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In this edition, following a busy week from the Takeovers Panel, we consider key takeaways from the Panel’s decisions to decline to conduct proceedings in respect of the affairs of both Virtus Health Limited and Wollongong Coal Limited and its declaration of unacceptable circumstances with respect to the affairs of DRA Global Limited.

In Over the Horizon, we consider the 2022-23 WA State Budget as well as why a key proxy adviser has recommended shareholders reject Woodside’s climate change report.

LEGAL

Takeovers Panel declines to conduct proceedings in relation to exclusivity arrangements entered into by Virtus Health Limited. In a previous edition of Boardroom Brief, we considered BGH Capital Fund I’s (BGH) latest application in relation to the affairs of Virtus Health Limited (Virtus). To recap, BGH submitted that Virtus had not taken steps to facilitate a genuine auction process between BGH and CapVest Partners LLP (CapVest), seeking final orders that Virtus grant BGH due diligence access to, and engage with, BGH in good faith in respect of its revised proposal. Ultimately, the Panel accepted Virtus’ submissions that it had already announced that the Virtus Board had determined that it would not be engaging with BGH in respect of its revised proposal and that the Board’s duties did not require them to do so given the decision not to engage was in the best interests of Virtus and its shareholders. See the Takeovers Panel’s Reasons for Decision.

Takeovers Panel releases reasons for decision to decline to conduct proceedings in relation to BGH’s bidders’ disclosures. The Takeovers Panel again declined to conduct proceedings in relation to the affairs of Virtus, this time, in relation to an application received from Virtus itself. In a previous edition of Boardroom Brief, we considered Virtus’ application which concerned BGH's disclosures in its bidder’s statement and supplementary bidder’s statement in response to a subsequent increase in CapVest’s control proposal. The Panel considered that many of Virtus’ concerns with BGH’s disclosure could sufficiently be addressed by Virtus in its Target’s Statement, which had been issued since Virtus’ application had been made. The Panel considered that it would be anomalous to require BGH to post a supplementary or replacement bidder’s statement that would likely contain less information on the benefits of CapVest’s revised proposal and the BGH bid than the Target’s Statement. See the Takeovers Panel’s media release.

Takeovers Panel releases reasons for decision to decline to conduct proceedings in relation to the affairs of Wollongong Coal Limited. In a previous edition of Boardroom Brief, we considered the ongoing dispute in relation to Jindal Steel & Power (Mauritius) Limited’s (Jindal) compulsory acquisition of Wollongong Coal Limited (Wollongong). To recap, the most recent application submits that Jindal’s revised independent expert report does not comply with the undertakings made to the Panel in an earlier proceeding as it, among other things, still contains shortcomings in determining “fair market value”. The Takeovers Panel considered that the initial concerns of the Panel had been sufficiently addressed in the revised independent expert’s report and that shareholders had been provided with enough information to form a view about the proposed compulsory acquisition. See the Takeovers Panel’s Reasons for Decision.

Panel makes a declaration of unacceptable circumstances in relation to the affairs of DRA Global. The affairs of DRA Global Limited (DRA) in question related to a section 249D notice received from, and then withdrawn by, certain senior executives of DRA. The section 249D notice was received by the Board on 18 February 2022 and stipulated the requisitioning shareholders sought to hold a general meeting with the intention of considering resolutions to remove the Managing Director and Chairman as directors of DRA. On 22 February 2022, the requisitioning shareholders withdrew the notices following the Board’s decision to engage with those shareholders on certain items. Before the notice was withdrawn, several DRA shareholders signed deeds of irrevocable undertaking pursuant to which they effectively undertook that they would vote in favour of the proposed resolutions. The Panel considered that the requisitioning shareholders and each other shareholder who provided a voting undertaking were associated, which resulted in their voting power exceeding 20% in breach of section 606 of the Corporations Act. Additionally, the Panel considered that the market had not been adequately informed in a timely way by DRA regarding the notice and related matters given the (then withdrawn) section 249D notice was not disclosed to the market until 13 April 2022. Therefore, the Panel made a declaration of unacceptable circumstances. The Panel’s reasons for decision will be released in due course, for now, see the Panel’s media release. Of note to Directors, this is a rare example of a successful application to the Panel by an executive of a company who is not a director, demonstrating the breadth of parties who may have standing to bring a complaint.

OVER THE HORIZON

WA 2022-23 State Budget announced. Last week, WA Premier Mark McGowan delivered the State’s 2022-23 budget of $5.7 billion, a slight reduction from last year’s record-high $5.8 billion. The budget includes $445 million to fund a $400 household electricity subsidy which will begin in July. In a timely announcement as COVID-19 related hospitalisations rise throughout the State, $252 million will go to WA’s health system, which is earmarked for 17 projects including more aged care beds, emergency department nurses and an expansion of telehealth services. An extra $181 million will go to mental health and drug alcohol services and a further $1.3 billion will fund COIVD-specific health measures. Western Australia remains the only state with an outlook of sustainable budget surpluses, which is likely to lead to calls to re-examine the current GST arrangements, particularly if there is a change of government on 21 May.

Key proxy adviser criticises Woodside’s emissions reductions plan. In a bid to be more transparent about its climate change policy, Woodside is seeking shareholder approval (albeit non-binding) for the adoption of its climate change action plan. However, Woodside is now facing a shareholder backlash after key proxy adviser CGI Glass Lewis and the Australian Centre for Corporate Responsibility both recommended shareholders reject the company’s climate change report. CGI Glass Lewis has criticised the report’s lack of detail, stating Woodside needs to address the Scope 3 emissions from the use of its products in a more direct manner. Further, the adviser raised concerns about the company’s use of carbon offset and its capital allocation disclosure. Woodside’s AGM to be held this week, at which it will seek approval to acquire BHP’s petroleum assets (thereby effectively doubling down on its commitment to fossil fuels), will be closely watched by climate activists.