Policy: Minimum Price Requirement s621(3) & (4) [28/03/2000] The Takeovers Panel

28 March 2000

Policy: Minimum Price Requirement ' s621(3) & (4)

The Corporations and Securities Panel (the Takeovers Panel) today released a policy about the minimum price requirement of the Corporations Law (s.621(3)) and some aspects of valuing listed securities offered as consideration under takeover bids. Under the minimum price requirement, a bidder must offer the same value, in cash or securities, as the highest price the bidder or an associate paid for bid class securities, in the four months before the bid.

The release draws attention to several matters which, taken together, should alleviate some concerns about the requirement that scrip offered as consideration must be valued when the bidder commences posting offers. There has been concern that a bidder may have to increase the number of securities it offers, if the market price of its scrip falls between the time it announces its bid and when it posts its offers.

In addition, the section does not make any express allowance for changes in the market price during the time a bidder needs to finalise, print and post its offer documents. Under policy announced by ASIC on 7 March 2000, a bidder can use market prices from just before it needs to print its offer documents to value its scrip. ASIC's initial estimate is that bidders will need two days to print their statements.

The Panel's President, Mr Simon McKeon, said that the Panel supports ASIC's policy of allowing bidders time needed to print bidders' statements. However, Panel members consider that ASIC's initial estimate of the time bidders will need to print their statements may be too short, given that bidders' statements for scrip bids must contain prospectus-type information. A period of up to five days may be appropriate.

Mr McKeon said that the Panel's policy supplements ASIC's policy and is intended to assist the market to adjust to the new section and to give practical effect to the section. He said that the Panel had consulted with ASIC on its policy and that ASIC and the Panel are both consulting with the market and will use market feedback to develop policy and advise the Government on the operation of the section.

The policy also points out that, while a bidder should use market prices to value quoted scrip, the section does not require a bidder to treat an isolated price point as representing the value of its scrip. The section allows the use of more appropriate valuation techniques, such as taking the weighted average market price over a short period.

The Panel will monitor the operation of the minimum price requirement. If bidders have difficulties in complying with the section, because they do not know how much scrip they must offer, until they post their offers, the Panel will consider recommending that the Government amend the section.

The Panel also invites comments whether it should make a rule to clarify the operation of subsections 621(3) and (4), particularly as regards the use and adjustment of market prices in valuing scrip.

A copy of the policy is available at the Panel's web site http://www.takeovers.gov.au

For further information, contact:

Nigel Morris
Director
Level 47, Nauru House
80 Collins Street
Melbourne
Tel: (03) 9280 3299

George Durbridge
Counsel
Level 47, Nauru House
80 Collins Street
Melbourne
Tel: (03) 9280 3390

Simon McKeon
President
Level 23, 101 Collins Street
Melbourne
Tel: (03) 9635 8100
0417 249102

CSP: 00/05