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from the australian Bryan Frith | December 21, 2007

Beyond the pale

SHAREHOLDERS of television production house and film and TV distributor Beyond International arguably have been let down by their directors.

On November 26, Beyond's independent directors dropped their recommendation to accept a cash bid of $1.25 a share from Mariner Financial, following a market raid in which Destra Corp acquired a 10 per cent stake, paying up to $1.35 a share.

They stopped short of recommending rejection, instead advising shareholders to "take no action at this time". At the same time, all of the directors advised that, in their capacity as shareholders, they did not intend to accept for any of their shares. In aggregate, the directors speak for 21 per cent of the capital.

Beyond had agreed to allow Destra to undertake due diligence, but Destra had not given any indication of its intentions other than the due diligence would assist it in "considering" an alternative proposal to the Mariner offer. Any bid by Destra within the next four months would have to be at a minimum of $1.35 a share.

One of the reasons given for the change of stance was that Destra's holding made it unlikely that Mariner could achieve its 90per cent minimum acceptance condition.

On December 10, Mariner responded by announcing that it would waive the minimum acceptance condition if it obtained 50.1per cent of the company but would not extend the offer beyond the closing date of December 20 unless a rival bid was announced during that time. The bid would also automatically extend for two weeks if, in the final week, Mariner either went through 50 per cent or raised its offer price.

But that didn't alter the attitude of the Beyond directors. As shareholders, it was the personal preference of each director to wait to see how discussions with Destra developed, even if that occurred "over the medium term". As directors, the board saw no point in imposing a deadline as it may frustrate Destra's ability to put forward a superior proposal.

The board also said it "anticipated" receiving a proposal from Destra in the near future and was strongly encouraging that company to present its proposal before Mariner's December 20 deadline. But it didn't happen and Mariner's bid closed yesterday.

Under ASIC's "truth in takeovers" policy, when target companies raise the prospect of a rival bid they are supposed to state in the final week whether they still consider there is a realistic chance of such an offer, and the expected terms. That also hasn't happened.

So, a certain offer has gone, at a price that previously got the board's recommendation, and there is no certainty of a rival offer.