2018] FCA 1092
Re Wesfarmers Ltd [2018] WASC 308
HILL J:
IDM International Limited (IDM) is an unlisted Australian public company.[1] On 6 February 2025, IDM announced on its website that it had entered into a Scheme Implementation Deed (SID) with Blackstone Minerals Limited (Blackstone) for the acquisition of all shares in IDM (Scheme).[2]
[1] Affidavit of Andrew Gerald Ricciardi filed 15 April 2025 [6].
[2] Affidavit of Andrew Gerald Ricciardi filed 15 April 2025 [9], 'AR-3'. The announcement by Blackstone which contained a copy of the SID is 'AR-4'.
The originating process dated 15 April 2025 came before me for the first court hearing on 6 May 2025. On that date, I ordered that a meeting of IDM's shareholders be convened to consider and vote on the proposed Scheme (Scheme Meeting). Orders were also made approving the distribution of a Scheme booklet, and for the conduct of the Scheme Meeting.
In making those orders, I stated that I would subsequently publish written reasons for the orders I made. These are those reasons.
Nature of proposed scheme
IDM is a mineral exploration company with a 64% ownership interest in the Mankayan Copper‑Gold Project in the Philippines.[3] As at 15 April 2025, IDM had the following securities on issue:[4]
(a)92,026,627 fully paid ordinary shares (Shares);
(b)3,800,000 options with an exercise price of $0.20 and expiring on 14 February 2026 (IDMUOPT2 Options);
(c)6,245,000 options with an exercise price of $0.40 and expiring on 1 November 2026 (IDMUOPT4 Options);
(d)1,2500,000 options with an exercise price of $0.40 and expiring on 5 February 2029 (IDMUOPT5 Options); and
(e)1,500,000 performance rights (Performance Rights).
[3] Scheme booklet [4.1.4] ‑ [4.1.5].
[4] Affidavit of Geoffrey Mark Gilmour [17], 'GG-2'.
Blackstone is an ASX listed mineral exploration and development company focused on production from nickel, cobalt, and gold projects in Vietnam and Canada. Blackstone is currently undertaking studies to develop an integrated battery metals processing plan to support Asia's growing lithium‑ion battery industry.[5]
[5] Scheme booklet [5.1.1].
If the Scheme is implemented, Shareholders will receive 7.4 new Blackstone shares for every Share held at the Record Date (Scheme Consideration).[6]
[6] SID, cl 1.1 (definition of Scheme Consideration), cl 4.3; Scheme cl 1.1 (definition of Scheme Consideration) and cl 4.1.
IDM's options are not part of the Scheme. Instead, it is proposed that all IDM options will be cancelled, and that Optionholders will receive the following consideration:[7]
(a)each ICMUOPT2 Option will be exchanged for 7.4 Blackstone options with an exercise price of $0.03 expiring on 14 February 2026;
(b)each ICMUOPT4 Option will be exchanged for 7.4 Blackstone options with an exercise price of $0.06 expiring on 1 November 2026; and
(c)each ICMUOPT5 Option will be exchanged for 7.4 Blackstone options with an exercise price of $0.06 expiring on 5 February 2029.
[7] SID, cl 1.1 (definition of Target Option Cancellation Deed) and cl 3.1(a).
Under the SID, IDM is required to ensure all Performance Rights vest or lapse in accordance with their terms and convert into Shares prior to the Record Date.[8]
[8] SID, cl 7.6.
Shareholders whose address is outside of Australia or New Zealand (Ineligible Foreign shareholders) are ineligible under the Scheme to receive Blackstone shares. The shares that would have otherwise been issued to these Shareholders will be issued to a sale agent on their behalf and sold on the ASX. The sale proceeds will be remitted to Blackstone, who will make the relevant pro‑rata payment to these Shareholders.[9]
[9] SID, cl 4.4.
The directors of IDM have unanimously recommended that, in the absence of a superior proposal, Shareholders vote in favour of the Scheme.[10]
[10] Affidavit of Geoffrey Mark Gilmour filed 2 May 2025 [85]; Scheme booklet.
IDM retained an independent expert, BDO Corporate Finance (WA) Pty Ltd (BDO), to provide an opinion on the proposed Scheme. BDO concluded that, in the absence of a superior proposal, the proposed Scheme is fair and reasonable and is in the best interests of Shareholders.[11] In reaching this conclusion, BDO compared the value of a Share prior to the Scheme to the value of the Scheme Consideration (both on a diluted and minority basis on the basis the Scheme is a merger of equals). BDO assessed the value of a Share to be between $0.387 and $0.683 per Share, with a preferred value of $0.530. This was lower than their assessment of the value of the Scheme Consideration of between $0.407 and $0.710 per Scheme, with a preferred value of $0.548.[12] The basis for the valuation and the methodology used are set out in the Independent Expert Report (IER). The consideration of advantages, disadvantages and other factors that are likely to impact shareholders are set out comprehensively in the IER.
[11] Scheme booklet, Annexure A.
[12] Scheme booklet, Annexure A.
The Scheme will not be implemented unless and until a number of conditions precedent are satisfied or waived. The conditions precedent which are required to be satisfied or waived are contained in the SID,[13] and summarised in the Scheme booklet.[14]
[13] SID, cl 3.1.
[14] Scheme booklet [3.5.1].
Blackstone's obligations under the Scheme are supported by a deed poll.[15]
[15] Affidavit of Geoffrey Mark Gilmour filed 2 May 2025, 'GG-12' (Deed Poll).
Legal principles in respect of the Scheme
Pursuant to s 411 of the Corporations Act 2001 (Cth) (Act), a scheme of arrangement can be used to re‑organise a company which is binding on members where:
(a)the arrangement is agreed by the requisite majorities prescribed by s 411(4)(a) of the Act, namely, 75% of shareholders by value and 50% by number; and
(b)the court approves the arrangement pursuant to s 411(4)(b) of the Act.
There are three stages to an application under s 411 of the Act. First, the court approves the convening of a scheme meeting. Second, the members vote on the proposed scheme at the scheme meeting. Third, assuming the first two stages have occurred, the court approves the proposed scheme.[16]
[16] Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358 [7].
There are well‑established principles that apply to each stage. In relation to the first court hearing, the court will order the scheme meeting to be convened if it is satisfied that:[17]
(a)there is a pt 5.1 body;
(b)there is a compromise or arrangement within the meaning of s 411 of the Act;
(c)the proposed scheme booklet contains the prescribed information[18] and provides proper disclosure;[19]
(d)the scheme is bona fide and properly proposed;
(e)the Australian Securities and Investments Commission (ASIC) has had at least 14 days' notice of the proposed hearing date and a reasonable opportunity to examine the terms of the scheme and the scheme booklet and make submissions;[20]
(f)the procedural requirements of the Act and the Supreme Court (Corporations) (WA) Rules 2004 (WA) have been met; and
(g)the scheme is of such a nature that, if it receives the necessary statutory majority at the scheme meeting, the court will be likely to approve it.
[17] Re SRG Ltd [2018] FCA 1092 [11]; Re Wesfarmers Ltd [2018] WASC 308 [60].
[18] Corporations Act 2001 (Cth) s 412(1)(a)(ii); Corporations Regulations 2001 (Cth) reg 5.1.01, sch 8 cl 8301 ‑ 8310.
[19] Corporations Act 2001 (Cth) s 412(1)(a)(i).
[20] Corporations Act 2001 (Cth) s 411(2)(b).
The standard of review that is undertaken by the court at the first hearing is whether the proposed scheme is not inappropriate and is one that sensible businesspeople might consider is of benefit to its members.[21] If the proposed arrangement is one that appears fit for consideration by a meeting of members and is a commercial proposition likely to gain the court's approval if passed by the necessary majority, leave should be given to convene the meeting.[22]
Should orders be made for the convening of the Scheme Meeting and the dispatch of the Scheme booklet?
[21] Re Amcom Telecommunications Ltd [2015] FCA 341 [10].
[22] Re SRG Ltd [12]; Re Wesfarmers Ltd [72] - [76].
At the first court hearing, IDM relied on four affidavits being:
(a)two affidavits of Andrew Gerald Ricciardi, a senior associate employed by Johnson Winter Slattery, the solicitors for IDM, filed 15 April 2025 and 5 May 2025;
(b)an affidavit of Geoffrey Mark Gilmour, IDM's company secretary, director, and chairman, filed 2 May 2025; and
(c)an affidavit of Jamie Anthony Byrde, Blackstone's company secretary, filed 2 May 2025.
Counsel for IDM also tendered a letter from the ASIC dated 5 May 2025.[23]
[23] Exhibit A.
These affidavits and the exhibit prove the formal matters that IDM is required to establish.
On the materials before me, there was nothing to suggest that the Scheme was not properly proposed.
There are a number of conditions precedent to the Scheme.[24] Neither IDM nor Blackstone has any basis to believe that any of these conditions precedent will not be satisfied or waived prior to implementation of the Scheme.[25]
Disclosure and Scheme booklet
[24] SID, cl 3.1.
[25] Affidavit of Geoffrey Mark Gilmour filed 2 May 2025 [49]; Affidavit of Jamie Anthony Byrde filed 2 May 2025 [10] - [11].
I was provided with a final copy of the draft Scheme booklet, which incorporated changes addressing ASIC's comments.[26]
[26] Affidavit of Geoffrey Mark Gilmour filed 2 May 2025, 'GG-4'.
I was and am satisfied that there will be proper disclosure as to the effect of the proposed Scheme and the material considerations for Shareholders.
There is evidence before me as to the due diligence and verification process undertaken by both IDM and Blackstone.[27] I accept that IDM and Blackstone have undertaken processes to verify the accuracy of statements attributable to each of them in the Scheme booklet and to ensure that the Scheme booklet does not omit any material information.
[27] Affidavit of Geoffrey Mark Gilmour filed 2 May 2025 [56] - [77]; Affidavit of Jamie Anthony Byrde filed 2 May 2025 [12] - [22].
Based on the checklist provided by counsel for IDM,[28] I was satisfied the Scheme booklet contained the prescribed information in accordance with s 412(1)(a)(ii) of the Act and sch 8 of the Corporations Regulations 2001 (Cth).
Performance risk
[28] Plaintiff's submissions filed 2 May 2025, Annexure 'A'.
On the evidence before the court, I was and am satisfied that Shareholders are adequately protected against any performance risk.
Under the terms of the Scheme:[29]
(a)Blackstone must issue (or procure the issue of) the Scheme Consideration and enter each securityholder's name and registered address into IDM's registers on the Implementation Date;
(b)transfer of the Shares is subject to provision of the Scheme Consideration; and
(c)beneficial title does not pass unless the Scheme Consideration has been issued in accordance with the Scheme.
[29] Scheme, cl 3.3, cl 4.1.
These arrangements are supported by the Deed Poll,[30] which can be enforced by any Shareholder.[31]
Exclusivity provisions and exclusivity fee
[30] Deed Poll, cl 5.
[31] Deed Poll, cl 2.
The SID contains the customary lock‑up devices (including, where usual, the fiduciary carve‑out).[32] If these provisions are breached, IDM will be obliged to repay a exclusivity fee of $25,000 (Exclusivity Fee), which was paid by Blackstone pursuant to a confidentiality deed entered into in January 2025.[33]
[32] SID, cl 9.1 - 9.6.
[33] SID, cl 9.10.
In considering whether the exclusivity provisions impact on completion of the transaction and the duties of directors, the court has regard to:[34]
(a)the period of the exclusivity, which should be no more than a reasonable period and capable of precise ascertainment;
(b)whether the provisions are subject to an overriding obligation that the directors do not breach their fiduciary duties or are otherwise unlawful; and
(c)whether there is adequate prominence given to these provisions in the Scheme booklet.
[34] Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400 [29] - [35]; Re Kangaroo Resources Ltd [2018] WASC 327 [57] ‑ [61]; RePacific Energy Limited [2019] WASC 443 [58].
In this case, the exclusivity period is, at most, a period of approximately six months. The exclusivity provisions are subject to appropriate fiduciary carve‑outs.
During the commercial negotiations of the SID, all parties were separately advised,[35] and the commercial justification for the exclusivity provisions have been explained.[36]
[35] Affidavit of Geoffrey Mark Gilmour filed 2 May 2025 [9].
[36] Plaintiff's submissions filed 2 May 2025 [45]; Affidavit of Geoffrey Mark Gilmour filed 2 May 2025 [93].
Importantly, the exclusivity arrangements are disclosed in the Scheme booklet.[37]
Directors' benefits and recommendations
[37] Scheme booklet [9].
IDM's directors have recommended that, in the absence of a superior proposal and subject to BDO continuing to conclude the Scheme is in the best interests of Shareholders, Shareholders vote in favour of the Scheme.
IDM drew my attention to the fact that each of the directors of IDM have interests in Shares, Options and Performance Rights, as well as interests in a company that is a substantial shareholder of IDM. In addition, if the Scheme is implemented, it is proposed that Mr Gilmour will be appointed as a non‑executive director of Blackstone and be entitled to fees.[38]
[38] Scheme booklet [4.7.3], [9.1].
Each of the directors considered whether they should make a recommendation on the Scheme to shareholders and believed it was appropriate to do so, given the importance of the proposed Scheme.[39]
[39] Affidavit of Geoffrey Mark Gilmour filed 2 May 2025 [90].
For two primary reasons, I did not consider that it was inappropriate for the directors to make a recommendation in respect of the Scheme.
First, the consideration each of the independent directors will receive if the Scheme is implemented is being issued to them as consideration for the Shares each owns in IDM or for their Options being cancelled. That is, they will receive the same consideration as every other securityholder of IDM. I accept that these interests should not prevent the directors from making a recommendation to Shareholders.
Second, I was and am satisfied these directors' interests in IDM are fully disclosed in the Scheme booklet.
Loan agreement
Blackstone has provided IDM with an unsecured loan of $1 million for working capital until the implementation of the Scheme (Loan Facility Agreement).[40] The terms of the Loan Facility Agreement are disclosed in the Scheme booklet.[41] As at 2 May 2025, IDM had drawn down $400,000 under the Loan Facility Agreement.[42]
[40] Affidavit of Geoffrey Mark Gilmour filed 2 May 2025, 'GG-11'.
[41] Scheme booklet [9.6].
[42] Affidavit of Geoffrey Mark Gilmour filed 2 May 2025 [103].
In considering agreements where a bidder has provided a loan to the target, the court considers whether it operates as a lock‑up device or is a break fee that might prevent shareholders freely considering the proposed scheme.[43]
[43] Re Nzuri Copper Ltd [2019] WASC 189 [67] - [68].
In this case, I was and am satisfied that the Loan Facility Agreement is not a lock-up device that would have a coercive effect on shareholders and option holders preventing them from considering the merits of the proposed Scheme. This is primarily because there is a commercial rationale for the Loan Facility Agreement, the interest rates are on arm's-length terms, the repayment date provides IDM with one month to seek alternative financing arrangements if the Scheme is not implemented, and the loan can be repaid in cash or Shares at IDM's election. In my view, the Loan Facility Agreement is a matter for Shareholders to consider at the Scheme Meeting.
Approval of Blackstone shareholders
It is a condition precedent of the SID that Blackstone shareholders approve the issue of the shares (namely the Scheme Consideration) and options (the consideration for the cancellation of the Options). These approvals are required under ASX Listing Rule 7.1.
I accept that this requirement is not a reason that the court should decline to approve the convening of the Scheme Meeting. The satisfaction or waiver of the conditions precedent to the Scheme will be the subject of evidence at the second court hearing and can be considered then.
Deemed warranties and no encumbrances
IDM also drew my attention to the deemed warranty and no encumbrance provisions in the proposed Scheme.[44] These clauses are not unusual and are acceptable provided there is adequate disclosure.
[44] SID, cl 6.3, cl 6.4; Scheme booklet [1.7.4], [3.6].
These provisions are drawn to the attention of Shareholders in the Scheme booklet. I was and am satisfied that adequate disclosure has been given of these clauses.
Dispatch of the Scheme booklet
IDM sought orders pursuant to s 1319 of the Act for electronic dispatch of the Scheme booklet and applicable proxy forms by email to securityholders who have nominated to receive communications electronically (Email securityholders). In respect of its securityholders who have nominated to receive communications in hardcopy, hardcopy documents will be dispatched by post.
Securityholders who have not made any election, as well as those Email securityholders in respect of whom notice is received that electronic delivery was ineffective, will be sent a letter with details of the website from which the Scheme booklet can be accessed, together with a copy of the applicable proxy form.
I was and am satisfied that the proposed orders for dispatch of the Scheme booklet are appropriate.
Conclusion and orders
At the first hearing before me, I was satisfied that the substantive and procedural requirements under s 411(1) and s 1319 of the Act had been satisfied and that the proposed Scheme was fit for consideration by IDM's shareholders. On this basis, at the conclusion of the hearing on 6 May 2025, I made orders in terms of Annexure 'A' to this judgment in respect of the Scheme.
Annexure 'A'
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KS
Associate to the Hon Justice Hill
29 MAY 2025
8
3