Ophir Energy Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Snowden |
| Judgment Date | 21 May 2019 |
| Neutral Citation | [2019] EWHC 1278 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2019-001002 |
| Date | 21 May 2019 |
[2019] EWHC 1278 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
COMPANIES COURT (CHD)
Royal Courts of Justice
Rolls Building, Fetter Lane,
London, EC4A 1NL
Mr Justice Snowden
Case No: CR-2019-001002
Andrew Thornton (instructed by Linklaters LLP) for the Applicant
Hearing date: 17 May 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is an application for the sanction of a scheme of arrangement (“the Scheme”) pursuant to Part 26 of the Companies Act 2006 (“the Act”).
The Scheme in outline
The purpose of the Scheme is to enable Medco Energi Global PTE Ltd (“Bidco”) to acquire the entire issued and to be issued ordinary share capital of Ophir Energy Plc (“the Company”), excluding ordinary shares held by the Company in treasury (the “Scheme shares”).
The Company is an independent upstream oil and gas exploration and production company with a diverse portfolio of assets in Indonesia, Thailand, Vietnam, Malaysia, Mexico and Tanzania. The Company was founded in 2004 and has been listed on the London Stock Exchange since 2011.
Bidco is a wholly-owned subsidiary of PT Medco Energi Internasional Tbk, a company incorporated in Indonesia (“Medco”). Medco is a leading Southeast Asian energy and natural resources company whose shares are listed on the Indonesian stock exchange. Bidco currently holds the non-Indonesian oil and gas assets of the group headed by Medco.
The Company has a portfolio of international oil and gas assets. Medco believes that a combination of the two businesses will benefit from synergies and create a stronger Southeast Asian presence with greater scale, a wider geographical footprint and a more balanced portfolio of assets.
The takeover of the Company by Medco is unanimously recommended by the directors of the Company, who have received advice from Morgan Stanley & Co. International plc and Lambert Energy Advisory Limited. The directors have given irrevocable undertakings to vote in favour of the Scheme in respect of their own holdings of shares which amount to about 0.14% of the Scheme shares. The intention is that they will all leave the Company in accordance with the terms of their service contracts after it is acquired by Bidco, and they have no other material interests which are dependent upon the outcome of the Scheme process.
The Scheme is structured as a simple ‘transfer’ scheme and involves the Scheme shares being transferred to Bidco in exchange for cash. There are options outstanding in relation to the Company's share capital which are capable of exercise. If and to the extent that the Company issues shares out of treasury pursuant to the exercise of options prior to the Scheme record time, they will participate in the Scheme. If exercised after the Scheme has taken effect, the shares acquired will be automatically transferred to Bidco pursuant to the provisions of the Company's amended articles of association for the same consideration received by Scheme shareholders.
The consideration to be received by the Scheme shareholders is 57.5 pence in cash for each Scheme share held at the relevant record time, which values the entire issued share capital of the Company at approximately £408.4 million. This represents a significant premium to the undisturbed share price for the Company's shares which was 33.2 pence per share on 28 December 2018, being the last business day before the announcement of a possible offer for the Company by Medco.
Rival interest in the Company
After the announcement of a possible offer from Medco, on 17 January 2019 the Company received a formal proposal from Soco International plc (“Soco”) regarding a proposed offer to acquire the whole of the issued and to be issued share capital of the Company in exchange for shares in the capital of Soco. On 22 January 2019 the board of directors of the Company resolved unanimously to reject the Soco proposal and there were no meaningful interactions between the Company and Soco thereafter.
The proposed acquisition by Medco was announced on 30 January 2019. The price offered was 55 pence per share. The Scheme document was then posted to shareholders on 1 March 2019 in accordance with the order of ICC Judge Barber of the same date.
On 6 March 2019, following market speculation relating to the Soco proposal, Soco announced that in light of the proposed acquisition of the Company by Medco, Soco did not intend to make an offer to acquire the Company.
Two days later, on 8 March 2019 the Company received an unsolicited preliminary indication of interest from Coro Energy plc (“Coro”), a relatively small AIM listed company, regarding a proposed offer to acquire the shares in the Company in exchange for payment of 40p in cash and an undetermined number of shares in the capital of Coro for each ordinary share in the Company.
In addition, a shareholder of the Company, Sand Grove Capital Management LLP (“Sand Grove”) increased its interest in the Company to become its largest shareholder, with an interest of approximately 18.73 per cent. Sand Grove indicated to Medco that it would not be willing to support an offer at 55 pence per Scheme share. Following further discussions between the advisers to Medco and Sand Grove, Sand Grove agreed to provide an irrevocable undertaking to vote in favour of the Scheme on the basis that the price offered under the Scheme was increased to 57.5 pence per Scheme share.
On 20 March 2019 the boards of the Company and Medco then announced that they had agreed an increase in the consideration to be offered under the Scheme to 57.5 pence per share. The Company also announced that following discussions between Coro and Sand Grove, and in light of the increased offer from Medco, Coro had confirmed to the Company that Coro did not intend to make a rival offer to acquire the Company.
The Court meeting
The Court meeting to vote on the Scheme took place on 25 March 2019. There was a single class of Scheme shareholders and the resolution to approve the Scheme was proposed on the basis of the increased price of 57.5 pence per Scheme share. In accordance with ICC Judge Barber's order, some institutional holders of Scheme shares were permitted to vote both for and against the resolution in respect of shares held for different beneficial interests.
Of the 170 Scheme shareholders who participated in the Court meeting, 139 voted in favour of the Scheme, holding 388,474,214 Scheme shares. 46 Scheme shareholders voted against the Scheme holding 45,049,646 Scheme shares. The majority in favour of the Scheme was therefore 81.76 per cent in number representing 89.61 per cent in value. The turnout at the meeting was 15.4 per cent in number and 61.24 per cent in value of Scheme shareholders.
The approach to sanction
The function of the Court at a hearing to sanction a scheme of arrangement is well known and is encapsulated in the following passage in Buckley on the Companies Acts at paragraph 219:
“Sanction of the Court
Once the meetings have approved the scheme, the sanction of the court must be sought. The sanction of the court is not a formality. The court has an unfettered discretion as to whether or not to sanction the scheme, but it is likely to do so, so long as (1) the provisions of the statute have been complied with, (2) the class is fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent, and (3) that the arrangement is such as an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve…..
The Court does not sit merely to see that the majority are acting bona fide and thereupon to register the decision of the meeting, but, at the same time, the court will be slow to differ from the meeting, unless either the class has not been properly consulted, or the meeting has not considered the matter with a view to the interests of the class which it is empowered to bind or some blot is found in the scheme, or if the Chairman did not conduct the meeting substantially in accordance with the procedure laid down by the court.”
More recently, in Re TDG plc [2009] 1 BCLC 445 at [29], Morgan J suggested that there were four matters which required attention when considering whether to sanction any proposed scheme of arrangement. Those matters were as follows:
“(i) The Court must be satisfied that the provisions of the statute have been complied with.
(ii) It must be satisfied that in relation to the class of shareholders, the subject of the court meeting, was fairly represented by those who attended the meeting, and the statutory majority are acting bona fide and not coercing the minority in order to promote interests adverse to those of the class they purport to represent.
(iii) An intelligent and honest person, a member of the class concerned and acting in respect of his own interest, might reasonably approve the scheme.
(iv) There must be no blot on the scheme.”
Applying these tests, subject to the point that I shall mention below, there is plainly no reason for me to refuse to sanction the Scheme. The statutory majority was obtained at the Court meeting at which the turnout, though low in absolute terms, was within the norms for takeover schemes of this type; there is no reason for me to suspect that the meeting was unrepresentative or that the majority were acting in any way improperly; the Scheme offers a premium to the undisturbed...
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