Novus Petroleum Limited 02 – Panel Declines to Commence Proceedings [27/05/2004] The Takeovers Panel

Thursday, 27 May 2004

NOVUS PETROLEUM LIMITED 02: PANEL DECLINES TO COMMENCE PROCEEDINGS

The Panel has considered the application (the Application) by Sunov Petroleum Pty Ltd (Sunov) dated 19 May 2004 alleging that unacceptable circumstances exist in relation to the affairs of Novus Petroleum Limited (Novus). It has decided not to conduct proceedings in relation to the Application.

The Application

Parties

Novus is currently the subject of two competing takeover bids. Medco Energi (Australia) Pty Ltd, a wholly owned subsidiary of PT Medco Energi Internasional Tbk (collectively, Medco) announced a conditional takeover bid for Novus on 22 December 2003. Medco’s bid is currently due to close on 8 June 2004 and, as at the date of the Application, the bid price offered by Medco for each ordinary share in Novus was $1.74.

Sunov subsequently announced a conditional takeover bid for Novus on 19 January 2004. As at the date of the Application, Sunov’s bid was due to close on 3 June 2004 and the bid price offered by Sunov for each ordinary share in Novus was $1.85.

On 22 April 2004, the independent directors of Novus made an announcement to ASX recommending that shareholders accept Sunov’s bid and that Novus had agreed to pay Sunov a break fee up to a maximum of $2.75 million in certain circumstances.

The Alleged Medco Statements

Sunov alleged that press reports attributed statements to Medco or its executives, in and outside Australia, which indicated that Medco would decide whether to increase its bid price by a nominated date (the Alleged Medco Statements), but that Medco had let that date pass without making any announcement regarding an increase.

Sunov further alleged that Medco had not denied or clarified the Alleged Medco Statements which, Sunov claimed, were stated in clear and unambiguous terms and without qualification or reservation. Sunov submitted that the Alleged Medco Statements created an expectation that an increase from Medco was imminent and that they were “last and final statements” thereby attracting the operation of ASIC’s “Truth in Takeovers” policy (Policy Statement 25).

Sunov submitted that the Alleged Medco Statements were last and final statements and therefore had a serious detrimental effect on the market for Novus shares resulting in the market for control of Novus not being efficient, competitive and informed, and in shareholders in Novus not having sufficient information to assess the merits of the bids by Medco and Sunov.

Orders sought by Sunov

Sunov requested that the Panel make final orders that:

(a) Medco prominently and clearly announce its intentions (the Statement of Intentions), by way of issuing a supplementary bidder’s statement or making an announcement to ASX, either that it would increase its bid to a specified price or that its then current price of $1.74 would not be increased; and

(b) Medco not do anything inconsistent with the Statement of Intentions.

Decision

The Alleged Medco Statements were reported by various press and news wire services in March and April 2004 (the Past Statements) and in May 2004 (the Current Statements).

The Current Statements (reported on 12 and 13 May) stated that Medco would decide “next week” (being the week ending Friday 21 May) as to whether or not it would increase its bid for Novus.

Given that the Application was received by the Panel on 19 May, the Panel wrote to the parties stating that it would defer making its decision whether to commence proceedings in relation to the Application until after the close of business on Friday 21 May, on the basis that it wished to consider what action (if any) had been undertaken by Medco in fulfillment of the Current Statements before that time.

Medco submitted to the Panel that, if and to the extent that the Alleged Medco Statements were based on statements made by Medco or its executives, they were not an accurate report of those statements and that, as a consequence, no “last and final statements” had been made by Medco and there was no justification for Medco being required to make the Statement of Intentions. The Panel noted this submission but also noted that Medco did not identify any effort on its part to retract or correct the Alleged Medco Statements.

Further, on 21 May, Medco lodged a supplementary bidder’s statement with ASIC stating that Medco would increase its bid price from $1.74 to $1.90 per Novus share (Medco’s Revised Bid), conditional upon:

(a) Medco successfully completing negotiations to arrange a binding financing package to fund the revised bid;

(b) Novus agreeing to similar break fee arrangements for Medco as it currently has with Sunov in relation to Sunov’s bid for Novus; and

(c) an announcement by the independent directors of Novus recommending Medco’s revised bid to Novus shareholders, in the absence of a superior offer.

Given the extent to which Medco’s announcement on 21 May made unnecessary the declaration and the principal order sought by Sunov, the Panel wrote to the parties inviting Sunov to advise whether it wished to continue with the Application and to provide any supporting reasons, and inviting the other parties to make submissions as to whether the Panel should commence proceedings on the remaining issues (being the alleged past existence of unacceptable circumstances in relation to the Past Statements and the order sought by Sunov that Medco not do anything inconsistent with the Statement of Intentions).

On 24 May, Sunov notified the Panel that it did not wish to continue with the Application. Medco submitted that the Panel should not commence proceedings on the remaining issues.

On 25 May, Medco announced to ASX that it had secured the financing package required to fully fund Medco’s Revised Bid. Also, the independent directors of Novus made an announcement to ASX recommending that shareholders accept Medco’s Revised Bid, withdrawing their recommendation of Sunov’s bid and announcing that a break fee arrangement had been entered into between Novus and Medco. Accordingly, Medco increased its bid price to $1.90 per Novus share and at the same time declared its offer to be unconditional.

The Panel subsequently received confirmation from ASIC that, in the current circumstances, ASIC did not wish to make any application to the Panel in relation to the Past Statements or Medco’s Revised Bid.

Given that after these developments the circumstances described in the Application as being unacceptable were substantially changed so that the Panel considered it was unlikely that it would make a declaration or orders on the Application, the Panel decided not to commence proceedings in relation to the Application, notwithstanding the important issues that Sunov had raised in the Application.

Sunov has since lodged a supplementary bidder’s statement stating that it is currently considering its position regarding the price and terms of its offer and intends to inform the market of its decision shortly.

The sitting Panel is Nerolie Withnall (sitting President), Jennifer Seabrook (deputy President) and Teresa Handicott.

George Durbridge
Director, Takeovers Panel
Level 47, 80 Collins Street
Melbourne, VIC 3000
Ph: +61 3 9655 3553
george.durbridge@takeovers.gov.au