AUSTRALIA Law and Practice Contributed by: Alberto Colla, Keith Tan, Hugh McDonald and Dean Zinn, MinterEllison
Takeovers This is the conventional structure for acquiring an ASX-listed public company or an unlisted public company with more than 50 shareholders. Under a takeover, the prospective acquirer (bid - der) makes separate identical offers directly to all target shareholders to purchase their shares in exchange for cash, shares in the acquirer ( “scrip” ) or a combination of cash and scrip. A takeover bid can be either an off-market bid or an on-market bid. On-market bids are rare, as these must be for cash only and unconditional. Usually, an off-market takeover bid is subject to conditions (see 6.4 Common Conditions for a Takeover Offer ). Takeover bids are characterised as “friendly” or “hostile” depending on whether the bidder has secured the support of the tar - get’s board in publicly recommending accept - ance of the bid. Scheme of Arrangement Acquiring a widely held Australian public com - pany can often be accomplished through a members’ scheme of arrangement. In fact, most friendly takeovers of such companies are now conducted using this method. A scheme is a process initiated and managed by the tar - get company, in which the target proposes “scheme” (plan) for approval by its sharehold - ers. Typically, the scheme involves all the shares of the target being transferred to the prospective acquirer in exchange for payment, which can be made in cash and/or shares. If the scheme is approved and implemented, the target contin - ues to exist as a corporate entity – the scheme process does not automatically dissolve it. The target simply becomes a wholly-owned subsidi - ary of the acquirer. If the target is listed on ASX, it will be de-listed shortly after implementation of the scheme.
A scheme requires the approval of the tar - get shareholders and the court. Specifically, a scheme needs the approval of at least: • a simple majority of the target’s shareholders by number present and voting at a meeting convened by order of the court; and • representing at least 75% of the votes cast (excluding any votes cast by the prospective acquirer or any of its associates if they hold any target shares). Importantly, shareholders who do not vote (due to apathy, being untraceable or otherwise) are not counted for this purpose and, therefore, do not affect the scheme voting process. Between these four primary acquisition meth - ods, the chosen method depends on various factors, including the target company’s size and ownership structure, the acquirer’s objec - tives, and tax considerations. Legal, taxation and financial advice are typically taken at the preliminary stages of a potential transaction to determine the most appropriate method. 2.2 Primary Regulators In Australia, M&A activity is primarily regulated by the following authorities. Australian Securities and Investments Commission (ASIC) ASIC regulates Australian companies, financial markets, and financial services organisations. Its remit is to ensure markets are fair and transpar - ent. Australian Securities Exchange (ASX) The timetable and general process for a takeo - ver or scheme of arrangement must comply with ASX’s listing rules.
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