https://www.minterellison.com/articles/standstills-in-public-merg...

https://www.minterellison.com/articles/standstills-in-public-mergers-and-acquisition-deals

Metallica Minerals Limited

On 21 May 2024, Diatreme Resources Limited (Daitreme) made an application to the Takeovers Panel in relation to the affairs of Metallica Minerals Limited (Metallica). Metallica was the subject of an unsolicited, hostile scrip takeover bid by Diatreme. Both Metallica and Diatreme operate silica sands projects close to each other in Queensland.

The application was primarily concerned about a mutual standstill agreed by Metallica and Diatreme in a confidentiality deed between them dated 30 October 2023. So far as is relevant to this article, Diatreme agreed that, for the term of the confidentiality deed, being two years or an earlier date agreed by the parties, Diatreme would not acquire, purchase or sell, or agree to acquire, purchase or sell any securities in Metallica without Metallica’s prior written consent (Diatreme Standstill).

No confidential information was ever provided by Metallica to Diatreme (or vice-versa) under the confidentiality deed.

On 16 February 2024, Diatreme announced its intention to make a takeover bid for Metallica. The announcement did not include a defeating condition that Metallica waive the Diatreme Standstill, but a condition to that effect was subsequently included.

On 24 April 2024, Metallica released its target’s statement in which the Metallica directors unanimously recommended that Metallica shareholders reject Diatreme's offer. Noting the existence of the Diatreme Standstill as a fundamental barrier to Diatreme lawfully acquiring any Metallica shares under the offer, the Metallica board said that it intended to release Diatreme from the standstill only at either of the following points in time:

(a) if no superior proposal for Metallica emerged, immediately prior to the end of the offer period under Diatreme's takeover bid; or

(b) if a superior proposal for Metallica emerged, after Metallica shareholders have voted down that superior proposal.

Diatreme complained that this was all too uncertain in the sense that the standstill would remain in place for an indeterminate period and that this detracted from the overall certainty and benefits of Diatreme's offer. Diatreme sought a declaration of unacceptable circumstances and orders from the Panel to the effect that Metallica be directed to release Diatreme from the standstill no later than 30 May 2024, as Diatreme's offer was scheduled to close on 3 June 2024.

The Panel declined to make the requested declaration or orders on the basis that Metallica was prepared to amend the standstill to ensure that it no longer continued for an indeterminate period. In particular, Metallica agreed to amend the standstill to include a more prescriptive definition of 'superior proposal', and to commit to a fixed date for the standstill to be released (being 28 June 2024) if a superior proposal for Metallica was announced before 17 June 2024. As it turned out, no superior proposal for Metallica emerged before 17 June 2024 (or subsequently). Therefore, the standstill fell away on 17 June 2024 and, on that date, Diatreme declared its offer unconditional. Diatreme's offer was extended to 23 July 2024 with Diatreme achieving voting power of 79.67% in Metallica at the time that it extended its offer.

The interesting aspect of this application is that the Panel was prepared to allow Metallica to have the continuing benefit of the standstill even though Metallica had not disclosed any confidential or other information to Diatreme from the date that they entered into their confidentiality deed.