I've got about 3 inches of printed pages that are the Scheme Booklet registered with ASIC as per the 1 August announcement.
I quote from page 74 Additional Information 7.7 Deed of Commitment. (Bolding is mine).
"As set out in Kidman's ASX announcement of 3 July 2019, Wesfarmers and SQM have since advised Kidman that the terms relating to exclusivity in the Deed of Commitment have been amended to align those provisions with the market standard exclusivity provisions between Kidman and Wesfarmer's contained in clause 13 of the Scheme Implementation Deed".
This is definately the first time I have read 3 inches of printed pages to do with a scheme of arrangement. My impression of the exclusivity provisions in clause 13 of the Scheme Implementation Deed was that taken together they made an alternative proposal getting up to be better than the WES proposal almost impossible. But I have no experience with which to judge whether they really were market standard or whether describing them as market standard was just spin to suggest that there was nothing unusual or untoward to be seen here so please just move along.
So I did some digging. The Takeovers Panel website has a guidance note 7 - Lock-up devices which I find to be relevant. They after all are the body that deals with this stuff all the time.
That chapter is actually quite short only 10 pages and I found it useful. It seemed to me that just about every species of lock-up device that can possibly exists (examples- break fees, no-shop agreements, no-talk agreements) is contained in our very own clause 13 Scheme Implementation Deed. The last update on the chapter was 11 Feb 2010 so perhaps the market standard has become more forceful more inclined to use more lock-up devices than it used to.
pg 2 definition "lock-up device" "an arrangement that encourages or facilitates a control transaction and potentially hinders another actual or potential control transaction"
pg3 "Lock-up devices are not unacceptable as such".... "However, they may also deter rival bidders".
"7 Whether any lock-up device gives rise to unacceptable circumstances will depend on its effect or likely effect, having regard to s602 and s657. The Panel will look at the effect or likely effect of the device on:
(a) competition involving current or potential bidders, and whether it is significant and
(b) shareholders and whether they may be substantially coerced into accepting the bid (ie, the tendency to diminish the value of the company if shareholders do not accept).
There is a lot - I do recommend reading - but this caught my eye
No-talk restriction
"25 A no-talk restriction prevents a target negotiating with any potential competing bidder. It might be graduated from the least restrictive form (allowing negotiations if the approach was unsolicited) to the most restrictive form (no negotiations, even if the approach was unsolicited)" [This is what we have].
"27. In the absence of an effective 'fiduciary' out, a non-talk restriction is likely to give rise to unacceptable circumstances. Even with a 'fiduciary out, the period of restraint must be limited and reasonable." [Note our period of restraint extends to the other side of the integrated definitive feasibility study being completed].
Finally
Remedies
"36 The Panel was wide power to make orders (including remedial orders) if a lock-up device gives rise to unacceptable circumstances, including cancelling agreements. The Panel's orders (or undertakings) will be designed to remove any anti-competitive or coercive effect."
----- In page 4 of the KPMG Independent Experts Report (p 96 of my printout bottom left) - the 'experts' describe what the criteria of reasonableness are in a series of seven bullet points the third last of which is "* any conditions associated with the scheme". [So I see this as relating to the exclusivity provisions or lock-outs].
But then in their "4 Summary of opinion" (p97) they state "In forming our opinion, we have assessed whether the Scheme is"
..
"* reasonable, by assessing the implications of the Scheme for Kidman shareholders, the alternatives to the Scheme and the consequences of not approving the Scheme".
Note they did not use "any conditions associated with the scheme" as a criterion. So it appears that criterion did not play a part in their assessment of its reasonableness despite that they included it in their seven bullet points.
------ My conclusion: I am not personally believing that the exclusivity provisions in 13 are market standard.
I'd actually personally prefer to see this thing tested at the takeovers panel to see if the lock-outs amount to unacceptable circumstances. But that will require a shareholder or shareholders willing.
Other than testing it, I don't see how the claim of market standard gets challenged. And I think the legal firms that are drafting these docs (for fees obviously) are effectively moving the market standard with each lock-up device they add that doesn't result in a test.
KDR Price at posting:
$1.90 Sentiment: Hold Disclosure: Held
