Third Application in Relation to Colonial First State Property Funds [11/10/2002] The Takeovers Panel

11 October 2002

THIRD APPLICATION IN RELATION TO
COLONIAL FIRST STATE PROPERTY FUNDS

Third Application Resolved

The Panel advises that the circumstances surrounding the third application in relation to the four Colonial First State Property funds (Colonial Funds) have now been resolved. Consequently, the Panel has decided not to make any declaration of unacceptable circumstances in this matter, Colonial 03.

The application from the Responsible Entity for the Colonial Funds sought orders to restrain Mirvac Funds Ltd (Mirvac) from acquiring units in the Colonial Funds or processing acceptances under its takeover bid unless and until certain amendments were made to the Mirvac Property Trust constitution. The Colonial Responsible Entity asserted that, under the constitution of the Mirvac Property Trust, Mirvac was unable to issue the stapled securities, or the options, offered under its bid. The Colonial Responsible Entity made its application on Tuesday 24 September, 2002.

The following events have occurred since the application was made:

(a) on 30 September 2002, unitholders in the Colonial Funds, the Commonwealth Property Office Funds and Gandel Retail Trust voted in favour of a proposal to merge the Colonial Funds with the Commonwealth and Gandel funds;

(b) on 2 October 2002, responding to a referral of a question of law from the Panel, the Federal Court held that Mirvac's bid could not be accepted in its current form and that the Mirvac Property Trust constitution would need to be amended in order for Mirvac to be able to issue options offered as consideration under the bid and for the bid to proceed. (The Court said, on the basis of a particular set of facts put forward to it, that Mirvac had the power to make that amendment if it considered that it would not adversely affect the rights of the Mirvac Fund unitholders); and

(c) on 3 October Mirvac withdrew its bid, with the consent of ASIC, citing the events in paragraphs (a) & (b) above as the reason for the withdrawal.

The Panel is grateful to the Federal Court for resolving the question of law in such a timely manner. As a result of the above events there are no longer any material issues in the proceedings that need to be resolved by the Panel, and accordingly the Panel has decided not to make any declaration of unacceptable circumstances in relation to this application.

When Unacceptable Circumstances May Occur

The Panel notes that it would constitute unacceptable circumstances for a bidder to proceed publicly with a bid when it did not have constitutional power to issue the consideration offered. In this matter, Mirvac's advice to the Panel was that it had received Senior Counsel's advice, before commencing its bid, that the Mirvac Property Trust constitution did support the issue of the consideration offered.

Media release in relation to the Court's Findings

The Panel is concerned at Mirvac's media release on 2 October which did not mention the defects in Mirvac's bid, in the form that the bid was made, that were clearly stated in the Court's findings. The Panel considers that the media release was misleading in that it did not advise that the court had found that the offers as formulated were incapable of acceptance. This is the more so where Mirvac used those deficiencies in its application to ASIC for ASIC's consent for Mirvac to withdraw its takeover offers.

Release of misleading statements in relation to ongoing Panel matters is a continuing concern and the Panel is considering whether further guidance is required in this area, beyond the Panel's views set out in its Rules for Proceedings which are available on the Panel's website. The Panel is also concerned at the use by Mirvac (and others previously) of triumphalist terms such as "vindicated" in relation to continuing Panel matters. Parties are unlikely to assist the timely and cooperative resolution of matters before the Panel by using inflammatory terms in public statements.

The Panel's reasons for its decision in this matter, Colonial 03, will be posted on the Panel's website when they have been settled.

The Panel was constituted by Jennifer Seabrook (sitting President), Karen Wood (sitting Deputy President) and Teresa Handicott.

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