Federal Court of Australia United Malt Group Limited, in the matter of United Malt Group Limited (No 2) [2023] FCA 1236 File number: NSD 787 of 2023 Judgment of: YATES J Date of judgment: 16 October 2023 Date of publication of reasons: 17 October 2023 Catchwords: CORPORATIONS – scheme of arrangement – second court hearing – application for order under s 411(4)(b) of the Corporations Act 2001 (Cth) for approval of scheme – scheme approved Legislation: Corporations Act 2001 (Cth) ss 411, 412 Cases cited: United Malt Group Limited, in the matter of United Malt Group Limited [2023] FCA 1071 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 16 Date of hearing: 16 October 2023 Counsel for the Plaintiff: Mr J Williams SC and Ms B Ng Solicitor for the Plaintiff: Gilbert + Tobin Counsel for Malteries Soufflet SAS: Ms T Wong SC Solicitor for Malteries Soufflet SAS: Allens ORDERS NSD 787 of 2023 IN THE MATTER OF UNITED MALT GROUP LIMITED BETWEEN: UNITED MALT GROUP LIMITED (ACN 140 174 189) Plaintiff order made by: YATES J DATE OF ORDER: 16 OCTOBER 2023 THE COURT ORDERS THAT: 1. Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (the Act), the Scheme of Arrangement between UMG and UMG Shareholders who are Scheme Shareholders (as defined in the Scheme Booklet, a copy of which is Exhibit 1 in this proceeding) agreed to by UMG Shareholders at the Scheme Meeting held on 12 October 2023 (Scheme) be and is hereby approved. 2. Pursuant to s 411(12) of the Act, UMG be exempted from compliance with s 411(11) of the Act in respect of the Scheme. 3. Pursuant to r 39.34 of the Federal Court Rules 2011 (Cth), these orders be entered forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT Ex tempore; revised from transcript YATES J: 1 On 7 September 2023, the Court made orders requiring the plaintiff to convene and hold a meeting of the UMG Shareholders to consider and, if thought fit, to approve (with or without modification) the Scheme of Arrangement: United Malt Group Limited, in the matter of United Malt Group Limited [2023] FCA 1071 (Reasons 1). In these reasons, I use the same abbreviations as in Reasons 1. 2 The Scheme Meeting has been held and the UMG Shareholders have agreed to the Scheme. The plaintiff now seeks an order pursuant to s 411(4)(b) of the Act that the Scheme be approved. I am prepared to make that order, as well as an order pursuant to s 411(12) of the Act relieving the plaintiff of the requirement to annex a copy of the approval order to its Constitution: see s 411(11) of the Act. 3 On the evidence before me, I am satisfied that: (a) on 7 September 2023, prior to its dispatch to the UMG Shareholders, the Scheme Booklet (which stands as the explanatory statement required by s 412(1)(a) of the Act) was registered by ASIC, in fulfilment of the requirement of s 412(6) of the Act; (b) on 11 September 2023, the Scheme Booklet was dispatched to each member as ordered in Orders 3 and 4 made on 7 September 2023; (c) the Scheme Meeting was convened and held on 12 October 2023 in accordance with the orders made on 7 September 2023; (d) at the Scheme Meeting, the resolution seeking the approval of the UMG Shareholders to the Scheme (the Scheme Resolution) was passed by the requisite majorities specified in s 411(4)(a)(ii) of the Act; and (e) the present hearing (the second court hearing) was advertised in accordance with Order 16 made on 7 September 2023. 4 As to dispatch of the Scheme Booklet, 322 "bounce back" notifications were received by Link Market Services Limited (Link) from Email Recipients, indicating that the email notification sent to those recipients in accordance with Order 3(a) made on 7 September 2023 had not been delivered. The evidence is that, in respect of these recipients, the relevant documents were then dispatched in accordance with Order 4 made on 7 September 2023. Further, Link received three requests from UMG Shareholders for a copy of the Scheme Booklet. These requests were complied with within 24 hours of being received. 5 On 12 September 2023, Link noted that 14 new UMG Shareholders had come onto the plaintiff's share register. The shareholders were treated as Non-Electing Postal Recipients with registered addresses in Australia. The relevant documents were dispatched to these shareholders in the manner referred to in Order 3(c) made on 7 September 2023. 6 As to shareholder agreement, the evidence is that at the Scheme Meeting: (a) 1,031 UMG Shareholders were present and, of these, 1,019 shareholders voted; (b) 88.42% of the UMG Shareholders present and voting at the Scheme Meeting voted in favour of the Scheme Resolution; and (c) 99.24% of the total number of votes cast at the meeting were cast in favour of the Scheme Resolution. 7 As to voter turnout, the evidence is that the voting participation rate at the Scheme Meeting was broadly in line with the voting participation rates at the plaintiff's Annual General Meetings in 2021, 2022, and 2023. 8 As to the Scheme Consideration, no Permitted Dividend has been declared or paid. Therefore, the Scheme Consideration will be $5.00 per Scheme Share. 9 In Reasons 1, I referred to the fact that the plaintiff operates employee incentive plans under which short-term incentives and long-term incentives are offered. I noted that the Scheme Implementation Deed requires that, as a condition precedent to the Scheme, the plaintiff take steps to ensure that all performance rights vest, lapse, or are cancelled, so that no such rights exist at the Record Date. 10 Following dispatch of the Scheme Booklet, the plaintiff received taxation advice that US-based employee holders of the performance rights that are to vest before the Record Date (approximately 96% of the performance rights) will incur an upfront US tax liability on the vesting date. In order to satisfy those liabilities, the plaintiff will make a withholding tax payment in respect of 851,254 performance rights of the 1,100,271 performance rights on issue. In respect of these performance rights: (a) 577,177 will be settled by the issue of 577,177 new UMG Shares before the Record Date; and (b) 274,077 will be cash-settled for an aggregate cash amount of $1,370,387 (representing an amount equal to $5.00 per performance right), which will be retained by the plaintiff to satisfy the withholding tax payments. 11 This mechanism was not disclosed in the Scheme Booklet. I am satisfied, however, that the economic outcome for those US-based holders of performance rights affected by the withholding tax liability is the same as the economic outcome described in the Scheme Booklet, given that the vested performance rights that are to be cash-settled will be cash-settled for $5.00 per performance right, which is an amount equal to the Scheme Consideration. 12 The Scheme Implementation Deed and the Scheme provide for a number of conditions precedent. The plaintiff and Malteries have entered into a Conditions Precedent Deed which stands as the certificates required to be given by each of them pursuant to clause 3.8(a) of the Scheme Implementation Deed and clause 2.2(a) of the Scheme. The plaintiff and Malteries agree that the conditions precedent relevant to the Court's approval of the Scheme have been satisfied or, to the extent not satisfied, waived. 13 ASIC has not appeared at the present hearing. However, the evidence includes a letter dated 16 October 2023 from ASIC that advises that, under s 411(17)(b) of the Act, it has no objection to the Scheme. 14 No person has come forward to oppose the Scheme being approved by the Court. No matter has been brought to the Court's attention that would stand as a reason for not approving the Scheme. 15 Taking into account: (a) the provisional view I expressed as to the likelihood of the Scheme being approved on an unopposed application: see Reasons 1 at [33]; (b) the recommendation of the directors; (c) the continuing opinion of the independent expert; (d) the substantial support of UMG Shareholders for the Scheme, expressed through the voting at the Scheme Meeting; (e) the fact that all conditions precedent relevant to the Court's approval have been satisfied or waived; (f) the lack of any opposition to the Scheme; and (g) the plaintiff's compliance with the Court's orders made on 7 September 2023, I am satisfied that the Scheme should be approved by the Court. 16 Orders will be made accordingly. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates. Associate: Dated: 17 October 2023