The second edition of Schemes, Takeovers and Himalayan Peaks has been launched at Freehills in Sydney by Professor Jennifer Hill of the Ross Parsons Centre at the University of Sydney.
Authored by Freehills partner Tony Damian and senior associate Andrew Rich, the book is the definitive text on the laws, practices and policies relating to the use of schemes of arrangement to effect mergers of listed companies in Australia.
The highly regarded and influential first edition of this book (published in 2004) sparked a law reform debate in Australia which culminated in the Corporations and Markets Advisory Committee (CAMAC) publishing a discussion paper (in 2008) which invited submissions on a wide range of reforms to the Australian scheme of arrangement provisions. CAMAC’s final report is expected to be published shortly.
Freehills partner Tony Damian said, ‘This is an important contribution to the debate on schemes. When you look into the law and the facts regarding schemes, it becomes very clear that Parliament should clarify once and for all that schemes of arrangement are a legitimate deal structure.’
Freehills senior associate Andrew Rich added, ‘Over the last five years since the first edition was published much has happened in relation to schemes of arrangement : the fact that this second edition is more than three times the length of the first edition is testament to that.’
Reform proposals
The book contains a number of law reform proposals which the authors believe would improve the ability to accommodate future merger activity, including the abolition of the controversial takeover avoidance provision – section 411(17) of the Corporations Act. This provision says a court cannot approve a scheme if it has been approved for the purpose of avoiding the takeover provisions, unless ASIC has sanctioned the scheme.
It has long been accepted that schemes are a legitimate and useful alternative deal structure to a takeover bid. The presence of the takeover avoidance provision adds an unnecessary element of completion risk to any change of control transaction where the protections for minorities in schemes are comprehensive and there is no need to test the scheme procedure against the takeover standard. Indeed, in many respects, schemes are more stringent than takeovers anyway.
Critics of schemes often suggest that schemes utilise a lower approval threshold (75 per cent vote) compared to a takeover bid (90 per cent acceptance). However, this is not always the case. Depending on a bidder’s starting stake, and voter turnout, the threshold to approve a scheme can actually be higher than to approve a takeover.
Schemes also provide minorities with a range of safeguards that are either not available or not mandatory under a takeover bid. These include:
- the class voting regime
- the two-stage court approval process
- a meeting of scheme shareholders to ventilate views
- the requirement to obtain an independent expert’s report, and
- the mandatory and detailed involvement of ASIC in the process.
Areas covered
The book, which is over 400 pages, includes chapters on each of the following areas:
- The regulatory landscape: acquiring widely held Australian companies
- The scheme procedure
- The scheme approval process
- The principal scheme documents
- Classes, interests and equality of opportunity in schemes
- Deal protection devices
- The role of schemes of arrangement
- Other transactions by way of scheme
- The early history and Parliament’s approach
- Interpretation and application of section 411(17)
- The overseas experience in various following jurisdictions
- Passing up Everest: in defence of schemes of arrangement
- Schemes: the future
About the authors
Tony Damian is a partner and Andrew Rich is a senior associate at Freehills. Both have extensive experience in all aspects of mergers and acquisitions, including schemes of arrangement, takeover bids, takeover defences and other public company transactions. They also regularly commentate and present on this interesting and dynamic area.
Damian was nominated as ‘Dealmaker of the Year’ at the 2009 Australian Legal Business Awards. His recent deals include advising Commonwealth Bank on its acquisition of BankWest and the current $2 billion acquisition of Sino Gold by Eldorado Gold.
Availability
To order a copy of Schemes, Takeovers and Himalayan Peaks, second edition, please complete this form and return via fax to (02) 9351 0200 or email law.parsons@usyd.edu.au.
More information
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