Pacman defence tests takeover laws

Most people know of Pacman as an early computer game, but for takeover lawyers the term has been applied to the unusual circumstances surrounding the battle between Alinta and The Australian Gas Light Company.

The term Pacman was used because AGL responded to Alinta’s initial ‘merger’ proposal by countering with its own ‘merger’ proposal, on essentially the same terms.

It was the first ‘Pacman defence’ that most takeover lawyers had experienced in Australia and raised what the Takeovers Panel called “novel issues”.

This included the question of what might occur if each of the bidders received acceptances for more than 50 per cent of the other.

The Takeovers Panel resolved the question by ruling that either bidder must acquire more than 50 per cent of the shares in their target, and the rival bidder must have acquireded less than 50 per cent, before an offer could become unconditional.

This was considered a setback for Alinta, advised by Blake Dawson Waldron, as it could potentially have gained control of AGL with a shareholding of less than 50 per cent.

The panel’s ruling provided impetus for the two companies to pursue the negotiated outcome to their takeover tussle.

It also highlighted the importance of the panel, which was established in 2000 as the main dispute resolution forum for takeovers in Australia.

It typically hears between 30 and 40 applications each year, and in the process has enabled takeover lawyers to avoid costly litigaton.

The panel has about 50 part-time members, including five Perth-based members – company directors Robyn Ahern and Simon Withers, Gresham Partners’ Michael Ashforth and Jennifer Seabrook and Clayton Utz partner Mark Paganin.

Not all rulings are as decisive as the Alinta ruling; in some cases, the panel tells the battling parties to go away and resolve their differences by negotiation or allow the market to determine the outcome.

For instance, Melbourne company Anzon Australia made an application claiming that takeover  target Nexus Energy (advised by Clayton Utz partners Will Moncrieff and Meredith Campion) had released misleading information to the market.

The panel declined to commence proceedings, noting that the Nexus information was suitably qualified and that, further, more detailed information was due to be released to the market.

Most takeovers are resolved without resort to the panel.

Mallesons Stephen Jaques partners Nigel Hunt and Stephen Minns played a key role in last year’s Foodland Associated takeover, which was one of the biggest and most complex takeover battles in Australian history.

The final transaction involved a demerger by way of a scheme of arrangement of Foodland’s Australian and New Zealand businesses and the subsequent acquisition, also by scheme of arrangement, of different parts of the business by Metcash Trading and Woolworths.

On the local front, the planned merger of Home Building Society (advised by Clayton Utz’s Mr Paganin) and StateWest Credit Society (advised by Lavan Legal’s Dean Hely) has been more protracted than initially planned after opponents of the deal won an unexpected court victory.