International Game Technology Plc (Formerly Georgia Worldwide Plc) and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Birss: |
| Judgment Date | 19 March 2015 |
| Neutral Citation | [2015] EWHC 717 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: 1813 OF 2015 |
| Date | 19 March 2015 |
[2015] EWHC 717 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Birss
Case No: 1813 OF 2015
and
and
Martin Moore QC (instructed by Clifford Chance) for the Claimants
Hearing dates: 16th March 2015
This is an application for an order under Regulation 16 of the Companies (Cross-Border Mergers) Regulations 2007 ("the CBM Regulations) for an order to complete a merger between an Italian company GTECH SpA ("GTECH") and an English company International Game Technology Plc ("IGT Plc"). Currently IGT Plc is a wholly owned subsidiary of GTECH.
The merger is part of a much larger corporate transaction. The overall transaction is to merge two separate lottery and gaming businesses. One business is that of GTECH. The other is the business of International Game Technology Inc. ("IGT Inc."), a United States company incorporated in the state of Nevada. Shares in GTECH are currently listed on the Borsa Italia with a market capitalisation of about €3 billion. Shares in IGT Inc. are currently listed on the New York Stock Exchange (NYSE) with a market capitalisation of about $4 billion.
The merger is to take place pursuant to a merger agreement signed on 15 th July 2014 and amended on 23 rd September 2014. The overall transaction is in two parts:
i) First IGT Plc is to implement the cross-border merger the subject of this application whereupon shareholders in GTECH will exchange on a one for one basis their shares in GTECH for shares in IGT Plc, save to the extent that withdrawal rights have been exercised.
ii) Second, as soon as the respective systems of law and time zones allow, IGT Inc. will merge under the merger provisions of Nevada law with a subsidiary of IGT Plc on terms that IGT Inc. is the surviving company. The former shareholders of IGT Inc. will receive shares in IGT Plc and a cash payment, possibly of the order of $3.19 billion from IGT Plc.
The state of affairs at the end of the whole transaction will be that IGT Plc will be the holding company for a group of companies comprising the businesses of GTECH and IGT Inc. The operating business of GTECH in Italy will be restructured. IGT Plc will be tax resident in the UK but its shares will be listed on the NYSE. It is anticipated that about 79% of IGT Plc's issued share capital will be held by former members of GTECH with about 21% by former members of IGT Inc.
Mr Moore informed me that to his knowledge, this was the first occasion in which the English court has had to consider a cross-border merger in a proper mergers and acquisitions (M&A) context rather than as part of an intra-group reorganisation, especially one which spans three jurisdictions. That feature creates complexities regarding the completion mechanics of the overall merger. Particular problems arise because, as part of the overall merger agreement, conditional elements are supposed to endure after the date of the Court makes the order approving the completion of the cross-border merger pursuant to Regulation16(1) of the CBM Regulations. There is also a termination right which endures after the merger which this court is asked to approve has taken effect. The termination right only comes to an end when the entire transaction completes.
Although it happens to be the case that in this transaction the conditions in part reflect the trans-Atlantic nature of part of the overall deal, Counsel submitted that it is to be anticipated that proper M&A cross-border mergers within the EEA would also, as a commercial matter, be subject to conditions.
I made the order sought. These are my reasons for doing so.
Steps up to today
On 2 nd September 2014 the court gave IGT Plc liberty pursuant to Regulation 13 of the CBM Regulations to convene a meeting of its members, i.e. GTECH and its nominee.
On 8 th September 2014, on the application of IGT Plc and GTECH the court approved the appointment of Grant Thornton as joint expert under Regulation 9(3) of the CBM Regulations.
On 6 th March the relevant competent authority in Italy certified that GTECH had completed properly the pre-merger acts and formalities for the cross-border merger. That certificate was made by a Notary Public, who is the competent authority under Article 10.2 of the Directive as implemented by Legislative Decree No. 130 of May 30, 2008. The Italian pre-merger certificate was issued in English. It includes a copy of a certificate from the Ordinary Court of Rome confirming that there has been no opposition to the merger by creditors of GTECH.
On 11 th March 2015 the court made an order under Regulation 6 of the CBM Regulations certifying that IGT Plc had completed properly the pre-merger acts and formalities for the cross-border merger.
On 12 th March 2015 the parties signed a confirmation letter agreeing that some of the conditions in the merger agreement had been satisfied or were waived. Also in evidence is a draft of a second confirmation letter which the parties expect to sign on 31 st March 2015 which is intended to confirm that all the then outstanding conditions have been satisfied or waived.
The order sought provides that the merger will takes effect at 12.01pm on 7th April 2015. That is more than 21 days from the date of the order (Regulation 16(2)).
Subject to the important point considered below, I am satisfied that there is no jurisdictional impediment to the making of the order. All the various matters set out in Regulation 16(1) (a) to (e) have been complied with. There is no relevant employee participation (Reg 16(1)(f)). Moreover, subject again to the point below, I would be satisfied that the discretion arising in Regulation 16 should be exercised in favour of the merger and in that regard I bear in mind the judgment of Sales J in Diamond Resorts (Europe) Ltd [2012] EWHC 3576 (Ch).
Conditions in the order
In order to complete the merger the applicants ask the court to make an order which contains conditions. That raises the question whether the court has jurisdiction to do so and, if it does, whether the order should be made in the exercise of the court's discretion.
The merger agreement provides for conditions to be satisfied and rights to terminate which survive the making of the order under Regulation The conditions are set out in Article VI of the merger agreement and the termination rights are set out in Article VII.
The wording of the conditions is lengthy and they do not need to be set out in full. The conditions deal with competition and regulatory clearances, no injunctions restraining the transaction and no breach of warranties and representations. One of the conditions relates to delisting of the shares in Italy. Borsa Italia has confirmed that upon confirmation of the cross-border merger as being wholly unconditional, they will issue a de-listing notice.
The termination rights reflect the conditions. Importantly, one termination right (clause 7.01(j)) gives IGT Inc. the ability to terminate in the event that the conditions have been satisfied but GTECH fails to effect completion at the contracted time. Termination in this way entitles IGT Inc. to receive a large sum (approximately 5% of the market capitalisation of IGT Inc.). Mr Moore submits and I accept that these clauses are all part of the scheme of the merger agreement intended to encourage and ensure that the merger takes place as agreed.
The order in the form originally sought was as follows:
IT IS ORDERED pursuant to Regulation 16 of the Companies (Cross-Border Mergers) Regulations 2007 that the completion of the proposed cross-border merger between the Claimants as set out in Schedule 1 hereto be approved for the purposes of Article 11 of Directive 2005/56/EC on cross-border mergers of limited liability companies
AND IT IS ORDERED that the consequences of the merger will take effect as of 12.01 a.m. on 7 April 2015, subject to satisfaction or waiver by that time and date of all conditions set out in Article VI of the merger agreement dated 15 July 2014 entered into between, among others, the Claimants, as amended on 23 September 2014 (the " Merger Agreement") and subject to the Merger Agreement not having been terminated by GTECH S.p.A. or International Game Technology under the terms of the Merger Agreement. Article VI of the Merger Agreement is set out in Schedule 2 hereto
LIBERTY TO APPLY
The second paragraph of the order is in a conditional form. Its intended effect is that it will take effect on 7 th April 2015 as long as two conditions are satisfied. The first condition is that all the conditions in Article VI of the merger agreement have been satisfied or waived. The second condition is that the termination rights have not been exercised by that date. The liberty to apply is there to allow the parties to return to court before completion in the event something does go wrong.
The right to terminate in clause 7.01(j) will endure beyond 7 th April 2015 until the overall completion of the whole transaction by the filing of documents at the relevant Registry in Nevada. It is envisaged that that will happen within about one day of 7 th April 2015. That enduring effect of clause 7.01(j) does not bear directly on the question of whether the court has jurisdiction to make a conditional order but it does have a bearing on the exercise of the court's discretion, if jurisdiction exists.
Does the court have jurisdiction under Regulation 16 to make an order subject to conditions?
The CBM Regulations were enacted to give effect to Directive 2005/56/EC of the European...
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