A tale of 3 NOMs. On 17 April, 30 May and 23 June BDT issued 3 Notices of Meeting for the EGM. The second and third documents are very similar except that the buyback price was raised from 5c to 7c (still “not fair” per the expert).Although the NOMs were issued 24 days apart, the expert’s reports with them were dated only a week apart (29 May and 6 June) - see later. There were large changes between the first and second NOMs. the most obvious being the inclusion of the expert’s report, but there were also some clarifications and new comments on voting exclusions (although the rationale was not explained).. I and several others complained to BDT about the lack of an expert report with the first NOM, given both the difficulty of valuing BDT shares and that it was a “change of control” proposal led by the CEO/ major shareholder, which lack was in conflict with ASIC guidelines. .ASIC’s website now discloses the following, which explains a lot. Do not try to look for ANY comment about ASIC’s intervention in the NOMs or on the ASX platform, because – disgracefully- there isn’t any! I had previously thought that the improvements to the NOM and the belated provision of an expert report were in response to shareholder complaints, especially from large shareholders.These may have helped, but the main reason is ASIC’s (quiet) intervention as it discusses below. Note the very important point that ASIC was sufficiently unhappy about some points to consider getting the Takeovers Panel involved if the deficiencies were not rectified.
“ ASICrecently intervened in a proposed buy-back that would significantly increasethe voting power of the company’s CEO from 27% to 70%, assuming fullshareholder participation. [This is obviouslyBDT] See recent ASIC press release “Share buy-backs with significant effectson control”
[ASIC]held concerns about both disclosure and fairness [re BDT] when considering theprinciples of Chapter 6 and relevant Takeovers Panel decisions. In particular:
- the notice of meeting included inconsistent and ambiguous statements about the value of the company. It suggested the share price undervalued the company, without an explanation, but also relied on the share price to suggest the buyback was at a premium
- the valuation did not appear to have a reasonable basis, and despite the significant control implications, no independent expert’s report had been commissioned
- the CEO intended to vote for the buy-back resolution, raising fairness concerns as to whether the CEO should be permitted to vote where the buy-back would substantially increase their voting power.
Thecompany considered ASIC’s position in good faith [sic!] and agreed to defer themeeting to:
- obtain an independent expert’s report
- provide enhanced disclosure in the notice of meeting, and
- impose a voting restriction on the CEO, who also abstained from making a recommendation.
ASICwas prepared to seekremedial orders in the Takeovers Panel to the same effect.
Subsequently,the company also increased the price of the buy-back.”
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I had complained about all these points (especially the abuse of the buyback exemption in the Corporations Act to achieve a de facto takeover) to BDT’s advisors but they dismissed my objections. The promoters (CEO, CFO etc) have used this loopholeso they can achieve the equivalent of a takeover by using BDT’s cash, not theirown funding. This approach also saves them a lot of regulatory work and removes the funding risk of being stuck with only partial success.
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Moreover, shareholders may not have noticed (as it’s only revealed in the expert’s report-section 2.4j- and even there you have to work it out yourself) that the $375K advisors’ costs for the transaction are borne by BDT itself (thus by shareholders) not by the CEO etc who have instigated the deal. This is extraordinary.
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The increase in the offer from 5c to 7c must have come about after immediate and strong objections by large shareholders, as the second expert’s report was written only a week after the first one.
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Thus we have, in effect, a takeover led by the CEO and CFO which uses BDT’s own cash- none of their win, and the target is also paying for the “bidders” advisers’ costs, not they themselves, and the documents blur the distinction between the company and the “bidders”. I wonder if we would even have got an expert report if not for ASIC’s intervention.
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This all adds insult to injury after the promoters have destroyed nearly all the capital invested in the IPO. This proposal is shameless. However, the likelihood of further losses under this management made me decide to sell on market and get out, even though 7c is too low.
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Not advice. DYOR.
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