Mind your own loophole
A private equity consortium is runnning rings around the Corporations Act with its creative approach to the MYOB takeover.
The purported commitment of four big MYOB institutional shareholders to accept the private equity bid for the software group is just a smidgeon too cute. There's a fair chance that MYOB's chairman, Simon McKeon, who also happens to be president of the Takeovers Panel, will challenge those commitments before the panel.
Between them, Guinness Peat Group, Colonial First State, Octavian and Schroders own about 34 per cent of MYOB. In announcing their offer, the private equity firms, Archer Capital and HarbourVest, said that GPG, Colonial and Octavian had already indicated they would accept the offer as soon as it opened.
Schroders had said it intended to accept the offer once it was open on the basis that the offer was being increased from its base level of $1.15 a share to the $1.25 a share the bidders will pay if they achieve compulsory acquisition.
Archer and HarbourVest could not enter any kind of agreement or understanding, whether formal or informal, to acquire 34 per cent of MYOB ahead of the bid without breaching the takeover threshold provisions of the Corporations Act. So they haven't.
Instead, someone has come up with a clever, perhaps too-clever, idea. The institutions have allowed it to be stated publicly that they will accept the offer. Their statements are unconditional – they haven't reserved the right to accept a higher offer, if one emerges. Nor have they made their proposed acceptances conditional on observing their fiduciary duties to their own stakeholders.
If Archer and HarbourVest were careful in their pre-bid discussions with the institutions – and there must have been discussions or they wouldn't have been able to state the shareholders' intentions in their takeover documents – they would have been able to avoid acquiring a relevant interest in the shares and therefore would have avoided breaching the Corporations Act.
By making the statements public, however, the bidders appear to believe that the Corporations Act, or rather the way the Australian Securities and Investments Commission interprets it, will bind the shareholders to their statements and deliver their acceptances into the bid.
ASIC's "truth in takeovers" policy would ensure that the institutions acted in accordance with their statements – ASIC would ensure that the institutions would do what the law would prohibit them from contracting to do.
If that strategy would adopted more broadly, it would undermine the takeover provisions of the Act.
Takeovers, of course, aren't governed purely by black letter law and ASIC isn't the only regulatory agency involved in takeovers. The Takeovers Panel can adjudicate in takeovers, using the "Eggleston Principles" within the Corporations Act as its guide. Those principles are aimed at ensuring acquisitions of control take place in an efficient, competitive and informed market.
If the commitments of the institutions to the private equity bid were – thanks to the truth in takeovers policy – binding, they would deter any counter-bid and deny other shareholders the possibility of receiving a significantly higher price for their shares.
One suspects the panel would want to look closely at what is happening in the MYOB bid and how it conforms, or doesn't, to the principles that under-pin both the panel's approach and takeover law.
Between them, Guinness Peat Group, Colonial First State, Octavian and Schroders own about 34 per cent of MYOB. In announcing their offer, the private equity firms, Archer Capital and HarbourVest, said that GPG, Colonial and Octavian had already indicated they would accept the offer as soon as it opened.
Schroders had said it intended to accept the offer once it was open on the basis that the offer was being increased from its base level of $1.15 a share to the $1.25 a share the bidders will pay if they achieve compulsory acquisition.
Archer and HarbourVest could not enter any kind of agreement or understanding, whether formal or informal, to acquire 34 per cent of MYOB ahead of the bid without breaching the takeover threshold provisions of the Corporations Act. So they haven't.
Instead, someone has come up with a clever, perhaps too-clever, idea. The institutions have allowed it to be stated publicly that they will accept the offer. Their statements are unconditional – they haven't reserved the right to accept a higher offer, if one emerges. Nor have they made their proposed acceptances conditional on observing their fiduciary duties to their own stakeholders.
If Archer and HarbourVest were careful in their pre-bid discussions with the institutions – and there must have been discussions or they wouldn't have been able to state the shareholders' intentions in their takeover documents – they would have been able to avoid acquiring a relevant interest in the shares and therefore would have avoided breaching the Corporations Act.
By making the statements public, however, the bidders appear to believe that the Corporations Act, or rather the way the Australian Securities and Investments Commission interprets it, will bind the shareholders to their statements and deliver their acceptances into the bid.
ASIC's "truth in takeovers" policy would ensure that the institutions acted in accordance with their statements – ASIC would ensure that the institutions would do what the law would prohibit them from contracting to do.
If that strategy would adopted more broadly, it would undermine the takeover provisions of the Act.
Takeovers, of course, aren't governed purely by black letter law and ASIC isn't the only regulatory agency involved in takeovers. The Takeovers Panel can adjudicate in takeovers, using the "Eggleston Principles" within the Corporations Act as its guide. Those principles are aimed at ensuring acquisitions of control take place in an efficient, competitive and informed market.
If the commitments of the institutions to the private equity bid were – thanks to the truth in takeovers policy – binding, they would deter any counter-bid and deny other shareholders the possibility of receiving a significantly higher price for their shares.
One suspects the panel would want to look closely at what is happening in the MYOB bid and how it conforms, or doesn't, to the principles that under-pin both the panel's approach and takeover law.
Share this article and show your support
Call 1300 880 160
Start a chat
Schedule a call
