- In the last six months two substantial shareholders have offered their shares for sale by tender under ASIC Regulatory Guide 102 (RG 102). Since its introduction in 1995, the process under RG 102 has been used only rarely.
- RG 102 allows the sale of a cornerstone stake on the basis that the buyer must promptly launch a follow-on cash bid for the remaining shares in the company.
- In the right circumstances, RG 102 may assist potential buyers of a cornerstone stake, or sellers seeking to maximise the value of a cornerstone stake.
A rarely used method allowing the sale of cornerstone stakes (over 20%) has been reawakened in the last six months by the decision of two substantial shareholders to pursue tender offers with ASIC relief under RG 102. RG 102 allows the sale of a cornerstone stake provided the buyer promptly launches a follow-on cash bid for the remaining shares in the company.
On 21 March PricewaterhouseCoopers (PwC), receivers and managers of Centrepoint Holdings Pty Ltd and the Oaks Apartment Management Pty Ltd, announced they had sought indicative ASIC relief under RG 102 for the sale by tender of their 34.4% holding in Oaks Hotels and Resorts Limited. This announcement was made within days of a hostile off-market takeover announcement for Oaks by Minor International Pty Ltd.
Since its introduction in 1995 until PwC’s announcement in March, RG 102 has only been triggered on a very small number of occasions, most recently in November 2010.
In November 2010 venture capitalist Start-Up Australia Pty Ltd announced invitations to tender its 27.76% shareholding in Bionomics Limited, a biotechnology company. The tender offer closed on 31 March without a buyer being found. On a previous occasion in 2007, a group of shareholders successfully sold approximately 25% of their shares in Auspine Limited to Gunns Limited (for whom Freehills was acting), who subsequently made an off-market takeover bid for Auspine.
When is relief available?
ASIC will consider relief where:
- the seller’s tender process is a serious test of the market
- the tender is conducted at arm’s length, and
- the successful buyer launches a takeover bid within 30 days after the sale agreement becomes binding.
The seller can apply for non-binding ASIC advice prior to the tender offer. In the Oaks case, ASIC has indicated its willingness to grant relief on application by the buyer.
Under RG 102 the sellers may decide to sell their shares prior to the takeover bid occurring, or they can agree to sell into the bid. The takeover offer must be:
- for cash consideration, or include a solely cash alternative
- at a price no less than paid or agreed under the tender offer, and
- subject only to prescribed occurrence defeating conditions.
The relief therefore lends itself to simpler offers and where the stake being sold is large enough to allay minimum acceptance concerns.
While rarely used to date, the RG 102 mechanism may provide interesting opportunities for both buyers and sellers in the right circumstances.