from the SMH ... http://www.smh.com.au/articles/2003/07/23/1058853141039.html
An interesting commentary on the ethics of "Scemes of Arrangement" that Hardman is being subject to.
Takeover schemes backlash grows
By Anthony Hughes
July 24 2003
Institutional investors' opposition to the escalating use of schemes of arrangements in corporate takeovers was bolstered yesterday by Australia's largest listed investment company declaring its "philosophical objections" to such offers.
Australian Foundation Investment Company, which criticised schemes that limit the ability of investors to extract fair value for their shares, also signalled it would probably vote against a $2.4 billion proposal to mop up the minorities in Perth-based regional BankWest.
Managing director of AFIC, Ross Barker, said he had recommended to the AFIC board that it vote its 2.6 million BankWest shares against the $4.35-a-share offer by Britain's HBOS, having also voted against a scheme takeover of United Energy earlier this month.
Schemes of arrangement provide certainty for the bidder because the outcome hinges on one shareholder vote, rather than a conventional bid where shareholders with more than 10 per cent can agitate over weeks or months for a higher offer price.
Mr Barker said the HBOS offer for BankWest was also at the low end of the independent expert's range of $4.20 to $4.70 a share and was "hardly a generous bid". HBOS, a 57 per cent shareholder, had warned it could withdraw support to the bank if the deal was rejected.
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Shareholders will vote on the scheme August 18.
The investor backlash against schemes of arrangement was also given more impetus yesterday when South Africa's Aveng said it would fund an additional 10c dividend if minority shareholders accepted its $1.54-a- share bid for engineer McConnell Dowell. Shareholders resisting the offer, including 452 Capital and Investors Mutual, have now agreed to support the scheme, set for a vote on Friday.
Xstrata's controversial bid for MIM was an example of a scheme of arrangement. The latest to emerge is a $1.40- a-share bid for National Can Industries by interests associated with 50.8 per cent shareholder and managing director Michael Tyrrell. AFIC's Mr Barker, also a National Can shareholder, said he would wait for an independent expert's report to be released, unlike National Can's independent directors who have already recommended the offer.
"In a takeover you have to have 90 per cent of shareholders accepting [to move to 100 per cent] whereas in a scheme of arrangement only 75 per cent of those who turn up at the meeting are required," he said. "I have some philosophical objections to them requiring everybody to sell on the basis of that." AMP Henderson's chief investment officer Merv Peaock said, as a principle, he was concerned that companies were being acquired "on the cheap without enough debate".
"Schemes of arrangement should be used where there are mergers and difficult situations, not for basic takeovers," Mr Peaock said.
ANZ Investment Bank's co-head of mergers and acquisitions and McConnell Dowell's adviser, Martin Hanrahan, said schemes were on the rise because they were more suitable for companies with increasingly complex capital structures. ". . . companies are increasingly creating other forms of securities that are quasi-equity (like reset preference shares) and there are limitations under the takeovers code," he said.
A spokeswoman for the Australian Securities and Investments Commission said the regulator did not have a preference for either form of takeover as long as the quality of information provided to shareholders was the same.
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