Supreme Court New South Wales Medium Neutral Citation: In the matter of Adbri Limited (No 2) [2024] NSWSC 750 Hearing dates: 14 June 2024 Date of orders: 14 June 2024 Decision date: 20 June 2024 Jurisdiction: Equity - Corporations List Before: Black J Decision: Orders made approving a scheme of arrangement. Catchwords: CORPORATIONS – Arrangements and reconstructions – Schemes of arrangement or compromise – Application under s 411 of the Corporations Act 2001 (Cth) for orders approving scheme of arrangement – Where formal requirements satisfied – Whether scheme of arrangement should be approved. Legislation Cited: - Corporations Act 2001 (Cth) s 411 Cases Cited: - Re Adbri Ltd [2024] NSWSC 546 - Re Anaconda Nickel Holdings Pty Ltd (2003) 44 ACSR 229; [2003] WASC 19 - Re Central Pacific Minerals NL [2002] FCA 239 - Re GBST Holdings Ltd [2019] NSWSC 1503 - Re InvoCare Ltd (No 2) [2023] NSWSC 1350 - Re Permanent Trustee Co Ltd (2002) 43 ACSR 601; [2002] NSWSC 1177 - Re Seven Network (No 3) (2010) 267 ALR 583; [2010] FCA 400 - Re Signature Capital Investments Ltd (No 2) [2016] FCA 385 - Re Silver Lake Resources Ltd (No 2) [2024] NSWSC 737 - Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 Category: Principal judgment Parties: Adbri Limited (Plaintiff) Representation: Counsel: J Williams SC (Plaintiff) J Hutton SC (Bidder) Solicitors: Herbert Smith Freehills (Plaintiff) Gilbert & Tobin (Bidder) File Number(s): 2024/140992 Judgment . Nature of the application and background 1. By Originating Process filed on 16 April 2024, the Plaintiff, Adbri Ltd ("Adbri"), sought orders under s 411 of the Corporations Act 2001 (Cth) ("Act") convening a meeting of its shareholders to consider a proposed scheme of arrangement between Adbri and the holders of its ordinary shares other than Barro Group Pty Ltd and its associates ("Barro Group") ("Independent Adbri Shareholders") and ancillary orders. By way of background, Adbri is an Australian public company limited by shares and is listed on the Australian Securities Exchange ("ASX") and is a building products and construction materials group and produces and distributes cementitious materials, lime, aggregates, masonry products and industrial minerals. The proposed scheme provides for CRH ANZ Pty Ltd ("Bidder"), which is a subsidiary of CRH plc ("CRH"), and individuals and entities associated with the Barro Group (as defined in the scheme booklet), to acquire all of the issued shares in Adbri held by Independent Adbri Shareholders for all cash consideration of $3.20 per fully paid ordinary share in the capital of Adbri. Following implementation of the scheme, all of the issued shares in Adbri will be held by the Bidder (as to 57.4%) and the Barro Group (as to 42.7% approximately) and it is proposed that Adbri would delist from the official list of ASX. 2. I made the orders sought by Adbri at the conclusion of the first Court hearing on 3 May 2024 for the reasons set out in my judgment in Re Adbri Ltd [2024] NSWSC 546. The proposed scheme of arrangement was then approved at the scheme meeting by both a majority in number of Independent Adbri Shareholders present, and more than 75% of the votes cast. Approximately 97.54% of shares by value, and approximately 82.73% of Independent Adbri Shareholders by number present and voting at the scheme meeting, voted in favour of the scheme. 3. At this second Court hearing, Adbri now seeks orders approving the scheme. I made those orders at the conclusion of the second Court hearing on 14 June 2024. These are my reasons for making those orders, and I have drawn on the helpful submissions of Mr Williams, who appears for Adbri, in this judgment. Affidavit and other evidence 1. Adbri reads the affidavit dated 12 June 2024 of Mr Jared Gashel which deals with the registration of the scheme booklet with the Australian Securities & Investments Commission ("ASIC"); the dispatch of scheme documents to Independent Adbri Shareholders; subsequent communications by Adbri to Independent Adbri Shareholders; the holding of the scheme meeting, the passing of the scheme resolution and the voting participation rate at that meeting; the publication of an announcement to ASX giving notice of the second Court hearing; the receipt of a letter from ASIC confirming that it has no objection to the scheme, for the purposes of s 411(17) of the Act; and a condition precedent certificate, evidencing satisfaction of the conditions precedent to the scheme. Applicable principles, submissions and determination 1. The Court must be satisfied of several matters in order to approve a scheme of arrangement at the second Court hearing, namely that the plaintiff has complied with the orders of the Court convening the meeting of members; the meeting of members so convened has approved the scheme with the requisite majorities; all other statutory requirements have been satisfied; the scheme is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it; the plaintiff has brought to the attention of the court all matters that could be considered relevant to the exercise of the court's discretion; and there was full and fair disclosure to members of all information material to the decision whether to vote for or against the applicable scheme: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601; [2002] NSWSC 1177 at [8]-[10]; Re Central Pacific Minerals NL [2002] FCA 239 at [8]-[14]; Re Seven Network (No 3) (2010) 267 ALR 583; [2010] FCA 400 at [35]-[39]; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 at [18]-[24]; Re Signature Capital Investments Ltd (No 2) [2016] FCA 385 at [4]. 2. Mr Williams also refers to my summary of the applicable principles in Re InvoCare Ltd (No 2) [2023] NSWSC 1350 at [8]-[9] as follows: "The matters of which the Court must be satisfied in approving the scheme at the second Court hearing are whether there was compliance with the orders of the Court convening the scheme meeting or meetings; whether the resolution to approve the scheme was passed by the requisite majority and whether other statutory requirements have been satisfied; and whether all conditions to which the scheme is subject (other than Court approval and lodgement of the Court's orders with ASIC) have been met or waived: Re ELMO Software Ltd (No 2) [2023] NSWSC 81 ("ELMO") at [7]. The Court also has, in exercising its power of approval, a residual discretion whether to approve a scheme and is not bound to approve it merely because it has made orders for the convening of meetings or because the statutory majorities have been achieved: Re Seven Network Ltd (No 3) (2010) 267 ALR 583 ("Seven Network") at [31]; Re Staging Connections Group Ltd (No 2) [2015] FCA 1102 at [12]. In exercising that residual discretion, the (non-exhaustive) matters the Court will take into account include whether the scheme is fair and reasonable so that an intelligent and honest member of the relevant class, properly informed and acting alone, might approve it; whether there was full and fair disclosure to members of all information material to the decision whether to vote for or against the scheme; and whether the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [8]; Seven Network at [35]-[40]; Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [10]; ELMO at [8]." 1. I have drawn this summary from my judgment in Re Silver Lake Resources Ltd (No 2) [2024] NSWSC 737 at [4]-[5]. 2. The evidence establishes that Adbri has complied with the Court's orders in respect of the distribution of scheme documents to Adbri shareholders. As I noted above, the scheme was approved at the scheme meeting by the requisite statutory majorities, being approximately 97.54% of shares by value, and approximately 82.73% of Independent Adbri Shareholders by number present and voting at the scheme meeting. A total of 184,514,413 votes were cast at the scheme meeting (either in person or by proxy) by 1,552 Independent Adbri Shareholders representing approximately 49.20% by number of Adbri shares and approximately 10.67% by number of Independent Adbri Shareholders. Each of the conditions precedent to the scheme have been satisfied or waived and ASIC has confirmed that it has no objection to the scheme for the purposes of s 411(17)(b) of the Act. I am satisfied that the procedural requirements for approval of the scheme are satisfied. 3. Turning now to the exercise of the Court's discretion in respect of the scheme, the scheme was recommended by Adbri's independent directors and the independent expert whose report was included in the scheme booklet expressed the view that the scheme was fair and reasonable and in the best interests of Independent Adbri Shareholders in the absence of a superior proposal. No Independent Adbri Shareholder or other person indicated an intention to appear at the second Court hearing on 14 June 2024 to oppose the scheme and there was no such appearance. Subject to the issue that I address below, there is no reason to doubt that the scheme is fair and reasonable so that an intelligent and honest Independent Adbri Shareholder, properly informed and acting alone, might approve it. 4. One issue arises relating to disclosure in respect of the scheme. Mr Williams draws attention to letters dated 23 and 27 May 2024 from the solicitors acting for Ms Elena Barro, who holds a minority interest in the Barro Group, to the solicitors for Adbri, as to matters which appear largely to relate to issues internal to the Barro Group or, possibly, the relationship between the Barro Group and CRH. The solicitors acting for Adbri responded to those letters on 27 and 28 May 2024 noting Adbri's view that nothing raised in those letters caused Adbri to consider that the scheme booklet contained insufficient disclosure. The solicitors for Adbri, properly, also provided that correspondence to ASIC which has not required any supplementary disclosure in the relation to the matters raised in that correspondence. Ms Barro did not give any notice of an intention to appear at the second Court hearing to oppose approval of the scheme and did not do so. Mr Williams submits that, where the Barro Group's shares are not being acquired under the scheme, and the matters raised in the correspondence from Ms Barro's solicitors concern the benefit (or comparative lack of benefit) to the Barro Group of its arrangements with CRH following implementation of the scheme, the matters raised in correspondence are not relevant to the decision of Independent Adbri Shareholders whether to approve the scheme and should not prevent approval of the scheme by the Court. 5. I recognise that the Court must form its own view as to the materiality of these issues, although ASIC has not raised any concern arising from them with Adbri or in the second Court hearing, and Ms Barro did not seek to pursue them at the second Court hearing. I am satisfied these matters do not indicate any non-disclosure of any material matter to Independent Adbri shareholders, where the basis on which Barro Group continues to hold an interest in Adbri would not rationally affect their decision whether to approve the scheme and sell their shares in Adbri for cash, a fortiori where Ms Barro's concerns appear to relate primarily to whether CRH has been unduly advantaged, as against the Barro Group, by their arrangement inter se. The Independent Adbri Shareholders, in considering whether to exit their shareholdings in Adbri for cash, would rationally be concerned with the adequacy of consideration which they will receive, not with the advantages or disadvantages to Barro Group and CRH, inter se, so far as they remain as shareholders in Adbri. 6. I am satisfied that there is otherwise no reason to doubt that Adbri has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion and that there was full and fair disclosure to Independent Adbri Shareholders of all information material to the decision whether to vote for or against the applicable scheme. I am therefore satisfied that the scheme is appropriate for the Court's approval. 7. Adbri also seeks an exemption under s 411(12) of the Act from compliance with s 411(11) so that a copy of the Court order approving the scheme does not need to be annexed to any copy of Adbri's constitution that may be issued in the future. I am satisfied that such an order should be made where, as here, the rights of Adbri shareholders are not modified by the scheme: Re Anaconda Nickel Holdings Pty Ltd (2003) 44 ACSR 229 at 240; [2003] WASC 19; Re GBST Holdings Ltd [2019] NSWSC 1503 at [15]. Orders 1. For these reasons, I made the orders sought by Adbri at the conclusion of the second Court hearing on 14 June 2024. ********** 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: 21 June 2024