AUSTRALIA Law and Practice Contributed by: Alberto Colla, Keith Tan, Hugh McDonald and Dean Zinn, MinterEllison
• no prescribed occurrences, such as any issued new shares. A bidder may elect to waive all or any of its con - ditions during the offer period (other than regu - latory approval conditions). Bidders typically do so during the second half of their offer period to make the offer less conditional and, therefore, more attractive to target shareholders. Various rules apply to conditions of takeovers, including: • offers under an off-market bid cannot be sub - ject to a maximum-acceptance condition; • offers under an off-market bid cannot be sub - ject to a defeating condition that depends on the bidder’s (or an associate’s) opinion, belief or another state of mind or that is within the control of the bidder or its associates (eg, a due diligence condition); and • on-market takeover bids must be uncondi - tional, except for certain prescribed occur - rences. For a scheme of arrangement, the conditions are similar to those outlined above for a takeover, except that: • there will be no minimum-acceptance condi - tion – this is not required for a scheme given the “all or nothing outcome” it produces; and • the scheme will instead be subject to approv - al by the requisite majority of target share - holders (75% by value and more than 50% by number) as well as the approval of the court. 6.5 Minimum Acceptance Conditions Although on-market takeover bids must be unconditional, off-market takeover bids may be subject to defeating conditions, including mini - mum acceptance conditions.
The bidder may specify in the offer the number of shares (specified as a number or percentage of the total shares of that class) chosen as the minimum acceptance level. Minimum acceptance conditions often reflect relevant control thresholds in Australia and are generally either 50.1% if the bidder merely wants to control the target or 90% if the bidder wishes to proceed to compulsory acquisition and own 100%. 6.6 Requirement to Obtain Financing For private M&A transactions, there is no legal impediment to the inclusion of a funding con - dition. It is a matter of negotiation. Targets are generally not receptive to funding conditions, especially in a competitive sale process where a target will evaluate offers not just on headline price but also overall execution certainty – which entails assessing the certainty and timeliness of the prospective acquirer’s funding arrange - ments. For public M&A transactions (whether by tender offer or scheme), a prospective acquirer must have an objectively reasonable basis for believ - ing it will be able to pay target shareholders. This applies at the time of the initial announcement of the takeover or scheme and throughout the entire process. 6.7 Types of Deal Security Measures For public M&A transactions, deal protections typically sought by prospective acquirers in the definitive agreement include: • positive public recommendation – an obliga - tion on the target’s board to (unanimously) publicly recommend the bidder’s proposal to target shareholders in the absence of a superior proposal (and generally, also subject
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