In November the ASX released a Consultation Paper seeking comments on whether a bidder company should obtain the approval of its shareholders for a scrip takeover bid, where the target company’s shareholders will become the majority in the bidder company – a so-called reverse takeover.
Currently neither the Corporations Act nor the Listing Rules require shareholder approval for a reverse takeover – under the Listing Rules the 15% in 12 months placement cap does not apply where scrip is offered under a takeover bid or scheme of arrangement. The Takeovers Panel has indicated that a reverse takeover may constitute unacceptable circumstances if it has the effect of “locking up” the bidder company – preventing a competing bid for the bidder. ASIC has indicated that it will take into account whether a scheme of arrangement will result in a target shareholder acquiring more than 20% of the bidder company in determining whether it will oppose a scheme.
Reverse takeovers are not common in Australia but they do happen. High profile examples are the Gloucester Coal/Whitehaven in 2009, Roc Oil/Horizon Oil in 2014 and Federation Centres/Novion in 2015.
A Listing Rule requirement for shareholder approval would be consistent with the other international exchanges (including London, New York, Hong Kong, Singapore and Toronto). That said, the ASX is a smaller market and a requirement for shareholder approval by ASX listed scrip bidders may put them at a competitive disadvantage to larger private and/or foreign bidders.
The ASX is seeking comments by 17 December 2015.