- The Panel found that material information deficiencies in UCL’s bidder’s statement gave rise to unacceptable circumstances in relation to the affairs of Minemakers.
- UCL was required to prepare a replacement bidder’s statement addressing the information deficiencies in its original bidder’s statement.
- The decision serves as an important reminder to market participants that a failure to meet the necessary disclosure standards may result in the progress of the bid being delayed.
UCL Resources Limited (UCL) announced an intention to make an off-market takeover bid for Minemakers Limited (MAK) on 18 May 2012.
UCL had previously been the subject of an unsolicited takeover offer by MAK. The MAK offer closed on 22 May 2012 with MAK having increased its interest in UCL by 2.65%, taking its total holding to 15.76%.
UCL lodged its bidder’s statement with ASIC on 28 May 2012.
On 5 June 2012, MAK made an application to the Takeovers Panel (Panel) submitting that the material disclosure deficiencies and omissions in UCL’s bidder’s statement gave rise to unacceptable circumstances.
Panel’s declaration and areas of concern
The Panel considered that there were material information deficiencies in the bidder’s statement, including in relation to:
- proposed funding of UCL’s bid,
- related party transactions,
- capital structure of the combined group, and
- recent sales of MAK and UCL shares and the offer premium,
and made a declaration of unacceptable circumstances in relation to the affairs of MAK.
The principal issue that concerned the Panel centred around that part of UCL’s funding that was through a convertible note issue, in circumstances where the Panel considered there was insufficient disclosure of:
- the fact that the party with funding obligations was controlled by a director of UCL,
- the creditworthiness of the funding entity,
- the terms of the funding,
- the capital structure of the group post-bid, taking into account funding and acceptance outcomes, and
- various other issues.
The Panel ordered UCL to advise the market of the information deficiencies in its bidder’s statement (including attaching a detailed schedule highlighting individual disclosure deficiencies), prepare a replacement bidder’s statement in a form approved by the Panel and refrain from despatching the original bidder’s statement.
In the context of Panel decisions which consider disclosure in bids, there has on occasion been a perception that the Panel has been too ready to forego taking action against deficient disclosure in the interests of keeping a bid moving along.
The Panel’s decision in this matter sends a timely reminder to all market participants of the importance of ensuring the sufficiency of information disclosed in the context of takeover bids.
It tells the market that the Panel will be prepared to require significant additions to a bidder’s statement. Such additional disclosure can result in bids being held up, thus emphasising the need for bidders to carefully consider disclosure as an important deal issue.