FEDERAL COURT OF AUSTRALIA
QMS Media Limited, in the matter of QMS Media Limited [2019] FCA 2172
File number:
VID 1280 of 2019
Judge:
O'CALLAGHAN J
Date of judgment:
12 December 2019
Date of publication of reasons:
20 December 2019
Catchwords:
CORPORATIONS – application under s 411(4)(b) of the Corporations Act 2001 (Cth) to approve scheme of arrangement – where directors will receive a substantial benefit in relation to the scheme that other shareholders will not receive – scheme approved
Legislation:
Corporations Act 2001 (Cth) s 411
Cases cited:
Re Amcor Ltd [2019] FCA 346
Re CSR Ltd (2010) 183 FCR 358
Re DuluxGroup Ltd [2019] FCA 961
Re Healthscope Limited [2019] FCA 542
Re Kidman Resources Limited [2019] FCA 1226
Re Villa World Limited [2019] NSWSC 1207
Re Wellcom Group Limited [2019] FCA 1655
Re Westfield Holdings Ltd (2004) 49 ACSR 734; [2004] NSWSC 458
Date of hearing:
12 December 2019
Registry:
Victoria
Division:
General Division
National Practice Area:
Commercial and Corporations
Sub-area:
Corporations and Corporate Insolvency
Category:
Catchwords
Number of paragraphs:
101
Counsel for the Plaintiff:
G J Ahern with F J Hudgson
Solicitor for the Plaintiff:
Lander & Rogers
Counsel for the Interested Party (Shelley BidCo Pty Ltd):
O Bigos SC
Solicitor for the Interested Party (Shelley BidCo Pty Ltd):
Gilbert + Tobin
ORDERS
VID 1280 of 2019
IN THE MATTER OF QMS MEDIA LIMITED
QMS MEDIA LIMITED
Plaintiff
JUDGE:
O'CALLAGHAN J
DATE OF ORDER:
12 DECEMBER 2019
OTHER MATTERS:
A. The Court notes that the Australian Securities and Investments Commission (ASIC) was provided with at least 14 days’ notice of the hearing of this application.
B. The Court is satisfied that ASIC has had a reasonable opportunity to:
(a) examine the terms of the proposed scheme of arrangement to which the application relates and a draft explanatory statement relating to that arrangement; and
(b) make submissions to the Court in relation to the proposed scheme of arrangement and the draft explanatory statement.
C. The Court notes the letter from ASIC to Lander & Rogers on behalf of QMS Media Limited ACN 603 037 341 (QMS) dated 11 December 2019 produced at the hearing notifying QMS that it does not currently propose to appear to make submissions or intervene to oppose the Scheme at the first hearing under section 411(1) of the Corporations Act 2001 (Cth).
THE COURT ORDERS THAT:
1. Pursuant to rule 2.13(1) of the Federal Court (Corporations) Rules 2000 (Cth) (Rules), Shelley BidCo Pty Ltd ACN 634 292 881 has leave to be heard in the proceeding without becoming a party to it.
2. Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Act), the Plaintiff convene and hold the following meetings (Scheme Meetings) to be held at the RACV Club, 501 Bourke Street Melbourne, Victoria to consider, and, if thought fit, to approve (with or without any alterations or conditions) the scheme of arrangement (Scheme) proposed to be made…
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- AGLC
- Re QMS Media Ltd [2019] FCA 2172
- Case
- [2019] FCA 2172
- Decision Date
CaseChat Overview and Summary
The Court found that the scheme was fair and reasonable for all shareholders. It noted that the Rollover Shareholders had voluntarily agreed to the terms, which were reflective of market conditions and the nature of the investment. The Court also determined that the explanatory statement was sufficient to allow shareholders to make an informed decision. The Court held that the scheme met the requirements for approval under section 411(4)(b) of the Corporations Act, despite the unequal treatment of shareholders, as it was fair and reasonable in all the circumstances.
Pursuant to the orders, Shelley BidCo Pty Ltd was granted leave to be heard without becoming a party to the proceeding. The Court ordered the convening of separate meetings for QMS shareholders to consider and approve the scheme, with detailed provisions for the communication of scheme-related documents and the conduct of the meetings. The scheme was subject to specific conditions, including the publication of an advertisement in The Australian and the appointment of a chairperson for the meetings. The hearing of the originating process was adjourned to a later date to allow for the scheme meetings to take place.
The final orders granted approval for the scheme of arrangement, subject to the conditions outlined, and provided for the convening of meetings to approve the scheme, with specific provisions for the communication and voting processes. The scheme was approved on the basis that it was fair and reasonable to all shareholders, despite the differential treatment of certain shareholders.
Orders
Orders of the court
1. Pursuant to rule 2.13(1) of the Federal Court (Corporations) Rules 2000 (Cth) (Rules), Shelley BidCo Pty Ltd ACN 634 292 881 has leave to be heard in the proceeding without becoming a party to it.
2. Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Act), the Plaintiff convene and hold the following meetings (Scheme Meetings) to be held at the RACV Club, 501 Bourke Street Melbourne, Victoria to consider, and, if thought fit, to approve (with or without any alterations or conditions) the scheme of arrangement (Scheme) proposed to be made between the Plaintiff and its shareholders, the terms of which are as set out in Annexure B to these orders:
(a) a meeting of the holders of fully paid ordinary shares in QMS, other than Barctin Superannuation Pty Ltd as trustee for the Barctin Superannuation Fund, Wenvale Pty Ltd as trustee for the Barclay Nettlefold Family Trust and John O’Neill Pty Ltd as trustee for the O’Neill Pastoral Discretionary Trust (collectively Rollover Shareholders), such meeting of shareholders (General Shareholders) to be held at 10am (Melbourne time) on 6 February 2020 (General Scheme Meeting); and
(b) a meeting of the Rollover Shareholders (Rollover Shareholders Scheme Meeting), such meeting to be held immediately following the conclusion of the General Scheme Meeting.
3. The Scheme Meeting be convened by sending on or before 19 December 2019:
(a) in the case of General Shareholders who have elected to receive shareholder communications electronically by way of email (Email Shareholders), an email substantially in the form of tab 10 of annexure “GJM-3” to the affidavit of Gregory James McKenzie sworn 12 December 2019 (Third McKenzie Affidavit) and which contains links to:
(i) a copy of the scheme booklet substantially in the form of tab 2 to annexure “GJM-3” to the Third McKenzie Affidavit, which comprises the explanatory statement as required by s 412(1)(a) of the Act (Scheme Booklet) which contains, among other things, the Notice of the General Scheme Meeting at Annexure D to the Scheme Booklet; and
(ii) an online portal or website that is accessible by the Email Shareholder which enables the Email Shareholder to lodge a proxy form for the General Scheme Meeting and provide their voting instructions online; and
(b) in the case of General Shareholders who are not Email Shareholders and whose registered address is in Australia, the following documents by pre-paid post addressed to the relevant addresses recorded in the Plaintiff’s register:
(i) a document substantially in the form of the Scheme Booklet, which contains, among other things, the Notice of the General Scheme Meeting at Annexure D;
(ii) a proxy form which is substantially in the form of tab 14 of annexure “WHS-1” of the Stevenson Affidavit) (Proxy Form); and
(iii) a reply-paid envelope for the return of the Proxy Form;
(c) in the case of General Shareholders who are not Email Shareholders and whose registered address is outside Australia, the following documents by airmail service addressed to the relevant addresses recorded in the Plaintiff’s register:
(i) a document substantially in the form of the Scheme Booklet, which contains, among other things, the Notice of the General Scheme Meeting at Annexure D;
(ii) a Proxy Form; and
(iii) a return envelope for the return of the Proxy Form; and
(d) in the case of Rollover Shareholders, the following documents by pre-paid post addressed to the relevant addresses recorded in the Plaintiff’s register:
(i) a document substantially in the form of the Scheme Booklet, which contains, among other things, the Notice of Rollover Shareholders Scheme Meeting at Annexure E to the Scheme Booklet;
(ii) a proxy form for the Rollover Shareholders Scheme Meeting, substantially in the form of tab 15 of annexure “WHS-1” of the Stevenson affidavit (Rollover Proxy Form);
(iii) an Election Form substantially in the form of tab 16 of annexure “WHS-1” of the Stevenson affidavit; and
(iv) a reply-paid envelope for the return of the Rollover Proxy Form.
4. Subject to these Orders, the Scheme Meetings be convened, held and conducted in accordance with the provisions of:
(a) Part 2G.2 of the Act (save for any applicable replaceable rule) that apply to a meeting of the Plaintiff’s members; and
(b) the Plaintiff’s constitution that apply in relation to meetings of member and that are not inconsistent with Part 2G.2 of the Act.
5. Voting on the resolution to approve the Scheme at each Scheme Meeting is to be conducted by way of a poll as declared by the Chairperson.
6. A Proxy Form or online proxy / voting instructions in respect of the General Scheme Meeting and a Rollover Proxy Form in respect of the Rollover Shareholders Scheme Meeting will be valid and effective if, and only if, it is completed and delivered in accordance with its terms by 10.00am (Melbourne time) on 4 February 2020.
7. Mr Wayne Hugh Stevenson, or failing him, Mr Robert Alexander, be Chair of the Scheme Meetings.
8. The Chair of the Scheme Meetings shall have the power to adjourn the meeting to such time, date and place as he considers appropriate.
9. Compliance with rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules) is dispensed with.
10. Compliance with rule 3.4 and Form 6 of the Rules is dispensed with.
11. The Plaintiff publish in The Australian newspaper once on or before 29 January 2020 an advertisement substantially in the form of Annexure A to these Orders.
12. The further hearing of the Originating Process is adjourned to a hearing before Justice O’Callaghan on 10 February 2020 at 10.15am (Melbourne time).
13. Liberty to apply.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
This is an application made by QMS Media Limited (QMS) pursuant to s 411(1) of the Corporations Act 2001 (Cth) (the Corporations Act) for an order convening separate meetings (the Scheme Meetings) of two classes of the holders of its fully paid ordinary shares (the QMS Shareholders) for the purposes of them considering and, if thought fit, agreeing to a proposed scheme of arrangement (the Scheme) between them and QMS. The application was supported by affidavits, a summary of which appears at Annexure 1 to these reasons. The Scheme, if implemented, will result in the acquisition of all the ordinary shares in QMS (the QMS Shares) by Shelley BidCo Pty Ltd (BidCo) and the subsequent delisting of QMS. BidCo is a special purpose entity established for the purpose of acquiring all of the QMS Shares under the proposed Scheme. It is an indirect wholly owned subsidiary of Shelley Topco Pty Ltd (HoldCo), which is the vehicle set up for investment in QMS by Quadrant Private Equity (Quadrant), an independent Australian private equity firm. There are three “Rollover Shareholders”:(1) two entities controlled by Mr Barclay Nettlefold (the Global Chief Executive Officer and executive director of QMS); and (2) one entity controlled by Mr John O’Neill (the QMS Australia Chief Executive Officer). Mr Nettlefold, Mr O’Neill and the Rollover Shareholders have entered into separate Voting and Rollover Agreements, under which the Rollover Shareholders have agreed to elect to receive scrip consideration (being securities in HoldCo) in respect of a certain percentage of their QMS Shares, being $40m in value in respect of the Nettlefold Rollover Shareholders and $3m in value by the O’Neill Rollover Shareholders. The scrip consideration for the Rollover Shareholders arose because to obtain the price of $1.22 per QMS Share (which is payable in cash to all QMS Shareholders other than the Rollover Shareholders), Quadrant required Mr Nettlefold and Mr O’Neill to accept a proportion of their Scheme consideration in the form of scrip consideration. The General Scheme Meeting is proposed to be held at 10am (Melbourne time) on 6 February 2020 at the RACV Club, 501 Bourke Street, Melbourne, Victoria, with the Rollover Shareholders Scheme Meeting to be held immediately afterwards. Under the terms of the Scheme:(a) Rollover Shareholders may elect whether they receive cash consideration of $1.22 per QMS Share or scrip consideration (being securities in HoldCo); (b) on the “Implementation Date”:(i) BidCo will acquire all of the QMS Shares;(ii) the Rollover Shareholders will receive the scrip and any cash consideration which they have elected to receive;(iii) the other QMS Shareholders will receive (as consideration for the acquisition of their shares) cash consideration payable by BidCo of $1.22 per QMS Share;(c) the transfer of the QMS Shares to BidCo on the “Implementation Date” is subject to:(i) HoldCo issuing the scrip consideration to the Rollover Shareholders; and(ii) BidCo providing the cash consideration to QMS who will in turn despatch it to those QMS Shareholders who are entitled to receive cash.