Panel Decision in Online Advantage Limited [10/09/2002] The Takeovers Panel

10 September 2002

PANEL DECISION IN ONLINE ADVANTAGE LIMITED

The Takeovers Panel today advises its decision in relation to applications made by McWilliam Nominees Pty Ltd and ASIC in relation to the affairs of Online Advantage Limited.

On 4 July 2002, McWilliam Nominees lodged an application for a declaration of unacceptable circumstances under Section 657A of the Corporations Act 2001 in relation to the alleged acquisition by certain persons specified in the application of approximately 100 million shares in Online Advantage on or around 3 June 2002 ("3 June Crossing").

On 1 August 2002, ASIC made an application in relation to Online Advantage also seeking a declaration of unacceptable circumstances in relation to the same events as the original application by McWilliam Nominees.

The Panel has received submissions from all interested parties in relation to the matter and has conducted conferences with all those parties it considered relevant to the proceedings. It has further conducted its own investigation in respect of all relevant documentation relating to the matter.

After due consideration of all of the matters surrounding the 3 June Crossing, the Panel has accepted undertakings from Online Advantage, Euroz Securities and Shaw Stockbroking. Under the undertakings, Online Advantage will make an offer of a selective buy-back of shares at 3.1c per share to those shareholders who acquired their shares in Online Advantage prior to 3 June 2002, and who remain shareholders of Online Advantage at the time that buy-back offers are made and accepted ("Relevant Shareholders"). Online Advantage will conduct the buy-back in accordance with the relevant provisions of Part 2J.1 of the Corporations Act and will, if required, seek shareholder approval for the buyback at the next annual general meeting of Online Advantage (which will be held on or before 30 November 2002).

The appointments of all directors of Online Advantage will expire at that AGM.

Online Advantage has provided an undertaking to the Panel to disclose in the share buy-back offers and in the notice of meeting to be sent to shareholders all benefits given, or which have been agreed to be given, by Online Advantage to related parties of the company and entities which are related to, or otherwise connected with, any director of the company.

In this regard, the Panel notes that Online Advantage and Churchill Capital Pty Ltd (an entity associated with Karl Paganin and Patrick O'Connor, two of the directors of Online Advantage) have entered into an agreement pursuant to which Churchill will provide all management and other services to Online Advantage. On that basis, Online Advantage and the Panel have agreed that it would be appropriate to provide shareholders of Online Advantage with information on those arrangements. Therefore, Online Advantage and Churchill have agreed that Online Advantage will set out, in the share buy-back offers and in the notice of meeting for the AGM, details of payments to, and contracts with, Churchill and related entities and to its or their employees.

Online Advantage has undertaken to provide similar information for each director who stands for election, and advice of the top 20 shareholders in Online Advantage and the relationships and connections which shareholders would reasonably expect to know in assessing the ownership of the company.

If the necessary consent or approval for the buy-back is not obtained, Shaw Stockbroking and Euroz Securities have agreed to underwrite the sale of the shares by the Relevant Shareholders who otherwise wish to accept the buy-back offer. Shaw Stockbroking and Euroz Securities advise the Panel that they believe that their agreement to underwrite this sale is a reasonable commercial resolution of the matter, but have stressed that this in no way implies any wrongdoing on their part.

The Panel is of the view that the undertaking it has received from Online Advantage, Shaw Stockbroking and Euroz Securities adequately address the Panel's concerns in relation to the 3 June Crossing. They provide an arrangement whereby the Relevant Shareholders who no longer wish to be shareholders of Online Advantage have a reasonable and equal opportunity to dispose of their shareholding. That opportunity will be at the same price as offered to the shareholders who sold their shares in the 3 June Crossings and a further crossing of 19.9% of the shares in Online Advantage which occurred on 16 July 2002.

As a result of the above arrangement, the Panel has declined to make a declaration of unacceptable circumstances and has terminated the interim orders.

The Sitting Panel for this application was constituted by Braddon Jolley (sitting President), Brett Heading and Chris Photakis.

Nigel Morris
Director,
Takeovers Panel
Level 47 Nauru House
80 Collins Street
MELBOURNE VIC 3000
+61 3 9655 3501
nigel.morris@takeovers.gov.au