AUSTRALIA Trends and Developments Contributed by: Alberto Colla, Keith Tan, Hugh McDonald and Dean Zinn, MinterEllison
conditional on the scheme vote failing. In this sense, the takeover offer is “fallback” or “Plan B” offer structure, but it is formally initiated from a market disclosure and procedural perspective at the same time as the slightly higher-priced “Plan A” scheme. The dual-track structure is typically used where an existing shareholder of the target – who might emerge as an opposing shareholder and/or a competing bidder – holds a stake large enough (of, say, between 10% and 20%) to potentially vote down the Plan A scheme (noting that a scheme requires the approval of at least 75% of the votes cast) but where that opposing stake is not large enough to defeat a Plan B takeover with a 50% minimum acceptance condition. The dual-track scheme/takeover structure means that a prospective acquirer does not lose any valuable time or momentum if its Plan A scheme fails to achieve the requisite level of shareholder voting support – if that happens, the Plan B take - over bid at the slightly lower price is immediately activated. The dual-track structure was first deployed in 2019 and was upheld as valid by the Takeo - vers Panel in 2023. In 2024, we saw the dual- track structure deployed on two occasions: the first by Japanese energy generation company J-POWER on its acquisition of renewable energy developer Genex Power Limited and the second by SEQ Hospitality on its acquisition of prop - erty and hotel group Eumundi Group Limited. We highlight the successful use of the dual-track structure by J-POWER (who were advised by MinterEllison) below. J-POWER successfully deployed the dual-track structure to curtail the potential for Skip Cap - ital to use its 19.9% stake in Genex to block a J-POWER acquisition. Skip Capital’s 19.9%
stake, combined with the fact that J-POWER already owned 7.72%, meant Skip Capital would only need ~3% of other Genex shareholders to vote against the scheme in order to block it. While J-POWER could have approached Skip to make a joint bid, this was not commercially attractive to J-POWER, given it would have as a result of their 20%+ combined stake required ASIC joint bid relief (which has unattractive con - ditions, including a ‘match or accept’ require - ment regarding any rival bids), and would tip J-POWER’s intentions to Skip with no guaran - tee Skip would be interesting forming part of the bidding group. The dual scheme/bid structure avoided these drawbacks and meant that Skip could not com - fortably reject the scheme and assume that the status quo would continue – as the takeover conditional on 50.1% minimum acceptances meant that Skip could find itself ‘locked in’ as a minority shareholder in a Genex controlled by J-POWER. Stub equity deals are now embedded within the deal structuring landscape Stub equity schemes by way of a scheme of arrangement, primarily deployed by private equity, have become entrenched in the Austral - ian public M&A landscape. At least four stub equity schemes were announced in 2024. These included Genesis Capital’s acquisition of Pacific Smiles, Knight Frank’s acquisition of McGrath, River Capital’s acquisition of Midway, and Adamantem Capital’s acquisition of QANTM. The stub equity structure gives target sharehold - ers the flexibility to maintain an investment expo - sure in the target rather than exiting in full for
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