Expro International Group Plc and The Companies Act 1985 and 2006
| Jurisdiction | England & Wales |
| Judgment Date | 26 June 2008 |
| Neutral Citation | [2008] EWHC 1543 (Ch) |
| Date | 26 June 2008 |
| Court | Chancery Division |
| Docket Number | No. 3512 of 2008 |
[2008] EWHC 1543 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Mr Justice David Richards
No. 3512 of 2008
In The Matter Of The Companies Act 1985 And 2006
Mr A Thornton appeared on behalf of Expro.
Mr Moore QC and S Horam appeared on behalf of Halliburton.
Mr M Crystal QC and MR J Cone appeared on behalf of Candover.
Mr D Mabb QC and MS C Bryant appeared on behalf of the Takeover Panel.
Mr R Hildyard appeared on behalf of Mason Capital.
Actually I had considered this and it accords with the way I wish to do things. I still need a little more time just to tidy up the judgment that I am going to deliver, but I am mindful that I told everyone to be here at 3 o'clock and I can therefore announce that my decision is that I refuse the application for an adjournment. What I would propose, and I am sorry, very sorry to cause inconvenience to everyone concerned, but I will deliver judgment at four o'clock.
(A short break)
MR JUSTICE RICHARDS: There is before the Court an application by Expro International Group plc (the company) for the sanction under part 26 of the Companies Act 2006 of a scheme of arrangement with its members. The purpose and effect of the scheme is the acquisition by a consortium of investors, acting through a company formed for the purpose called Umbrellastream Limited, of the entire issued share capital of the company not already owned by the consortium. It is therefore a takeover scheme of an entirely conventional sort.
The proposed acquisition and its terms were put forward to shareholders in the context of some interest from Halliburton Company, a US based corporation. The price per share payable under the scheme is £16.15 but this has been the result of two increases since the scheme was originally announced on 17 April 2008. At that stage the price was £14.35 but it was increased on 23 May 2008 to £15.50. This increase was made by Umbrella Stream in response to an approach by Halliburton to the company on the same day with an indicative offer of £15.25. The second increase to £16.15 was made unilaterally by Umbrellastream on 13 June 2008.
The first preliminary proposal from the consortium behind Umbrellastream came in late February 2008 and was announced on 29 February. The proposal was rejected by the board of the company. On 14 March 2008 a revised proposal at £14.39 was put to the board. These events prompted interest from a number of parties. The board held discussions with those parties. Halliburton was one of them and on 18 April 2008 it announced that it might make an offer for the company and that any such offer, if made, would be in cash at a premium to the price proposed by Umbrellastream.
The company applied to the court in the usual way for directions to convene a meeting of shareholders to consider the scheme embodying the Umbrellastream proposals. Notice was given on 9 May 2008 to shareholders for the meeting which was fixed for 2 June 2008.
The circular accompanying the notice explained the earlier approaches and expressions of interest and, after referring to Halliburton's announcement of 18 April 2008, stated that as at 9 May Halliburton continued to conduct due diligence on the company, but that there could be no certainty that a formal offer would ultimately be made.
On 23 May 2008 the company announced that it had received a proposal from Halliburton indicating that it was prepared to offer £15.25 per share. The proposal did not amount to a firm intention to make an offer and was subject to preconditions. As I have mentioned Umbrellastream's revised proposal of a price of £15.50 was made the same day.
On 27 May, 2008 the company announced that it would seek the adjournment of the meeting convened for 2 June to 9 June. A further circular was sent to shareholders on 27 May. The circular recorded terms reached between the company and Umbrellastream, whereby the company agreed not to seek to postpone or further adjourn either the meeting to be held on 9 June or the court hearings for the sanction of the scheme and the confirmation of reduction of capital involved in it, fixed for 23 and 25 June.
This however was subject in the case of the court hearings to:
“An independent competing offeror not announcing a higher cash offer in accordance with the requirements of rule 2.5 of the Takeover Code on or before 20 June, 2008.”
In this way, it may be observed, some degree of certainty could be brought to an otherwise uncertain situation.
The Takeover Code to which the circular refers governs the conduct of public offers for companies in the UK. The City Panel on Takeovers and Mergers (the panel) is responsible for drawing up and administering the Code. The underlying purpose of the Code is described in the introduction to the Code in the following terms:
“The Code is designed principally to ensure that shareholders are treated fairly and are not denied an opportunity to decide on the merits of a takeover and that shareholders of the same class are afforded equivalent treatment by an offeror. The Code also provides an orderly framework within which takeovers are conducted. In addition, it is designed to promote, in conjunction with other regulatory regimes, the integrity of the financial markets.
“The Code is not concerned with the financial or commercial advantages or disadvantages of a takeover. These are matters for the company and its shareholders. Nor is the Code concerned with those issues, such as competition policy, which are the responsibility of government and other bodies.
“The code has been developed since 1968 to reflect the collective opinion of those professionally involved in the field of takeovers as to appropriate business standards and as to how fairness to shareholders and an orderly framework for takeovers can be achieved.”
When formed in 1968 and for many years thereafter there was no direct statutory or other formal backing for the Code or the Panel. A description of the Panel in those days may be found in the judgment of Sir John Donaldson MR in Reg v Panel on Takeovers and Mergers, ex p Datafin plc [1987] QB 815. Now the panel is the designated supervising authority in relation to takeovers pursuant to the EU Directive on Takeover Bids (2004/25/EC) and its functions are set out in chapter 1 of part 28 of the Companies Act 2006.
One of the purposes served by the Code is to bring a degree of certainty in the conduct of bids for the benefit of all shareholders. To this and other ends the code contains a number of provisions. Announcements of bid approaches are required by rule 2.2. Rule 2.4B provides:
“At any time following the announcement of a possible offer (provided the potential offeror has been publicly named) the offeree company may request that the Panel impose a time limit for the potential offeror to clarify its intentions with regard to the offeree company. If a time limit for clarification is imposed by the Panel the potential offeror must, before the expiry of the time limit, announce either a firm intention to make an offer for the offeree company in accordance with rule 2.5 or that it does not intend to make an offer for the offeree company, in which case the announcement will be treated as a statement to which rule 2.8 applies.”
Rule 2.5(a) provides:
“An offeror should only announce a firm intention to make an offer after the most careful and responsible consideration. Such an announcement should be made only when an offeror has every reason to believe that it can and will continue to be able to implement the offer. Responsibility in this connection also rests on the financial adviser to the offeror.”
The identity of the offeror, the terms of the offer and other matters prescribed by rule 2.5B must be included in the announcement.
Rule 2.7 provides:
“When there has been an announcement of a firm intention to make an offer, the offeror must normally proceed with the offer unless, in accordance with the provisions of rule 13, the offeror is permitted to invoke a precondition to the posting of the offer or would be permitted to invoke a condition to the offer if the offer were made.”
Rule 2.8, which is of particular importance in the present case, provides:
“A person making a statement that he does not intend to make an offer for a company should make his statement as clear and unambiguous as possible. Except with the consent of the Panel, unless there is a material change of circumstances or there has occurred an event which the person specified in his statement as an event which would enable it to be set aside, neither the person making the statement, nor any person who acted in concert with him, nor any person who is subsequently acting in concert with either of them, may within six months from the date of the statement (a) announce an offer or possible offer for the offeree company …”
I need not read the rest of that:
“(b) acquire any interest in shares of the offeree company if any such person would thereby become obliged under rule 9 to make an offer.”
I need not read (c):
“(d) make any statement which raises or confirms the possibility that an offer may be made for the offeree company, or (e) take any steps in connection with a possible offer for the offeree company where knowledge of the possible offer might be extended outside those who need to know in the potential offeror and its immediate advisers.”
Rule 2.8 goes on to provide that:
“Failure to comply with this rule may lead to the period of six months referred to above being extended.”
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