FEDERAL COURT OF AUSTRALIA Talent2 International Limited, in the matter of Talent2 International Limited (No 2) [2012] FCA 926 Citation: Talent2 International Limited, in the matter of Talent2 International Limited (No 2) [2012] FCA 926 Parties: TALENT2 INTERNATIONAL LIMITED (ACN 000 737 744) File number: NSD 933 of 2012 Judge: YATES J Date of judgment: 23 August 2012 Catchwords: CORPORATIONS – scheme of arrangement – second hearing – approval Legislation: Corporations Act 2001 (Cth) Corporations Regulations 2001 (Cth) Cases cited: Prime Infrastructure Holdings Ltd [2010] NSWSC 1337 Re Investorinfo Limited (2006) 24 ACLC 44 Talent2 International Limited, in the matter of Talent2 International Limited [2012] FCA 771 Date of hearing: 23 August 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 18 Counsel for the Plaintiff: Mr I Jackman SC Solicitor for the Plaintiff: Freehills Counsel for Morgan & Banks Investments Pty Ltd and Perbec Pty Ltd: Mr M Oakes SC Solicitor for Morgan & Banks Investments Pty Ltd and Perbec Pty Ltd: Watson Mangioni Lawyers Counsel for Allegis Group Inc: Mr M Oakes SC Solicitor for Allegis Group Inc: DLA Piper Australia IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 933 of 2012 IN THE MATTER OF TALENT2 INTERNATIONAL LIMITED (ACN 000 737 744) BETWEEN: TALENT2 INTERNATIONAL LIMITED (ACN 000 737 744) Plaintiff JUDGE: YATES J DATE OF ORDER: 23 AUGUST 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to paragraph 411(4)(b) and subsection 411(6) of the Corporations Act 2001 (Cth) (Corporations Act): (a) the scheme of arrangement between Talent2 International Limited (Talent2) and certain ordinary shareholders in Talent2 in the form of Annexure A to these orders be approved, subject to the following alteration: deleting the meaning given to the term "Excluded Shareholder" and replacing that meaning with "Morgan & Banks Investments Pty Limited, Perbec Pty Limited and Pergal Pty Limited" (the Scheme); and (b) the scheme of arrangement between Talent2 and the holders of options over shares in Talent2 in the form of Annexure B to these orders be approved, subject to the following alteration: deleting the meaning given to the term "Excluded Shareholder" and replacing that meaning with "Morgan & Banks Investments Pty Limited, Perbec Pty Limited and Pergal Pty Limited" (Option Scheme). 2. Pursuant to subsection 411(12) of the Corporations Act, Talent2 be exempted from compliance with subsection 411(11) of the Corporations Act in relation to the Scheme and the Option Scheme. 3. These orders be entered forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 933 of 2012 IN THE MATTER OF TALENT2 INTERNATIONAL LIMITED (ACN 000 737 744) BETWEEN: TALENT2 INTERNATIONAL LIMITED (ACN 000 737 744) Plaintiff JUDGE: YATES J DATE: 23 AUGUST 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The plaintiff, Talent2 International Limited (Talent2), seeks orders pursuant to s 411(4)(b) and s 411(6) of the Corporations Act 2001 (Cth) (the Act) that a scheme of arrangement between itself and certain of its ordinary shareholders, and a scheme of arrangement between itself and the holders of options over its shares, be approved with certain alterations. 2 On 17 July 2012 I made orders pursuant to s 411(1) and s 1319 of the Act providing for the convening of: (a) a meeting of scheme shareholders for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement, the terms of which were contained in an identified Scheme Booklet (the Scheme Meeting); and (b) separate meetings of scheme optionholders for the purpose of considering and, if thought fit, agreeing to an option scheme of arrangement, the terms of which were also contained in the Scheme Booklet (Option Scheme Meeting 1 and Option Scheme Meeting 2). 3 My reasons for making those orders are to be found in Talent2 International Limited, in the matter of Talent2 International Limited [2012] FCA 771 (my earlier reasons). In these reasons I will adopt, where appropriate, the same terms and expressions used in my earlier reasons. 4 In support of the orders it seeks, Talent2 relies upon the following evidence: (a) The affidavit of David Patteson sworn on 21 August 2012. This affidavit deals with: (i) the conduct of, and the results of voting at, the extraordinary general meeting, the Scheme Meeting, Option Scheme Meeting 1 and Option Scheme Meeting 2, each held on 20 August 2012; (ii) the confirmation by Lonergan Edwards that the results contained in Talent2's preliminary (unaudited) financial statements for the financial year ended 30 June 2012 did not change the views previously expressed by them that the scheme of arrangement is fair and reasonable and in the best interests of Talent2 shareholders in the absence of a superior proposal and that the option scheme of arrangement is fair and reasonable and in the best interests of Talent2 optionholders in the absence of a superior proposal; (iii) the declaration of a conditional fully franked special dividend of $0.09 per Talent2 share on 7 August 2012 (the special dividend); and (iv) the fact that no superior proposal was received by Talent2 prior to the Scheme Meeting, Option Scheme Meeting 1 or Option Scheme Meeting 2. (b) The affidavit of David Squires affirmed on 20 August 2012. This affidavit deals with: (i) the dispatch of the Scheme Booklet and proxy forms to scheme shareholders and scheme optionholders; (ii) the receipt and recording of proxy votes; (iii) the registration of attendees at the Scheme Meeting, Option Scheme Meeting 1 and Option Scheme Meeting 2, respectively; and (iv) the poll procedure and results of voting at the Scheme Meeting, Option Scheme Meeting 1 and Option Scheme Meeting 2, respectively. (c) The affidavit of Andrew Rich affirmed on 21 August 2012. This affidavit deals with: (i) the substantial conformity of the Scheme Booklet dispatched to scheme shareholders and scheme optionholders with the Scheme Booklet approved for distribution by the orders made on 17 July 2012; (ii) the dispatch of the documents referred to in order 1(l) made on 17 July 2012. This evidence included notices under reg 5.6.13 of the Corporations Regulations 2001 (Cth) in the form of Form 530 with respect to the sending of the documents by prepaid post or prepaid airmail to each scheme shareholder and scheme optionholder appearing in the books of Talent2 at their respective addresses as identified by reference to the books of Talent2 as at 11 July 2012; (iii) the publication of the advertisement referred to in order 2 made on 17 July 2012; and (iv) the fact that as at the date of the affidavit, no notice of opposition had been given by any person seeking to be heard at this hearing. (d) The affidavit of Andrew Banks sworn on 20 August 2012. This affidavit deposes to the fact that MBI was the only Excluded Shareholder holding shares in Talent2 at the date of the meetings and MBI did not participate in the scheme meeting. Mr Banks also deposes to the fact that, on the basis that 23 August 2012 will be the Effective Date as defined in the scheme of arrangement, it is proposed that, on that day, MBI will transfer all of its shares in Talent2 to Pergal, following which Pergal will transfer all of its Talent2 shares to Perbec. It is not proposed that MBI will hold any Talent2 shares on the Scheme Record Date, as defined in the scheme of arrangement. (e) The affidavit of Sophie MacKinnell affirmed on 26 July 2012. This affidavit deals with the typesetting of the Scheme Booklet and, in particular, its final version incorporating the amendments identified in Exhibit A, and the printing of the final version of the Scheme Booklet. (f) The affidavit of Aaron Smith affirmed on 20 August 2012. This affidavit deals with the printing of the Scheme Booklet. (g) A written statement from ASIC for the purpose of s 411(17)(b) of the Act: Exhibit D. (h) Certificates as to the satisfaction or waiver of conditions precedent: Exhibit E. (i) Oral evidence concerning registration of the Scheme Booklet by ASIC. 5 I should also record that I have been provided with written submissions on behalf of the plaintiff. These have been marked for identification: MFI 3. Written submissions had earlier been provided on behalf of the plaintiff in relation to the convening of the meetings. They were also marked for identification: MFI 2. 6 I am satisfied on the evidence before me that there has been compliance with the orders made on 17 July 2012 with respect to the dispatch of the Scheme Booklets, proxy forms and envelopes to scheme shareholders and scheme optionholders. The evidence discloses that on 20 July 2012 these documents (the scheme package) were sent to scheme shareholders and scheme optionholders registered as at 11 July 2012 on Talent2's share register and option register, respectively. I note that, thereafter further scheme packages were dispatched on 9 August 2012 (to persons who became shareholders between 12 July 2012 and 6 August 2012) and on 13 August 2012 (to persons who became shareholders between 7 August 2012 and 12 August 2012). On 15 August 2012 an email was sent to persons who became optionholders between 12 July 2012 and 12 August 2012. The email attached an electronic version of the Scheme Booklet and proxy form. There were 10 such optionholders. I note that the Scheme Booklet (standing as the explanatory statement) was registered by ASIC before it was dispatched, as required by s 412(6) of the Act. 7 I am also satisfied on the evidence before me that the meetings were convened and held in accordance with the orders made on 17 July 2012, and that resolutions were passed in favour of the scheme of arrangement and the option scheme of arrangement by the required statutory majorities: see s 411(4)(a)(ii) of the Act. 8 In my earlier reasons I set out in some detail the background to the scheme of arrangement and the option scheme of arrangement, and referred to and discussed various features of them. I will not repeat the details of that discussion. It is appropriate, however, that I draw attention to the following matters in light of the evidence noted above. 9 In my earlier reasons I referred to the fact that cl 4.9 of the SID provided that the IBC may declare a fully franked special dividend. As noted above, on 7 August 2012 the special dividend was declared. This dividend was conditional on the scheme of arrangement becoming effective and Talent2's shareholders approving, by way of special resolution pursuant to s 260B of the Act, financial assistance being given by Talent2 to Perbec by this means. The evidence shows that an extraordinary general meeting was convened and held on 20 August 2012 prior to the holding of the Scheme Meeting, Option Scheme Meeting 1 and Option Scheme Meeting 2. At that meeting a special resolution pursuant to s 260B of the Act was passed approving the financial assistance to be given by Talent2 to Perbec. 10 As noted in my earlier reasons, the effect of declaring and paying the special dividend is that the scheme consideration will be reduced by the per share cash amount of that dividend. However, the scheme shareholders will still be entitled to an aggregate cash amount of $0.78 for each scheme share (consisting of the scheme consideration and the special dividend). 11 At the extraordinary general meeting an ordinary resolution was also passed approving the acquisition by Perbec, Pergal and Allegis of a relevant interest in the Talent2 shares in which MBI had a relevant interest. I refer to [34] of my earlier reasons which explains the need for this resolution. 12 In my earlier reasons I also referred to the fact that, at the time that the Scheme Booklet was to be released, Talent2's financial statements for the year ended 30 June 2012 would not then be available. However, as foreshadowed in my earlier reasons, on 7 August 2012 Talent2 released its preliminary (unaudited) financial statements for that year and, as noted above, Lonergan Edwards confirmed their view that, in the absence of a superior proposal being received, the scheme of arrangement is fair and reasonable and in the best interests of scheme shareholders. They have also confirmed that the option scheme of arrangement is fair and reasonable and in the best interests of scheme optionholders. 13 I am satisfied that the scheme of arrangement and the option scheme of arrangement are fair and reasonable. In arriving at that conclusion I take into account the opinions expressed and confirmed by Lonergan Edwards and note that no superior proposals have been received. I also take into account the fact that: (a) in relation to the Scheme Meeting, 86.69% of the scheme shareholders present and voting (either in person or by proxy) voted in favour of the scheme of arrangement and that 98.09% of the votes cast were in favour of the scheme of arrangement; (b) in relation to Option Scheme Meeting 1, 100% of the "out of the money" optionholders present and voting (either in person or by proxy) voted in favour of the option scheme of arrangement and that, consequently, 100% of the total debts and claims of those scheme optionholders were voted in favour of the option scheme of arrangement; (c) in relation to Option Scheme Meeting 2, 100% of the "in the money" optionholders present and voting (either in person or by proxy) voted in favour of the option scheme of arrangement and that, consequently, 100% of the total debts and claims of those scheme optionholders were voted in favour of the option scheme of arrangement; (d) the independent directors unanimously recommended that the scheme shareholders vote in favour of the scheme of arrangement in the absence of a superior proposal and that each independent director in fact voted in favour of the scheme at the Scheme Meeting in relation to the scheme shares held or controlled by him or her; (e) the independent directors unanimously recommended that scheme optionholders vote in favour of the option scheme of arrangement in the absence of a superior proposal. No independent director held any scheme options; and (f) no notice of appearance has been served by any person seeking to appear in relation to this hearing to oppose approval being granted to either the scheme of arrangement or the option scheme of arrangement. 14 There are three further matters I should mention. The first is that, as noted above, certificates have been tendered in relation to satisfaction of the relevant conditions precedent for the coming into effect of the scheme of arrangement and the option scheme of arrangement (that is, the satisfaction of those conditions precedent that do not concern approval by the Court and the steps required to be taken as a consequence of that approval). 15 The second matter is that, also as noted above, a statement in writing by ASIC (stating that it has no objection to the scheme of arrangement or the option scheme of arrangement) has been produced to the Court, thus removing the prohibition in s 411(17) of the Act. 16 The third matter is that Talent2 seeks an alteration to each scheme whereby the definition of Excluded Shareholder is altered to mean "Morgan & Banks Investments Pty Limited, Perbec Pty Limited and Pergal Pty Limited". In their present form each scheme defines Excluded Shareholder as follows: [A]ny Talent2 Shareholder who is a Joint Bidder Group Member and any Talent2 Shareholder who holds a Talent2 Share on behalf of, or for the benefit of (a) a Joint Bidder Group Member, (b) Andrew Banks, (c) Geoff Morgan or (d) any entity controlled by Andrew Banks and/or Geoff Morgan. 17 The alteration is sought because, at the time and date for determining eligibility to vote at the Scheme Meeting, MBI was the only Excluded Shareholder. It held 32,105,226 Talent2 shares. MBI did not participate in the Scheme Meeting. As noted above, on the basis that 23 August 2012 will be the Effective Date for the purposes of the scheme of arrangement, it is proposed that MBI will transfer all of its Talent2 shares to Pergal, following which Pergal will transfer all of its Talent2 shares to Perbec. It is not proposed that MBI will hold any Talent2 shares on the Scheme Record Date. Thus the alteration is sought to reflect these realities and to identify with greater precision the Excluded Shareholders: see Prime Infrastructure Holdings Ltd [2010] NSWSC 1337 at [4]-[11]; see also Re Investorinfo Limited (2006) 24 ACLC 44 at [7]. 18 For these reasons it is appropriate that the scheme of arrangement and the option scheme of arrangement be approved by the Court in the terms sought by the plaintiff. Orders have been made accordingly. I have also ordered pursuant to s 411(12) that Talent2 be exempted from compliance with s 411(11) of the Act. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates. Associate: Dated: 31 August 2012