March 2008

ALERT:  We alert clients that international acquisitions MAY require consent from the New Zealand Overseas Investment Office where there is a New Zealand business operated by the “target”.  This is a change from the previous legislation.  Such application can impact on the timing of the transaction.  A paper detailing the circumstances of requiring such approval can be obtained from davidquigg@quiggpartners.com.

Australian High Court Rules on Status of Australian Takeovers Panel:  The Australian High Court published in February 2008 reasons for its decision made in December clarifying the powers of the Takeovers Panel.

Alinta argued that the Takeovers Panel’s action (in the Alinta/AGL/Australian Pipeline Trust takeover) were invalid because it exercised judicial Commonwealth powers, but the High Court ruled otherwise.  It its findings, the High Court agreed that the Panel could not exercise judicial powers but said it had acted appropriately when it made an order about the process to be undertaken.  The Court determined that the Takeovers Panel lacks the power to compel compliance with its orders and would need a Court order to enforce them.

Delaware Decision:  In the United Rentals/Cereberus decision the Delaware Chancery Court declined granting an order for specific performance in respect of a merger agreement.  The case gave a very interesting discussion of the use and application of exclusive remedy and termination fee clauses.

Tennessee Court of Chancery:  The Genesco decision involved the interpretation of whether a material adverse effect clause had been triggered.  The Court also rejected an allegation of a fraudulent concealment of its results and projections.  A point made by the Court was the acquirer could have asked for revised financials but had not.

Attractiveness of an Amalgamation via Scheme:  The Court of Appeal upheld the High Court decision that the PGG Wrightson amalgamation (via a Scheme of amalgamation) did not trigger “pre-emptive rights”.  The Court reinforced the effect of an amalgamation is the amalgamating companies “continuing as a single company” (no transfer of assets arising).  The Court confirms that an amalgamation, via a scheme, means the various protective provisions in the stand alone amalgamation procedure do not apply (hence the attractiveness of “amalgamation via scheme”).  The Court also specifically recognised that pre-emptive rights may be triggered depends on the wording of the pre-emptive rights and that in broadly analogous circumstances, American Courts have taken a different approach.

An updated discussion paper on use of Schemes of Arrangement/Amalgamations is in circulation with submissions received mid-February.  The Panel had flagged that it was concerned that a “loophole” exists that allows use of schemes/amalgamations to avoid similar protections in changes of control circumstances under the Takeovers Code and is requesting “feedback” on various alternative suggestions.

• Tenix Alliance on its purchase of Robt. Stone Engineering;
• Tenix on New Zealand legals in respect of the sale of Tenix Defence to BAE Systems Limited;
• Kerifresh on the takeover offer by Turners & Growers;
• Kinloch Funds Management in respect of MacarthurCook purchasing a 35% stake;
• on the New Zealand aspects of the sale of Electric Visual to Volcom;
• on the New Zealand securities law aspects of the merger of CopperCo Limited and Mineral Securities Limited;
• on the New Zealand Overseas Investment Office approval required for Citigroup's acquisition in Japan of Nikko Cordial Corporation.