This edition of the Deal Report focuses on the $156 million acquisition of Zenith Energy Limited (ASX: ZEN) by Elemental Infrastructure BidCo Pty Ltd (Elemental), by way of a scheme of arrangement that was implemented on 21 August 2020.

The transaction is of interest to market participants as it involves two external parties to the initial scheme negotiations each acquiring a substantial interest in the target following the announcement of the scheme, so that their voting power could be used as a bargaining tool to, in the case of one party, join the bidder as a party to the scheme, and in the case of the other party, to negotiate an increase to the offer price.

Specifically, Apex Opportunities Fund Pty Limited as trustee for The Apex Opportunities Trust (Apex), an entity controlled by Infrastructure Specialist Asset Management Ltd as trustee for the Diversified Infrastructure Trust and OPTrust Private Markets Group (an investment division of OPSEU Pension Plan Trust Fund) (together, the Apex Consortium), became a party to the transaction following Zenith Energy Limited’s initial scheme announcement by acquiring a substantial interest of 17.61% in the company on-market.

This acquisition led Elemental to enter into a Co-operation and Process Deed with the Apex Consortium in order to pursue the takeover via a revised scheme of arrangement, as Elemental formed the view that their initial proposal was unlikely to proceed without the support of the Apex Consortium.

Following the Apex Consortium joining the bid, Westoz Funds Management Pty Ltd, an entity controlled by Euroz Securities, began acquiring Zenith securities until it controlled 12.94% of Zenith, representing 22.25% of the eligible votes on the proposed scheme. At this point, Westoz submitted a ‘no’ proxy vote to the proposed scheme and engaged in negotiations which ultimately led to an increase in the offer price from $1.01 per Zenith share to $1.05.

Scheme of Arrangement details