The following paper will analyse and critically evaluate the decisions made by takeover panels for the cases, Mount Gibson Iron Limited and BigAir Group Limited. This evaluation will be undertaken by breaking up the discussion into 2 parts. Firstly breaking down the facts of the case and discussing the applications, orders and tactics taken by the parties involved and the Panel. It will compare and contrast the decisions of each case by providing the similarities and differences. Lastly, there will be an evaluation of both panels decisions and whether they came to the right conclusion.
Mount Gibson Iron Limited
The case of Mount Gibson is a very complicated case as it involves many relationships between both people and companies.
In 2005, negotiations began between Mount Gibson and Shougang Holding, resulting in a participation agreement for a slurry pipeline investment in Asia Iron. Soon after in June 2006, COL Capital successfully requested the appointment of Alan Jones to the Mount Gibson board.
30 November 2006, Mount Gibson held a general meeting, where the votes cast by Mr Bogue (Managing Director of RIM Capital and former Director or APAC) were opposite to the majority of non associated Mount Gibson shareholders.
Early 2007, Shougang became interested in the iron ore offtake from Mount Gibson
12 June 2007, there was a meeting in Hong Kong between Gazmetall and APAC, where Gazmetall was asked to invest in APAC. It was noted at this meeting that the main purpose for APAC’s investment in Mount Gibson was to become the first Chinese company to have a major stake in the fastest developing Australian iron ore companies. This was done so they could gain competitive advantage overtime.
October 2007, there was talk of Mr Horn selling Gazmentall shares with potential buyers, including Shougang Holding, Shougang, and APAC. Around the same time Mr Jones contacted Mr Horn to discuss Gazmantall’s interest in selling its Mount Gibson stake, as APAC may be interested in buying it.
5 December 2007, Mr Horn informed Mr Lee that Gazmentall had decided to sell to another bidder. However, in early 2008 it was evident that this sale would fall through.
18 January 2008, Shougang met Gazmetall in Hong Kong to discuss the sale of Mount Gibson shares for $2.60 per share. Then on 25 January 2008, the directors of Shougang were notified of the proposed acquisition via email. This resulted in a 19.76% stake in Mount Gibson.
31 January 2008, the announcement of the transaction was made with the reason being, “to secure a long term and stable source of supply of raw materials for the Group’s steel manufacturing operations”1.
Applications before the panel:
Mount Gibson relied on sections of the Corporations Act for the panel to declare unacceptable. Ss 674A(2)(a)2, 674A(2)(b)3, and 674A(2)(c)4 were all implemented which stated that a panel may declare circumstances unacceptable if they meet certain criteria under these sections.
Mount Gibson ultimately applied these sections around four application bases:
1. Circumstances surrounding the proposed transaction
2. Shougang and APAC’s prior conduct in relation to mount Gibson
3. Structural links between Shougang and APAC
4. Other dealings between APAC and Shougang
The outcomes of these applications are discussed later in the paper.
Orders sought from the panel:
Since Mount Gibson is at risk of losing majority power, they sought orders to ultimately prohibit any actions that could potentially put them in such a position. The first order was to prohibit the completion of the proposed trade and also to forbid Gazmentall, Shougang and APAC from exercising any rights that may arise from the shares in Mount Gibson. This was done so that throughout the court process, the welfare and status quo of Mount Gibson could not be tampered with. As a result, on 29 February, the panel prohibited the completion of the transaction until a final…