Supreme Court New South Wales Medium Neutral Citation: In the matter of Origin Energy Limited [2023] NSWSC 1246 Hearing dates: 18 October 2023 Date of orders: 18 October 2023 Decision date: 24 October 2023 Jurisdiction: Equity - Corporations List Before: Black J Decision: Order convening scheme meeting and associated orders made. Catchwords: CORPORATIONS – Arrangements and reconstructions – Schemes of arrangement or compromise – Application under s 411 of the Corporations Act 2001 (Cth) for orders convening meeting of members to consider and, if thought fit, to agree to proposed scheme of arrangement – Whether requirements to order scheme meeting are satisfied. Legislation Cited: - Corporations Act 2001 (Cth), ss 260A, 411, 1319 - Supreme Court Corporations Rules 1999 (NSW), rr 3.2, 3.4 Cases Cited: - Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 - F T Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 - Re Abacus Funds Management Ltd (2006) 24 ACLC 211; [2005] NSWSC 1309 - Re Associated Advisory Practices Limited [2013] FCA 761 - Re Australian Leisure and Entertainment Property Management Ltd [2021] NSWSC 1421 - Re Cashcard Australia Ltd (2004) 48 ACSR 738 - Re Centrebet International Ltd [2011] FCA 870 - Re Citadel Group Ltd (2020) 148 ACSR 598; [2020] FCA 1580 - Re CSR Ltd (2010) 183 FCR 358; [2010] FCAFC 34 - Re DWS Ltd [2020] FCA 1590 - Re ELMO Software Pty Ltd [2023] NSWSC 12 - Re Foster's Group Ltd (No 2) [2011] VSC 547 - Re Foundation Healthcare Ltd (2002) 42 ACSR 252; [2002] FCA 742 - Re InvoCare Ltd [2023] NSWSC 1180 - Re Isentia Group Ltd [2021] NSWSC 910 - Re Kidman Resources Ltd [2019] FCA 1226 - Re Kyckr Ltd [2022] NSWSC 1316 - Re Nzuri Copper Ltd (No 4) [2020] WASC 10 - Re Oz Minerals Ltd [2023] FCA 197 - Re Pendal Group Ltd (No 2) [2022] NSWSC 1648 - Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 - Re RXP Services Ltd [2021] FCA 38 - Re SAI Global Ltd [2016] FCA 1312 - Re Sirtex Medical Ltd [2018] FCA 1315 - Re Spark Infrastructure RE Ltd (2021) 156 ACSR 257 - Re Sydney Airport Ltd and Trust Co (Sydney Airport) Ltd as responsible entity for Sydney Airport Trust 1 [2022] NSWSC 25 - Re Tatts Group Ltd [2017] VSC 552 - Re Templeton Global Growth Fund Ltd [2021] NSWSC 1169 - Re Trust Company (Re Services) Ltd as responsible entity of the VitalHarvest Freehold Trust [2021] NSWSC 108 - Re Uniti Group Ltd (2022) 160 ACSR 602; [2022] FCA 671 - Re Villa World Ltd [2019] NSWSC 1207 Category: Principal judgment Parties: Origin Energy Limited (Plaintiff) MidOcean Reef BidCo Pty Ltd (Bidder) Representation: Counsel: J Williams SC (Plaintiff) N Bender SC (Bidder) Solicitors: Herbert Smith Freehills (Plaintiff) Allens (Bidder) File Number(s): 2023/309697 Judgment Nature of application and background 1. By Originating Process filed on 29 September 2023, the Plaintiff, Origin Energy Ltd ("Origin") seeks an order under s 411(1) of the Corporations Act 2001 (Cth) ("Act") to convene a meeting of holders of its ordinary shares (other than Excluded Shareholders as defined) to consider a proposed scheme of arrangement, and ancillary orders under s 1319 of the Act. 2. By way of background, Origin is an Australian public company limited by shares, and its ordinary shares are quoted for trading on the Australian Securities Exchange ("ASX"). Origin is an integrated energy company which provides electricity, gas, liquified petroleum gas, solar, internet and other services, and also owns a 27.5% shareholding in Australian Pacific LNG Pty Ltd ("APLNG") which produces liquified national gas and a 20% interest in Octopus Energy Group Limited ("Octopus Energy"), an energy retail and technology company in the United Kingdom. 3. In August 2022, Origin received a confidential non-binding indicative proposal by Brookfield Asset Management Inc (together with its affiliates and their managed funds) ("Brookfield") and EIG Management Company, LCC ("EIG") to acquire all of Origin's issued shares at a price of $7.95 per share and that proposal was rejected by Origin's board. After further engagement between Origin and the consortium, a scheme implementation deed ("SID") was executed between Origin, MidOcean Reef BidCo Pty Ltd ("Bidder") and Brookfield Renewable Group Australia Pty Ltd, which provided for the Bidder to acquire of all of the issued shares in Origin at a higher price, by way of a scheme of arrangement. On 27 March 2023, Origin announced to the ASX that it had entered into that scheme implementation deed. 4. The proposed scheme provides for the acquisition of all of Origin's ordinary shares by "Bidder, an Australian proprietary company which is a wholly-owned subsidiary of MidOcean Energy, LLC ("MidOcean Energy") which is managed by EIG, a US-headquartered investment firm and institutional investor in the global energy sector. 5. Under the proposed scheme, the Bidder would acquire all of the issued shares in Origin for all-cash consideration of approximately $8.81 per fully paid ordinary share in the capital of Origin comprising three components. The first of those components is AUD scheme consideration of $6.25, less a special dividend of $0.39 if determined and paid by Origin before the scheme is implemented. The second component is USD scheme consideration of US$1.64, which will be converted to AUD by the Bidder shortly before implementation of the scheme and paid in AUD unless the Origin shareholder validly elects to receive USD, with a current Australian dollar implied value of $2.56 based on the USD/AUD exchange rate of 0.64 as at the Last Practicable Date (as that term is defined in the draft scheme booklet). The Australian dollar value of the USD consideration may increase or decrease based on the USD/AUD exchange rate at the time of conversion. The third component is a fully franked special dividend of $0.39, which the Origin board intends to pay subject to certain conditions being met. If the special dividend is not paid, this amount will be paid as part of the AUD consideration. The scheme consideration reflects an adjustment to the AUD consideration to deduct 36.5 cents in ordinary dividends previously paid to Origin shareholders and an addition for a ticking fee of approximately 0.15 cents per day, which accrues on a daily basis from 1 December 2023. 6. Mr Williams, who appeared for Origin in this application, points out that the scheme is part of a broader transaction and, following implementation of the scheme, various shareholdings and assets within the Origin group will be reorganised so that the group is divided into two separate businesses, being the upstream integrated gas business comprising Origin's 27.5% interest in APLNG and associated assets, including exploration assets, hedging arrangements and LNG trading business ("Midocean IG Business"); and the energy markets business comprising electricity generation and energy retailing business and associated assets, including certain development projects, hedging arrangements and Origin's 20% interest in Octopus Energy ("Brookfield EM Business"). Following completion of that internal restructure, the Origin subsidiaries, trusts and assets comprising the Brookfield EM Business will be transferred to a special purpose vehicle, the interests in which will be held by a consortium comprising various Brookfield managed funds and a syndicate of various passive institutional investors to be managed by Brookfield, together with their institutional partners, Buckland Investment Pte Ltd and Davis Investments Pte Ltd ("BGTF Consortium"). The effect of the broader transaction is that, following completion of the internal restructure and sale transaction, the EIG-managed Midocean Energy will own the Midocean IG Business and the Brookfield-managed BGTF Consortium will own the Brookfield EM Business. 7. I made the orders sought by Origin at the conclusion of the hearing on 18 October 2023. These are my reasons for doing so. I have drawn on Mr Williams' helpful submissions in this judgment. Affidavit evidence 1. Origin relies on the affidavit dated 28 September 2023 of its solicitor, Mr Luke Hastings, which exhibits a company extract for Origin obtained from the Australian Securities and Investments Commission ("ASIC") in accordance with the requirements for an application of this kind. 2. Origin also relies on the affidavit dated 17 October 2023 of Ms Kathryn Jordan, who is General Counsel and Executive General Manager, Company Secretariat, Risk and Governance of Origin. In that affidavit, Ms Jordan outlines the scheme consideration, which I have described above, and notes that the amount payable, in AUD, may vary subject to currency fluctuations between the AUD and the USD between the Last Practicable Date (as defined) and the implementation date of the scheme and would be increased by the amount of the ticking fee if implementation is delayed beyond the expected implementation date of 18 December 2023. 3. Ms Jordan notes that the reasons why the Origin board recommends the scheme, subject to there being no superior proposal and the independent expert continuing to conclude that the scheme is in the best interests of Origin shareholders, are set out in a proposed letter from Origin's chair and in section 1 of the scheme booklet. Ms Jordan also addresses the basis on which a break fee is payable in respect of the scheme, which is a little less than 1% of the equity value of Origin, and refers to exclusivity provisions in the SID and the period for which they will operate. Ms Jordan also addresses the manner in which the proposed scheme meeting will be held and refers to the interests of, and consents to act of, the proposed chair and alternate chair of the scheme meeting. Ms Jordan also addresses the process for verification of the scheme booklet, which was in customary form, confirms that the scheme booklet was provided to ASIC and addresses the proposed manner of dispatch of scheme documents to Origin shareholders. 4. Ms Jordan also addresses proposed communications with shareholders, and I was helpfully provided with the proposed script for communications through a shareholder information line and by an outbound call campaign to Origin's 100,000 largest shareholders and proposed email or telephone communications to Origin's largest 100 shareholders. I have reviewed the scripts for those communications which cause no difficulty. Ms Jordan also refers to Origin's intent to undertake a proxy adviser engagement process. Mr Williams foreshadows that the documents used in that engagement will be provided to the Court at the second Court hearing and I have no difficulty with that course. Ms Jordan also notes that, in accordance with the practice that is now ordinarily accepted in this Court in respect of listed companies, Origin will release information concerning the second Court hearing to shareholders by an announcement made to the ASX. 5. Ms Jordan's affidavit exhibits the scheme booklet, and Mr Williams took me through that booklet in the course of his submissions. The scheme booklet commences with a letter from Origin's chair which refers to the background to the scheme and outlines the scheme consideration and the Origin directors' recommendation in respect of the scheme, and refers to the independent expert's opinion that the scheme is fair and reasonable and therefore in the best interests of Origin shareholders in the absence of a superior proposal. That letter also draws attention to the location and time for the scheme meeting. The scheme booklet also summarises reasons to vote in favour of or against the scheme, identifies risks associated with continuing to hold Origin shares and contains a table of "frequently asked questions" and their answers, again in a customary form. 6. The scheme booklet also contains a detailed overview of the scheme, again referring to the components of the scheme consideration and addressing changes in the components of scheme consideration since the original announcement made on 27 March 2023, reflecting the fact that Origin has paid a dividend in that period, and adjustments of the mix of the AUD and USD components of the scheme consideration as contemplated by the original announcement. The scheme booklet helpfully shows the sensitivity of the AUD consideration to movements in the AUD/USD exchange rate, which will be relevant to shareholders who do not make the currency election to receive the USD component of the scheme consideration in USD. The scheme booklet also addresses the proposed special dividend which is a component of the scheme consideration, the process by which a shareholder can make the currency election, and the conditions precedent to the scheme. A condition precedent in respect of Australian Competition & Consumer Commission ("ACCC") approval for the scheme has already been satisfied. 7. The scheme booklet also contains detailed information about Origin and its several business units and provides an overview of the Bidder and of arrangements between the Bidder, Brookfield and the other participants in a wider transaction associated with the scheme. It also provides detailed information concerning the funding of the scheme consideration, by way of equity and debt funding contributed by several participants to that wider transaction and by third party lenders. The scheme booklet also, appropriately, indicates the interests of the managing director and chief executive officer of Origin by way of long term and short term incentives, which will be vested in connection with the scheme, in circumstances that he is making a recommendation in respect of the scheme. 8. The scheme booklet describes the terms of the SID, referring, inter alia, to the exclusivity provisions which continue until April 2024. As I will note below, that is a relatively long exclusivity period, from the date of the commencement of the transaction, but is justifiable here given the complexity of the scheme and the wider transaction, and the regulatory approvals that were required from the ACCC and are still required from other regulatory bodies in respect of the scheme. 9. The scheme booklet also contained an independent expert's report by Grant Samuel & Associates Pty Limited ("Grant Samuel"), as to whether, in the expert's opinion, the scheme is fair and reasonable and in the best interests of Origin shareholders. Grant Samuel notes that a valuation of Origin is challenging and subject to considerable uncertainty, given developments in the Australian and global energy markets, undertakes a valuation based principally on a discounted cashflow basis and concludes that the scheme is fair and reasonable and in the best interests of Origin shareholders in the absence of a superior proposal, for the reasons set out in the report. The Grant Samuel report relies on an independent technical specialist's report prepared by Gaffney, Cline & Associates Pty Ltd, largely directed to the valuation of oil and gas assets including Origin's interest in APLNG. 10. Origin also relies on the affidavit dated 18 October 2023 of Mr Vijay Coati, a partner at Allen's and the solicitor acting for the consortium investors in the scheme and associated transaction, including the Brookfield entities and EIG which will manage the fund(s) that indirectly own the Bidder. Mr Coati refers to the entry into the SID and the transactions which are associated with the scheme and addresses the verification process adopted in respect of bidder information concerning the scheme. He also addresses execution of a deed poll in customary form in favour of persons who own Origin shares at the record date of the scheme. 11. Origin also tendered a letter dated 18 October 2023 from ASIC to Origin which confirmed, in customary form, that ASIC had had an opportunity to review documents relating to the scheme, reserved its position in respect of s 411(17)(b) of the Act in the usual way, and does not propose to appear to make submissions or intervene to oppose the scheme at the first Court hearing. Applicable principles 1. Mr Williams notes that the principles governing an application for orders to convene a meeting of members under s 411(1) are well settled and refers to my recent judgment in Re InvoCare Ltd [2023] NSWSC 1180 ("InvoCare") at [14]ff. He points out that the Court's discretion to make an order under s 411(1) is enlivened if: a compromise or arrangement is proposed between a Part 5.1 body and its members (or any class of them); application for the order is made in a summary way by the body; the procedural requirements of the Supreme Court (Corporations) Rules 1999 (NSW) ("Rules") have been met; the scheme booklet provides proper disclosure to shareholders; 14 days' notice of the hearing of the application has been given to ASIC (or such lesser period as the Court or ASIC permits); and the Court is satisfied that ASIC has had a reasonable opportunity to examine the terms of the proposed compromise or arrangement to which the application relates and a draft explanatory statement relating to the proposed compromise or arrangement and make submissions to the Court in relation to the proposed compromise or arrangement and the draft explanatory booklet. 2. Mr Williams submits and I accept that each of these requirements is met in the present case. ASIC has been given more than 14 days' notice as required under s 411(2) of the Act. Ms Jordan's affidavit establishes that the matters required by rule 3.2(b) of the Rules in respect of the chair and the alternate chair nominated for the proposed scheme meeting have been confirmed. Details of the second Court hearing will be published in an ASX announcement, and this is a proper case for the Court to dispense with the requirement under r 3.4 of the Rules, requiring publication of a notice in the form of Form 6, consistently with Practice Note SC Eq 4 at [26(f)]. I have referred to the independent expert report in respect of the scheme above. As I noted above, Ms Jordan's affidavit summarises the verification procedure undertaken in respect of the "Origin Information" in the scheme booklet and Mr Cugati's affidavit summarises the verification procedure undertaken to verify the "Bidder Information" in the scheme booklet, which were in customary form. 3. Once the preconditions to the exercise of the Court's power under s 411(1) of the Act are satisfied, it remains for the Court, in the exercise of its discretion, to determine whether the power ought to be exercised. It is well-established that the Court "will not ordinarily summon a meeting unless the scheme is of such a nature and cast in such terms that, if it achieves the statutory majority at the creditors' meeting the court would be likely to approve it on the hearing of a petition which is unopposed": F T Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72, approved in Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 504. In Re Foundation Healthcare Ltd (2002) 42 ACSR 252; [2002] FCA 742 at [36] and [44], cited with apparent approval in Re CSR Ltd (2010) 183 FCR 358; [2010] FCAFC 34 at [58], French J observed that: "… [i]t is however important to bear in mind that, by granting leave to convene the meeting, the court does not give its imprimatur to the proposed scheme. If the arrangement is one that seems fit for consideration by the meeting of members or creditors and is a commercial proposition likely to gain the court's approval if passed by the necessary majorities, then leave should be given: Re ACM Gold Ltd (1992) 34 FCR 530; 107 ALR 359; 7 ACSR 231; 10 ACLC 573 (O'Loughlin J). The court is not required to give close consideration to the effects of the scheme upon individual members of the classes of members or creditors affected. So to do would be to "introduce burdensome and to a large extent ineffectual consideration at this interlocutory stage": Re Jax Marine Pty Ltd [1967] 1 NSWR 145 at 148 (Street J)… The court at the stage of ordering a meeting to approve a scheme does not ordinarily go very far into the question of whether the arrangement is one which warrants the approval of the court … That question is to be answered when the scheme returns to the court for final approval. That is not to exclude the possibility that a scheme may appear on its face so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further." 1. At the first Court hearing, the Court is concerned not with whether final approval should be given to the scheme, but whether the scheme is one which is adequately explained to those who have a financial interest in it, and whether there is any obvious flaw in the scheme, such that it would be inappropriate even for it to be submitted for shareholders' consideration, and the question is whether it is reasonable to suppose that sensible business people might consider the arrangement proposed is of benefit to members: Re Abacus Funds Management Ltd (2006) 24 ACLC 211; [2005] NSWSC 1309 at [23]; Re Centrebet International Ltd [2011] FCA 870 at [29]; Re SAI Global Ltd [2016] FCA 1312 at [18]. In Re Associated Advisory Practices Limited [2013] FCA 761 at [22], Farrell J summarised the principles to which I have referred above as follows: "The court will not ordinarily convene a meeting of members to consider a scheme of arrangement unless the court is satisfied that the scheme is of such a nature and cast in such terms that, if it receives the statutory majority at the meeting of members, the court would be likely to approve the scheme on the hearing of an unopposed application: Re Central Pacific Minerals NL [2002] FCA 239 at [8]; Re CSR Ltd (2010) 183 FCR 358 at [12]; Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 504. By granting leave to convene the meeting, the court does not give its imprimatur to the proposed scheme or foreshadow its approval at the second court hearing for the purposes of s 411(4)(b): Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at [36]; Australian Securities Commission v Marlborough Gold Mines Ltd at 504–505. The question for the Court is whether it is reasonable to suppose that sensible business people might consider the arrangement proposed as being beneficial to members: In Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 at 243; Re CSR Ltd at [80]. The court does not need to be satisfied that no better scheme could have been proposed: Re Foundation Healthcare Ltd at [44]. Ultimately, the question is for the members themselves: see FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72." 1. Mr Williams also refers to my judgment in Re Villa World Ltd [2019] NSWSC 1207 at [15]-[19], where I summarised the principles to which I have referred above. 2. Mr Williams points out that this scheme is an all-cash acquisition scheme and he submits and I accept that there is nothing in the terms of the scheme, or in its effect on Origin shareholders, that would warrant the Court declining to permit its consideration by members. Particular issues in respect of the scheme 1. Mr Williams also draws a number of aspects of the scheme to the Court's attention, consistent with the approach contemplated by Barrett J in Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at 603. 2. First, Mr Williams points out that, as I noted above, the scheme consideration comprises both AUD and USD components and the AUD consideration is adjusted to deduct the amount of any special dividend that is paid to Origin shareholders prior to implementation of the scheme. He notes that, as I also noted above, the scheme consideration also reflects an adjustment to the AUD consideration to deduct 36.5 cents in ordinary dividends previously paid to Origin shareholders and an addition for a ticking fee of approximately 0.15 cents per day, which accrues on a daily basis from 1 December 2023. As I noted above, unless an Origin shareholder makes a valid election to receive the USD component in US dollars by requesting and submitting a currency election form, the shareholder will receive the scheme consideration by way of a total cash payment in AUD, with the USD component of the scheme consideration converted to AUD. 3. Mr Williams submits and I accept that these matters give rise to no relevant difference in the treatment of Origin shareholders. He submits that the alternative form of consideration available to each Origin shareholder promotes choice for shareholders, a matter that I noted in respect of a choice of differing mixes of scrip and cash in InvoCare at [3]. He submits and I also accept that the fact that some Origin shareholders may elect to receive the USD component of the scheme consideration in US dollars is not class creating: Re Australian Leisure and Entertainment Property Management Ltd [2021] NSWSC 1421 at [21]. 4. Mr Williams recognises that a consequence of the conversion of the USD component of the scheme consideration into AUD shortly prior to the implementation date is that the amount of the total cash payment in AUD to be made to Origin shareholders (or at least those who do not or cannot make a currency election so as to receive the USD component in USD) will be subject to fluctuations in the AUD/USD exchange rate until the point of conversion, and Origin shareholders will therefore not know with certainty the precise AUD amount of the total cash payment when voting on the scheme. These matters are disclosed in the scheme booklet. 5. Mr Williams refers to Re Templeton Global Growth Fund Ltd [2021] NSWSC 1169 at [19]-[20], where I dealt with a formula providing for a variable consideration under a scheme and observed that: "… variable consideration mechanisms of this character have been accepted in previous schemes involving listed investment companies, although they are not common in schemes generally: Re Scarborough Equities Limited [2009] FCA 24 at [2]; Re Scarborough Equities Limited (No 2) [2009] FCA 484; Re Premium Investors Ltd [2012] FCA 1211 at [3], where Jagot J accepted that the uncertainty in the precise figure for the consideration (as distinct from the formula by which it is determined) can be addressed by disclosure in the explanatory memorandum; Re Murchison Metals Ltd [2014] NSWSC 951. … there is nothing inherently unfair in the consideration being determined based on [the specified formula and] … shareholders will have little difficulty in comprehending the conceptual basis for the determination of both the Scrip Consideration and Cash Consideration …there are other situations in schemes where the precise amount of consideration that members will receive if the scheme proceeds is not known at the date of the scheme meeting, for example, if the scheme company proposes to declare a special dividend between the date of the scheme meeting and the date of implementation of the scheme. I am satisfied that I should follow the approach adopted in the case law to which I have referred, albeit not always with extended reasoning, on the basis that disclosure is sufficient to address this issue. It seems to me that TGG shareholders are properly informed in the explanatory memorandum of the methodology by which the amount they will receive by shares or options in WAM Global under the scheme, or cash under the buy-back is determined, and its relationship with the NTA of TGG and WAM Global as applicable, and as to the range of possible outcomes by the illustrations in the explanatory memorandum. If any issue then arises as to the implementation of that formula, including by any unexpected market developments which particularly affect either TGG or WAM Global, that is properly addressed at the second scheme hearing." 1. Mr Williams submits and I also accept that the uncertainty in the precise AUD figure to be received, depending on the AUD/USD exchange rate, is not a matter which should prevent the Court from ordering the convening of the scheme meeting. I accept that prominent disclosure is made of the potential impact of currency fluctuations on the amount of the total cash payment in the chair's letter and sections 2 and 4 in the scheme booklet (including worked examples in section 4) and it seems to me that Origin shareholders will have no difficulty in understanding that matter. 2. Second, Mr Williams refers to exclusivity provisions and notes that cl 11.1 of the SID imposes customary no shop, no talk and no due diligence obligations and notification and matching rights in favour of the Bidder and Brookfield during the Exclusivity Period (as defined). He notes that the no talk and no due diligence provisions are subject to fiduciary exceptions on market standard terms, under cl 11.2 of the SID. He also refers to my summary of the Court's approach to exclusivity provisions in Re Isentia Group Ltd [2021] NSWSC 910 at [23], as follows: "The Court will wish to be satisfied that any exclusivity period is for no more than a reasonable period which is capable of precise ascertainment; that an exclusivity clause dealing with an unsolicited alternative merger proposal is subject to a fiduciary carve out; and that the provision is clearly disclosed in the explanatory statement to the scheme shareholders: Re Arthur Yates & Co Ltd (2001) 36 ACSR 758; [2001] NSWSC 40 at [9]; Re TPG Telecom Ltd [2020] NSWSC 772 at [22]." 1. Mr Williams points out that the Exclusivity Period is defined in the SID as the period from 27 March 2023, being the date of the SID, until the earlier of the date of termination of the SID; the End Date (defined in the SID as 30 April 2024, or such other date as agreed in writing by the parties); and the date on which the scheme becomes effective. Mr Williams notes that the Exclusivity Period could therefore be as long as 13 months, or, I should add, possibly longer if agreed by the parties. He points out that, in determining whether an exclusivity period is reasonable, the Courts have taken into account the complexities of the transaction and potential delay in obtaining regulatory approvals, particularly where there are lengthy review periods associated with obtaining such approvals; the period required to actually effect the scheme proposal; the operation of the break fee provisions with respect to the exclusivity period; and the level of control the bidder has over the target's actions by operation of the break fee provisions: Re Tatts Group Ltd [2017] VSC 552 ("Tatts Group") at [38]. 2. Mr Williams submits that a maximum Exclusivity Period of 13 months, of which six and a half months now remains, is not unreasonable in the circumstances of this transaction due to the potential for delays in obtaining regulatory approvals, which are outside of Origin's and the acquiring parties' control. He points to the size and significance of the transaction which made it very likely that obtaining competition clearance from the ACCC would be an involved and time-consuming process, and to the time that in fact passed between the execution of the SID and the application for orders convening the scheme meeting, which has been brought after ACCC approval was obtained. Mr Williams also points out that courts have approved schemes with exclusivity periods of 12 months or more, including in Tatts Group at [36] (14 months); Re Sirtex Medical Ltd [2018] FCA 1315 at [37] (12 months); Re Nzuri Copper Ltd (No 4) [2020] WASC 10 at [29] to [30] (initially 9 months, extended to over 13 months due to delays in obtaining Chinese regulatory approval); Re Trust Company (Re Services) Ltd as responsible entity of the VitalHarvest Freehold Trust [2021] NSWSC 108 at [38]-[40] (12 months). I accept that an exclusivity period of this length was reasonable in the circumstances of this transaction, given the need for regulatory approvals which would likely take a significant time to achieve. This matter also gives rise to no reason not to convene the scheme meeting. 3. Third, Mr Williams address the position in respect of equity incentives. He points out that, as set out in section 9.2 of the scheme booklet, Origin operates long-term and short-term incentive plans under which share rights and deferred cash entitlements may be granted to employee participants (including senior management); it also operates an employee share plan under which eligible Origin employees (excluding the Managing Director and Chief Executive Officer who is not eligible) can choose to be eligible for awards under the 'general employee share plan' or 'matching share plan'; and it has a non-executive director share plan under which each non-executive Origin director may be granted share rights through sacrificing a portion of their remuneration. Mr Williams also notes that cl 4.5(a) of the SID requires that Origin must procure that no performance rights, options, warrants or any other securities or rights to receive shares, other than Origin shares, are in existence on the Scheme Record Date (as defined), and that the manner in which Origin intends to satisfy this condition is described in section 9.2(b) of the scheme booklet. 4. Mr Williams submits and I accept that holders of performance rights or similar rights to receive Origin shares who are also Origin shareholders are not in a separate class of members by reason only that they also hold such rights: Re Cashcard Australia Ltd (2004) 48 ACSR 738; Re Foster's Group Ltd (No 2) [2011] VSC 547 at [38]-[43]; Re Kyckr Ltd [2022] NSWSC 1316 ("Kyckr") at [16]; Re Pendal Group Ltd (No 2) [2022] NSWSC 1648 ("Pendal Group") at [22]. 5. Mr Williams also notes that Mr Calabria, who is Origin's Managing Director and Chief Executive Officer, holds Origin Equity Incentives (as that term is defined in the scheme booklet) and "deferred cash", and the manner in which Origin intends to deal with Mr Calabria's Origin Equity Incentives and that deferred cash is described in section 9.1(b) of the scheme booklet. In summary, Origin will lift any restrictions on all of Mr Calabria's equity incentives and they will vest in full, and will waive the deferral period for deferred cash awarded under the short term incentive plan upon the scheme becoming effective. Mr Williams recognises that the balance of the case law indicates that, where a director will receive a substantial benefit in relation to a scheme which other shareholders will not receive, that benefit should be disclosed as a matter for shareholders to take into account when considering that director's recommendation, and a director may make a recommendation provided that disclosure is made: Re Kidman Resources Ltd [2019] FCA 1226 at [115]; Re DWS Ltd [2020] FCA 1590 at [41]-[49]; Kyckr at [18]; Pendal Group at [25]. I accept that proposition and consider that Mr Calabria's interest is sufficiently disclosed in the chair's letter and the scheme booklet. This matter gives rise to no reason not to convene the scheme meeting. 6. Fourth, Mr Williams notes that, under cl 12.2 of the SID, Origin must pay the Bidder a "Reimbursement Fee" of $151,004,098 in certain circumstances ("Break Fee"). He submits and I accept that the circumstances in which the Break Fee is payable under that clause do not depart from common practice, and no Break Fee is payable merely because the resolution submitted to the scheme meeting is not approved by the required majorities. The Break Fee represents just under 1% of the implied equity value of Origin (based on the scheme consideration of $8.81), which accords with the guideline in Takeovers Panel Guidance Note 7: Lock-up devices. This matter also gives rise to no reason not to convene the scheme meeting. 7. Fifth, Mr Williams points out that, if the scheme is approved and implemented, Origin shareholders will receive the scheme consideration of approximately $8.81 cash for each share held, less the cash amount of the special dividend of $0.39 if determined and paid by Origin prior to implementation of the scheme. He notes that the Origin board intends to pay a fully-franked special dividend of $0.39 per Origin share, subject to certain conditions being met including the availability of franking credits, Origin having sufficient cash available and Origin receiving a draft class ruling from the Australian Taxation Office (in a form acceptable to Origin) as described in section 4.3 of the scheme booklet. I accept that an amount can be paid by special dividend in connection with a scheme, and the scheme consideration adjusted accordingly, and that does not amount to financial assistance for the purpose of s 260A of the Act: Re Citadel Group Ltd (2020) 148 ACSR 598; [2020] FCA 1580 at [47]-[53]; Re RXP Services Ltd [2021] FCA 38 at [49]-[57]; Re Uniti Group Ltd (2022) 160 ACSR 602; [2022] FCA 671 at [50]-[61]; Re Oz Minerals Ltd [2023] FCA 197 at [18]; InvoCare at [18]. 8. Sixth, Mr Williams notes that cl 4.2(a) of the scheme of arrangement adopts the conventional mechanism of making the transfer of Origin shares to the Bidder conditional on the payment of the total scheme consideration into a trust account maintained by Origin or its nominee on trust for Origin shareholders, and Origin shareholders are thereby protected against the risk that their Origin shares are transferred without receiving the scheme consideration, and the Bidder has also accepted the obligations under a deed poll, which is also a well-established means of managing performance risk: Re ELMO Software Pty Ltd [2023] NSWSC 12 at [27]-[28]. 9. The case law has recognised the issues that may arise where a party to the deed poll is a special purpose vehicle which does not have capacity to perform its obligations under that deed poll without financial support from a holding company or consortium members and where that third party funding is presently conditional: Re Spark Infrastructure RE Ltd (2021) 156 ACSR 257 at [31]-[32]; Re Sydney Airport Ltd and Trust Co (Sydney Airport) Ltd as responsible entity for Sydney Airport Trust 1 [2022] NSWSC 25. Recently commenced practice notes of this Court (Practice Note SC Eq 4 at [28(b)]), other state Courts and the Federal Court of Australia, which reflect the Practice Note – Harmonisation in schemes of arrangement as developed by the Committee for the Harmonisation of Rules of the Council of Chief Justices of Australia and New Zealand, have also noted that: "[w]here a special purpose vehicle with minimal assets is to acquire securities of substantial value under a scheme, a risk of a scheme not completing is likely to be material to securityholders, irrespective of the fact that their securities are not transferred to that special purpose vehicle until the consideration is paid. Disclosure of such a risk is also important to maintaining a fully informed market. Evidence should be led at the first Court hearing of the availability of the funding or other financial support on which the special purpose vehicle will rely to complete the scheme." 1. Mr Williams recognises that the Bidder is here a special purpose vehicle and points out that it has the benefit of binding equity and debt commitments to fund the scheme consideration, as described in sections 6.3(c) and 6.5(b) of the scheme booklet. The maximum amount of the scheme consideration is, unsurprisingly, very large, being $11,391,211,919 (plus ticking fee) and USD$2,836,766,740. Mr Williams points out that the Bidder has available to it equity and debt commitments in excess of these amounts, including a loan note from a Brookfield entity which is in turn backed by funding commitment letters and a debt commitment letter from a syndicate of banks; the equity commitments are subject only to the scheme becoming effective and are otherwise unconditional; and the debt commitments sourced from debt facilities are subject only to customary conditions precedent for syndicated debt facilities. Mr Williams also refers to a debt funding commitment under the CoP Funding Note (as defined in the scheme booklet) and notes that the availability of that funding is subject to mechanical requirements for drawing it, the correctness of certain standard representations in relation to the Bidder and the SID, and the non-occurrence of standard events of default or certain events giving rise to a right to terminate the SID. It would have been preferable if more direct evidence had been given of these funding commitments. However, these matters also do not give rise to any reason not to convene the scheme meeting, in the circumstances of this transaction. 2. Seventh, Mr Williams notes that details of the proposed despatch of scheme materials are set out in Ms Jordan's affidavit and I am satisfied that they give rise to no difficulty. 3. Eighth, Mr Williams also addresses proposed communications between Origin and its shareholders, also described in Ms Jordan's affidavit and (with one exception) exhibited to that affidavit in draft form. I noted the relevant case law in Invocare at [25], and I observed (at [26]) that: "[w]hile I am inclined to think that a scheme company's intended communications with securityholders should be disclosed at the first Court hearing, I would prefer to characterise that as an expectation of the Court rather than a requirement. It may be that little turns on the difference between the two, since it is not easy to see why scheme companies or their advisers would prefer to leave securityholder communications to be reviewed only at a second Court hearing and risk the prospect of failure of a scheme at that hearing if those communications have undermined the integrity of the securityholder vote, rather than making those communications available for review at the first Court hearing while there is still time to correct any difficulty with them." 1. The harmonised practice notes (relevantly, Practice Note SC Eq 4 at [26(k)]) also observe that: "[t]he Court expects that the Court's approval should be sought for a supplementary explanatory statement to be sent to securityholders in a scheme. The Court also expects that the nature of the scheme proponent's intended communications with securityholders should be disclosed at the first Court hearing. Parties may also wish to continue the existing practice of drawing the Court's attention to material communications to securityholders after the first Court hearing, at least by a communication to the chambers of the judge hearing the application, to reduce the risk of difficulties arising at the second Court hearing." 1. Origin's proposed shareholder communications include a "reminder to vote email" to shareholders; an inbound shareholder information line operated by Morrow Sodali, the script for which was put before the Court; an outbound call campaign conducted by Morrow Sodali, in which it is proposed that Morrow Sodali will undertake phone calls to the largest 100,000 Origin shareholders, the script for which was also put before the Court; communications by email or calls by Morrow Sodali with Origin's top 100 shareholders, where a proforma template of the proposed email was also put before the Court. Origin proposes that Morrow Sodali will facilitate a proxy adviser engagement process using a "Governance Briefing" slide deck which will not travel beyond the information in the scheme booklet and will put those documents before the Court at the second Court hearing. No orders are sought approving the form of such documents, consistent with the approach which I accepted in InvoCare at [26]. Orders 1. For these reasons, I was satisfied that I should convene the scheme meeting and make the associated orders and I made orders, on the day of the hearing, in accordance with the short minutes of order initialled by me and placed in the file. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 October 2023