Re Rural Press Ltd

Case [2007] FCA 314

FEDERAL COURT OF AUSTRALIA

Rural Press Limited, in the matter of Rural Press Limited
 [2007] FCA 314

IN THE MATTER OF RURAL PRESS LIMITED (ABN 47 000 010 382)

NSD 180 OF 2007

LINDGREN J
8 MARCH  2007
SYDNEY


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 180 OF 2007

RURAL PRESS LIMITED
(ABN 47 000 010 382)
Plaintiff

JUDGE:

LINDGREN J

DATE OF ORDER:

26 FEBRUARY 2007

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1. Pursuant to subs 411(1) of the Corporations Act 2001 (Cth) (‘the Act’):

(a)the Plaintiff, Rural Press Limited (‘Rural Press’), convene a meeting (‘Preferred Scheme Meeting’) of the holders of preferred shares in Rural Press, other than the holders of Excluded Shares (‘Preferred Shareholders’), for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement (with or without modification) proposed to be made between Rural Press and the Preferred Shareholders (‘Preferred Scheme’), the terms of which are contained in Annexure ‘C’ to the scheme booklet which is Exhibit P1 in this proceeding (‘Scheme Booklet’);

(b)the Preferred Scheme Meeting be held at 10.00 am (Sydney time) on 5 April 2007 at the Sofitel Wentworth Hotel, 61–101 Phillip Street, Sydney, NSW, 2000;

(c)Rural Press convene a meeting (‘Ordinary Scheme Meeting’) of the holders of ordinary shares in Rural Press, other than the holders of Excluded Shares (‘Ordinary Shareholders’) for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement (with or without modification) proposed to be made between Rural Press and the Ordinary Shareholders (‘Ordinary Scheme’), the terms of which are contained in Annexure ‘B’ to the Scheme Booklet;

(d)the Ordinary Scheme Meeting be held at 10.00 am (Sydney time) on 19 April 2007 at the Sofitel Wentworth Hotel, 61–101 Phillip Street, Sydney.

(e)John B Fairfax AM or, failing him, Timothy Vincent Fairfax, or failing both, any other Non-Executive Director of Rural Press, act as Chairman of the Preferred Scheme Meeting and the Ordinary Scheme Meeting (collectively ‘the Scheme Meetings’);

(f)the Chairman have the power to adjourn the Scheme Meetings for such time that the Chairman considers appropriate;

(g)at the Preferred Scheme Meeting, a person will be entitled to one vote for each Rural Press preferred share they are registered as holding at 7.00 pm on 3 April 2007;

(h)at the Ordinary Scheme Meeting, a person will be entitled to one vote for each Rural Press Ordinary Share they are registered as holding at 7.00 pm on 17 April 2007;

(i)the Explanatory Statement comprising the Scheme Booklet (other than Annexures ‘E’ and ‘F’ thereto) be approved;

(j)on or before 6 March 2007, there be:

(i)in the case of each Ordinary and Preferred Shareholder who has a registered address in Australia, dispatched by prepaid post addressed to the relevant address as recorded in the Rural Press register of members (‘Register’) as at 1 March 2007; and

(ii)in the case of each Ordinary and Preferred Shareholder who has a registered address outside Australia, dispatched by prepaid airmail…

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Details
AGLC
Re Rural Press Ltd [2007] FCA 314
Case
[2007] FCA 314
Decision Date

CaseChat Overview and Summary

Rural Press Limited brought an application for orders approving two schemes of arrangement, one for its preferred shareholders and one for its ordinary shareholders. The schemes propose that Fairfax Media Limited acquire all shares in Rural Press. Fairfax Media Limited is the majority shareholder of Rural Press. The Australian Securities and Investments Commission has indicated it does not intend to appear on the first hearing. The court had to decide whether the schemes should be approved, considering the financial assistance provided by Rural Press to Fairfax Media Limited for acquiring shares, the disclosure of dividends and the repayment of a credit facility, and the procedural fairness in convening the meetings of shareholders. The court concluded that the schemes should be approved as the financial assistance did not materially prejudice the interests of Rural Press or its shareholders and the disclosure of the material changes in financial position and the repayment of the credit facility were adequate. The court also found that the procedures for convening the meetings of shareholders were fair.

The court ordered that Rural Press convene meetings of preferred and ordinary shareholders to consider the schemes, with specific dates, times, and locations. The chairman of the meetings was to be a non-executive director of Rural Press, with the power to adjourn the meetings. The explanatory statement and proxy forms were to be dispatched to shareholders, with deadlines for returning the proxy forms. Notice of the hearing of any application for an order approving the schemes was to be published in the Sydney Morning Herald. The proceedings were adjourned to a later date for the hearing of any application to approve the schemes. The orders were to be entered forthwith. The terms and conditions of the schemes, including the special provisions for ineligible overseas shareholders, the recent declarations of dividends, and the repayment of the credit facility, were disclosed in the scheme booklet.

Orders

Orders of the court

1. Pursuant to subs 411(1) of the Corporations Act 2001 (Cth) (‘the Act’):

(a) the Plaintiff, Rural Press Limited (‘Rural Press’), convene a meeting (‘Preferred Scheme Meeting’) of the holders of preferred shares in Rural Press, other than the holders of Excluded Shares (‘Preferred Shareholders’), for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement (with or without modification) proposed to be made between Rural Press and the Preferred Shareholders (‘Preferred Scheme’), the terms of which are contained in Annexure ‘C’ to the scheme booklet which is Exhibit P1 in this proceeding (‘Scheme Booklet’);

(b) the Preferred Scheme Meeting be held at 10.00 am (Sydney time) on 5 April 2007 at the Sofitel Wentworth Hotel, 61–101 Phillip Street, Sydney, NSW, 2000;

(c) Rural Press convene a meeting (‘Ordinary Scheme Meeting’) of the holders of ordinary shares in Rural Press, other than the holders of Excluded Shares (‘Ordinary Shareholders’) for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement (with or without modification) proposed to be made between Rural Press and the Ordinary Shareholders (‘Ordinary Scheme’), the terms of which are contained in Annexure ‘B’ to the Scheme Booklet;

(d) the Ordinary Scheme Meeting be held at 10.00 am (Sydney time) on 19 April 2007 at the Sofitel Wentworth Hotel, 61–101 Phillip Street, Sydney.

(e) John B Fairfax AM or, failing him, Timothy Vincent Fairfax, or failing both, any other Non-Executive Director of Rural Press, act as Chairman of the Preferred Scheme Meeting and the Ordinary Scheme Meeting (collectively ‘the Scheme Meetings’);

(f) the Chairman have the power to adjourn the Scheme Meetings for such time that the Chairman considers appropriate;

(g) at the Preferred Scheme Meeting, a person will be entitled to one vote for each Rural Press preferred share they are registered as holding at 7.00 pm on 3 April 2007;

(h) at the Ordinary Scheme Meeting, a person will be entitled to one vote for each Rural Press Ordinary Share they are registered as holding at 7.00 pm on 17 April 2007;

(i) the Explanatory Statement comprising the Scheme Booklet (other than Annexures ‘E’ and ‘F’ thereto) be approved;

(j) on or before 6 March 2007, there be:

(i) in the case of each Ordinary and Preferred Shareholder who has a registered address in Australia, dispatched by prepaid post addressed to the relevant address as recorded in the Rural Press register of members (‘Register’) as at 1 March 2007; and

(ii) in the case of each Ordinary and Preferred Shareholder who has a registered address outside Australia, dispatched by prepaid airmail or air courier addressed to the relevant address as recorded in the Register as at 1 March 2007; or

(iii) in either case, personally served:

(1) a document substantially in the form of the Scheme Booklet (which includes the Explanatory Statement);

(2) proxy forms for the Preferred Scheme Meeting and the Ordinary Scheme Meeting substantially in the form of Exhibit P2 and Exhibit P3 in this proceeding;

(3) Consideration Election Forms for the Preferred Scheme Meeting and the Ordinary Scheme Meeting substantially in the form of Exhibit P4 in this proceeding;

(4) an envelope addressed to Computershare Investor Services Pty Limited.

(k) the time by which the Preferred Shareholders must return their proxy forms for the Preferred Scheme Meeting be 10.00 am (Sydney time) on 4 April 2007;

(l) the time by which Ordinary Shareholders must return their proxy forms for the Ordinary Scheme Meeting be 10.00 am (Sydney time) on 18 April 2007.

2. Rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) shall not apply to the Scheme Meetings, except insofar as that rule applies Regulation 5.6.13 of the Corporations Regulations 2001 (Cth).

3. Notice of the hearing of any application for an order approving the Preferred Scheme and the Ordinary Scheme be published once in the Sydney Morning Herald newspaper by an advertisement substantially in the form of ‘Annexure A’ to these Orders, such advertisement to be published on or before 17 April 2007.

4. Notice of the hearing of any application for an order approving only the Ordinary Scheme be published once in the Sydney Morning Herald newspaper by an advertisement substantially in the form of ‘Annexure B’ to these Orders, such advertisement to be published on or before 17 April 2007.

5. The proceedings be adjourned to 9.15 am on 23 April 2007, for hearing of any application to approve the Schemes.

6. These orders be entered forthwith.

In these orders, an ‘Excluded Share’ is a fully paid preferred or ordinary share in Rural Press held by Fairfax Media Limited or its related bodies corporate.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

LINDGREN J
The Australian Securities and Investments Commission has indicated, in accordance with its usual practice, that it does not intend to appear on the first court hearing.Conclusion It was my view that the Preferred Shareholders and the Ordinary Shareholders should have the opportunity of considering and agreeing to the Schemes. For the above reasons I made orders as sought by Rural Press.

Ratio Decidendi

Legal Principle Established

Established by: LINDGREN J

It is common in schemes of arrangement for special provision to be made for foreign shareholders. The reason is that there are restrictions in certain foreign countries making it impractical or unlawful for residents in those countries to receive a new issue of shares. Rather than attempting to identify the position in each foreign country in which any Preferred Shareholder and any Ordinary Shareholder may reside, those who have devised the Schemes have included special provisions for ‘Ineligible Overseas Shareholders’. In substance, the Fairfax shares that would otherwise have been issued to them will be allotted to a nominee appointed by agreement between Rural Press and Fairfax then sold by the nominee who will remit the proceeds of sale to Rural Press, which will, in due course, remit the proceeds, after deduction of applicable brokerage, costs, taxes and charges, to the respective Ineligible Overseas Shareholders. Otherwise, Ineligible Overseas Shareholders still enjoy both Option A and Option B. In particular the cash components of those options are to be paid directly to them.Recent declarations of dividends On 8 February 2007, the Board of Rural Press declared a fully franked interim dividend for the six months ended 31 December 2006 of $0.30 for each Rural Press Ordinary Share, and $0.33 for each Rural Press Preferred Share. The interim dividend, totalling approximately $60 million, is due to be paid on 2 March 2007. Also on 8 February 2007, the Board of Rural Press declared fully franked special dividends of $0.57143 for each Rural Press Ordinary Share, and $0.62858 for each Rural Press Preferred Share (see (e) and (f) of the MID, outlined above at [15]). The anticipated date for payment of the Special Dividends is 8 May 2007. The declaration of the interim dividend and the special dividends amounts to a material change in the financial position of Rural Press since 31 December 2006, being the date of the last published financial statements of Rural Press. However, the change is disclosed in the Scheme Booklet.Repayment of credit facility Rural Press has a facility of $350 million with Westpac Banking Corporation, which will become repayable on the Implementation Date. Fairfax has covenanted in the MID to repay this facility on that date. It intends to fund the payment from a syndicated facility to be arranged by CBA and ANZ. This matter is also disclosed in the Scheme Booklet.Financial assistance Section 260A(1) of the Act allows the giving of financial assistance by a company for acquiring shares in the company or a holding company of it, only in the circumstances stated in paras (a), (b) or (c) of s 260A(1). The condition referred to in s 260A(1)(a) is that the giving of the assistance does not materially prejudice the interests of the company or its shareholders, or the company’s ability to pay its creditors. By reason of payment of the Special Dividends, Rural Press is giving assistance to Fairfax to acquire shares in Rural Press. The Board of Rural Press has determined that the giving of this financial assistance is in the best interests of its shareholders and of Rural Press itself, and will not materially prejudice its ability to pay its creditors. Disclosure of this matter and of the determination by the Board of Rural Press is also set out in the Scheme Booklet.