AUSTRALIA Law and Practice Contributed by: Alberto Colla, Keith Tan, Hugh McDonald and Dean Zinn, MinterEllison
ommendations of target directors will materi - ally influence the outcome of a hostile takeover bid. In particular, history shows that it is rare for hostile takeover bids that do not embody a sub- sequent price increase that prompts a change in recommendation from the target board (from “reject” to “accept” ) to result in the bidder acquiring 100% of the target.
• breach of the substantial holding provisions (see 4.2 Material Shareholding Disclosure Threshold ); • bidder or target statement disclosure; • the parameters of deal protection mecha - nisms (see 6.7 Types of Deal Security Meas- ures ); • shareholder intention statements/truth in takeovers (see 6.11 Irrevocable Commit- ments ); • frustrating action (see 9.2 Directors’ Use of Defensive Measures ); • undervalue statements by targets in hostile takeovers (see 9.4 Directors’ Duties ); and • rights issues, share buy-backs and other share capital reductions that have a control impact. 10.2 Stage of Deal Disputes in private M&A generally arise after completion. Conversely, disputes in public M&A generally arise prior to completion (ie, prior to or during the course of a takeover bid or scheme). Additional - ly, disputes are not uncommon to be taken to the Takeovers Panel even before a binding agree - ment has been struck between a prospective acquirer and the target. For example, a number of high-profile cases have recently been brought before the Takeovers Panel concerning the per - missible boundaries of deal protection arrange - ments granted by a target to a bidder during the non-binding, indicative proposal stage. 10.3 “Broken-Deal” Disputes The overwhelming majority of take-private deals publicly announced and recommended by the boards of ASX-listed targets close successfully. However, the Australian market has recently seen a proliferation of failed and disputed “friendly” take-private deals.
10. Litigation 10.1 Frequency of Litigation
In private M&A transactions, the definitive agree - ment typically contains an agreed approach to resolve disputes. This may include private nego - tiation, mediation and/or binding or non-bind - ing arbitration. As a result, litigation is relatively uncommon in Australian private treaty M&A deals. In public M&A transactions, disputes concern - ing takeover bids and other control transac - tions are generally determined by the Takeovers Panel other than disputes in relation to scheme of arrangement transactions, which are more often (but not always) considered by the courts. Applications to the Takeovers Panel may only be made by bidders, targets, shareholders, ASIC and other persons whose interests are affected by the relevant circumstances (eg, a competing bidder). Since the Takeovers Panel was given exclusive jurisdiction over takeover disputes in 2000, it has heard approximately 28 cases per year. The types of issues raised in applications vary from year to year but often include: • breach of the 20% prohibition (see 6.2 Man- datory Offer Threshold );
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