TDG Plc
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Morgan:,MR JUSTICE MORGAN |
| Judgment Date | 26 September 2008 |
| Neutral Citation | [2008] EWHC 2334 (Ch) |
| Court | Chancery Division |
| Date | 26 September 2008 |
| Docket Number | Case No: 6345 of 2008 |
[2008] EWHC 2334 (Ch)
IN THE HIGH COURT OF JUSTICE
(Chancery Division)
Mr Justice Morgan
Case No: 6345 of 2008
Mr. M. Moore QC (instructed by Linklaters LLP) appeared for the Applicant.
Mr. E. Chalker appeared in Person.
APPROVED JUDGMENT
Transcription by:
N° of words: 4150
N° of folios: 58
This is an application in which TDG Plc (“the Company”) seeks an order under section 899 of the Companies Act 2006 sanctioning a scheme of arrangement and, in addition, an order under section 137 of the Companies Act 1985 confirming a resolution for the reduction of capital involved in the scheme. For reasons which I need not go into, but which are of a common character, the order that I am asked to make today is the order sanctioning the scheme, leaving the question of the reduction of capital to be the subject of an order made in a few days time when final details are ascertained; those details being necessary for the purpose of drawing up the final form of order.
However, for the purpose of sanctioning the scheme I am, of course, concerned to consider the attitude the Court will adopt when asked to make an order confirming the resolution for the reduction of capital. If I considered that there would be difficulty in relation to the reduction of capital, that would have an impact on the decision I ought to make in relation to the order sanctioning the scheme of arrangement.
The object of the scheme, in short, is to effect the Company's acquisition by another company (LIT Plc), which is a company incorporated for this purpose in the Isle of Man by Laxey Partners Ltd., a private equity house. The terms of the acquisition value the entire issued Ordinary share capital of the Company at some £203 million. It is currently proposed that the Ordinary shares of LIT Plc will be admitted to trading on the alternative investment market.
I ought to say a brief word about the issued shares in the Company. There are some 81 million Ordinary shares in issue, and some 800,000 B shares in issue. In relation to the Ordinary shares, Laxey Partners Ltd. own approaching 18 million of those, which I am told is 21.9% of the issued Ordinary share capital.
The B shares are not subject to the scheme. The scheme relates to the holders of Ordinary shares. The Ordinary shares have been divided into two classes. The first class, which one can immediately put on one side, are what are called the “Laxey Scheme” shares. Those are being dealt with by agreement and without the need for a court meeting and such like.
However, the remainder of the Ordinary shares, some 63 million of them, are regarded as the “scheme” shares. It is in relation to those shares that the statutory procedures have been followed through.
The scheme makes a series of offers to a shareholder of a scheme share. The basic provision (and this is the default provision) is that a holder of an Ordinary scheme share is offered cash for his share of £2.50. The offers are, however, more complicated than that. Mr. Moore QC (who appears for the Company) referred to the menu of offers as being á la carte, with a range of alternative dishes in place of some part of the £2.50. That matter was, of course, material to the way in which the scheme was drafted and the offer was made but it is not necessary, for today's purposes, to narrate the detail of those alternative offers.
I do not consider I need to go into any detail as regards the technical parts of the scheme. The first part of the scheme reorganises the issue of share capital of the Company and will lead to some six classes of shares reflecting the á la carte options, to which I have referred.
The application for the sanction of the scheme has already been before the Court, when the Court ordered a meeting of a single class, namely the holders of the scheme shares; that is some 63 million shares or so. That Court meeting took place. I have, in the usual way, the Chairman's report indicating what happened at the meeting on the 3 rd September 2008. The number of those present voting in favour of the scheme was 89.7% of those who voted. The majority in value of those present voting in favour of the scheme was some 98.7%.
Looking at the comparison between the numbers present and voting and the total number of scheme shareholders, the number of members voting was 21% of the members. The number of members voting represented 46% in terms of value of the holders of scheme shares.
At this point I need to introduce what I believe is a relatively unusual feature of applications of this kind. Mr. Moore QC appears on behalf of the Company, but the Court has also been assisted by the submissions of a shareholder, a Mr. Chalker. Mr. Chalker voted against the scheme at the Court meeting. He has appeared in person and has made submissions to me in opposition to the suggested approval of the scheme.
I have said that Mr. Chalker is a shareholder. His shareholdings fall into these classes. In respect of 2,603 shares, he is the beneficial holder of the shares. In respect of 918 shares, he is the shareholder but he holds the shares as trustee for others. There is a third class of shares which are held by nominee shareholders. The ultimate beneficiary is Mr. Chalker's mother-in-law. In relation to those shares, Mr. Chalker has a power of attorney. That class of shares comprises 1,557 shares. I dare say that that combined shareholding is a worthwhile investment for Mr. Chalker, but it will of course not be forgotten that the number of his shares, when placed against the figures I have already stated (there are some 63 million scheme shares) is comparatively modest.
Mr. Chalker wrote to the Court in the last few days. The letter has been made available to the Company. Mr. Chalker makes a number of points in his letter, which I will refer to. I will not read out verbatim what Mr. Chalker has written, but I will attempt to summarise the essential points he makes in the letter. It may then be necessary to say a little bit more about what Mr. Chalker said when he made his oral submissions to me.
One point Mr. Chalker makes in his letter is to draw attention to the percentages represented by the votes; not only the percentages in favour registered by those present and voting, but also the comparison between the numbers who voted and the numbers who did not vote. He refers to the fact that only 36% of the 81 million Ordinary shares in issue support the scheme. (This ignores the 18 million shares, which are part of the 81 million shares, and which are owned by Laxey). He draws my attention to certain provisions in the Companies Act 2006, in particular sections 979 and 986, which contain the well-known provisions in a takeover context where an offeror for shares can acquire, on a compulsory basis, the shares of certain dissenting shareholders but, for that purpose, the statute makes it clear that the offeror, before this compulsory power is vested in it, must show it has not less than 90% in value of the shares to which the offer relates.
I am not attempting to summarise the provisions in any detail but, for present purposes, Mr. Chalker draws attention to the 90% which is needed before an offeror has a compulsory power of acquisition. He contrasts that with the present case, where those promoting the scheme can demonstrate only a much more modest percentage than 90% and yet, if the scheme is approved, the consequence for Mr. Chalker is the same. He is divested of his shares and he is given a sum of money – a situation which he does not voluntarily accept.
The second point made in Mr. Chalker's letter is to draw attention to what he says are shortcomings in the information given to shareholders. He drew my attention to what was said in the report of the independent Directors. I will not read in extenso from what is a lengthy letter of report from the independent Directors, but I will attempt to summarise the salient points.
In paragraph 3 of the letter, the cash offer is described as “£2.50 a share”. That is described as showing a healthy premium to the closing price, computed in different ways by reference to the Stock Market up to February 2008. (Mr. Moore, on behalf of the Company, has pointed out that the Stock Market, at today's date, stands very much below what it did in February 2008).
In paragraph 9 of the independent Directors' letter, the letter describes in a little detail the history of bid interest being expressed by Laxey and by another bidder, leading to the offer which is now the subject of the proposed scheme.
The TDG Directors and their financial advisers have explored whether there is any other source of interest. They have concluded that there is not. They are not aware of any other parties currently contemplating an offer for shares in TDG. The independent Directors said that they believed that the cash offer, when considered against the expected future trading performance, offered TDG shareholders a fair price in cash and, on the basis of these and other factors which they considered relevant, and having taken advice from Rothchilds, they have concluded that the terms of the cash offer were fair and reasonable and should be recommended to TDG shareholders.
Mr. Chalker points out that the independent Directors did not go on to say why any particular shareholder should sell. Mr. Chalker refers to...
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