As alluded to in the Supplementary Bidder’s Statement, I am...

As alluded to in the Supplementary Bidder’s Statement, I am anticipating additional communications from RG over the coming week or so with further threats. I suspect most holders are used to the misleading threats by now and are unfazed by them.

The Supplementary Bidder’s Statement specifically referenced a potential capital raising. As reported, there was a $204.8 million decrease in net debt in H1 FY24 compared to the PCP. H2 FY24 should see continued positive momentum, subject to any attempt by Pact/RG to downplay the results. We should also start to see a significant reduction in financing costs. If required, Pact has undrawn debt capacity, with $329.7 million in committed undrawn facilities.

It’s difficult to envision why a capital raising may be required other than if it’s purely RG's attempt to increase control of Pact to ensure compulsory acquisition, which would, of course, be in breach of regulations. I note that there has once again been recent news reports regarding the potential sale of Loscam.

If a capital raising is indeed announced, I’ll be particularly interested to see how RG’s legal team ensures compliance with ASIC Regulatory Guide 6 (Takeovers: Exceptions to the general prohibition) and supporting regulations. I have included a few snippets below from the referenced Regulatory Guide, although they should, of course, be read in the full context of the guide:

RG 6.157 “Where the underwriter is a related party, an underwriting arrangement may need approval by members under Pt 2E.1. A company that gives a financial benefit to a related party must obtain member approval unless the underwriting is on arm’s length terms: s208 and 210. This is a vital part of corporate governance.”

RG 6.159 “An underwriter that controls or is a director of a company will be a related party: s228(1) and (2).”

RG 6.4 “Central to the structure of the takeover provisions is the ‘general prohibition’ set out in s606. Subject to certain exceptions, s606(1) prohibits a person acquiring a relevant interest in voting shares or interests through a transaction in relation to securities that increases that person’s, or someone else’s, voting power in a regulated entity…”

RG 6.81 “The Takeovers Panel may declare unacceptable circumstances in relation to the affairs of a company. The Panel may make a declaration on the basis of a contravention of Ch 6, but may also do so where circumstances are unacceptable having regard to the purposes of Ch 6 (as set out in s602), or the effect of the circumstances on control or the acquisition of a substantial interest: s657A(2).”

RG 6.82 “Accordingly, a rights issue or underwriting arrangement may give rise to unacceptable circumstances even though it falls within the legal terms of items 10, 10A or 13. This would include, for example, a rights issue or underwriting arrangement that has been devised to enable a holder or underwriter to obtain control of the issuer through the fundraising, in reliance on the exceptions.”

RG 6.83 “We will carefully consider a rights issue or underwriting that falls within the terms of the rights issue, accelerated rights issue or underwriting exceptions but that appears to be:
(a) designed to avoid the requirements of Ch 6; or
(b) otherwise unacceptable, having regard to the purposes of Ch 6 set out in s602.

A rights issue of this kind risks an application to the Takeovers Panel or other regulatory action.”