Pinnacle 8 Review Panel Upholds Decision in Relation to Pinnacle 5 [18/06/2001] The Takeovers Panel

Monday 18 June 2001

Pinnacle 8 Review Panel Upholds Decision in Relation to Pinnacle 5

Requires more Stringent Undertakings from Pinnacle and Reliable on Shareholder approval Meeting

The Panel advises that a review Panel (Pinnacle 8) has confirmed the decision made by the Pinnacle 5 Panel that the transactions entered into, or proposed, by the board of Pinnacle VRB with Vanteck (VRB) Technology Corp and Int-A-Grid-A-Grid should go to Pinnacle shareholders for approval. In confirming the decision, the Pinnacle 8 Panel has imposed more stringent conditions on the shareholder approval process in the form of undertakings from the bidder and the target. The bidder, Reliable Power Inc had applied for review of the Pinnacle 5 Panel decision. The application was made on 23 May 2001.

The application related to the announcement by Pinnacle on 29 March 2001, that it has granted a licence to Vanteck to market, sell, manufacture and utilise Pinnacle's Vanadium Redox Battery technology within Canada, the United States, Central and South America (the Vanteck Transaction), and a further transaction announced on 11 April 2001, that Pinnacle has granted Int-A-Grid (UK) Ltd similar, sole and exclusive licence for the territories of Europe, Russia and the Middle East (the Int-A-Grid Transaction) ( together the Transactions).

The Pinnacle 8 Panel has required more stringent conditions on the timing, disclosure, content of resolutions, voting restrictions at the meeting. The review Panel also set out requirements for ratification of the transaction if there were, or may have been, any improper purpose on the part of the Pinnacle board in entering into the Transactions. The review Panel made no findings as to the Pinnacle board's purpose.

Following a conference with parties over the weekend, the Pinnacle 8 Panel affirmed the view of the Pinnacle 5 Panel that unacceptable circumstances would exist in relation to the Transactions. The review Panel also agreed with the Pinnacle 5 Panel that if Pinnacle took the Transactions to its shareholders for approval (complying with the additional conditions imposed by the review Panel) it would not be in the public interest to make a declaration or orders in relation to the Transactions.

The Pinnacle 8 Panel agreed that because the Transactions were entered into after the announcement of Reliable's Bid and may trigger a defeating condition in the Bid, they may have the effect of depriving Pinnacle shareholders of access to benefits which they might have received under Reliable's Bid. The Pinnacle 8 Panel confirmed that the Transactions should be subject to approval by Pinnacle's shareholders, and to the additional conditions imposed by the review Panel.

The Pinnacle 8 Panel was concerned at the lapse of time since the original announcements, and since Pinnacle's undertaking to the Pinnacle 5 Panel. To ensure that the Pinnacle shareholders have the opportunity to make their decision on the Transactions as quickly as possible, and in a fair and informed manner, the Panel required Pinnacle to provide a number of undertakings in relation to convening the meeting, and voting at the meeting, and Reliable to provide undertakings relating to its bid.

The review Panel required undertakings from Reliable that it would not seek to withdraw its bid if the Transactions were not approved by Pinnacle shareholders (notwithstanding that Pinnacle has already entered into part of the Transactions). The Pinnacle 8 Panel was concerned to ensure, as far as practicable, that the Pinnacle shareholders have a viable choice between the Transactions and the Reliable bid when they come to make that choice.

The Pinnacle 8 Panel has required (amongst other things) that:

  • the Pinnacle board address directly, in the explanatory statement attached to the notice convening the meeting, Reliable's question as to the proper purpose of the Transactions, and the Pinnacle board seek ratification if there was, or may have been, any improper purpose
  • the notice of meeting compare the value of the Transactions to shareholders with the value offered under Reliable's bid
  • the notice of meeting advise Pinnacle shareholders that a consequence of approving the Transactions may be that the Transactions breach a defeating condition of Reliable's bid
  • no liability accrue to Pinnacle in the event the Transactions are not approved
  • the meeting be convened by 5 July, and held by 3 August 2001

The sitting Panel (the review Panel/the Pinnacle 8 Panel) in this matter Justice Kim Santow (sitting President), Denis Byrne (sitting Deputy President) and Trevor Rowe.

The sitting Panel's reasons will be published on the Panel's website in the near future.

Nigel Morris

Director, Corporations and Securities Panel

Level 47 Nauru House, 80 Collins Street, Melbourne VIC 3000

Ph: +61 3 9655 3501
nigel.morris@takeovers.gov.au