Takeover Panel: BHD And HML Declaration Of Unacceptable Circumstances

On 25 January 2018, Australian Government’s Takeovers Panel made declarations of unacceptable circumstances in response to applications by shareholders of Benjamin Hornigold Limited (ASX: BHD) and Henry Morgan Limited (ASX: HML) regarding the affairs of both the companies.

Earlier on 10 September 2018, John Bridgeman Limited (NSX: JBL) announced its intention to acquire all of the issued capital in Benjamin Hornigold Limited and Henry Morgan Limited.

In the bid implementation agreements, both the companies represented that their respective voting Directors would unanimously recommend the bids in the absence of a superior proposal. The companies also agreed to early dispatch of the bidder’s statements without qualification.

After the bids were announced, Benjamin Hornigold Limited agreed to:

  • convert the repayment of a receivable it was owed by JBL into an unsecured loan of up to $4.5mn repayable within 18 months.
  • extend the terms of certain loans to JBL and JB Financial Group Pty Ltd (JBFG).

In October 2018, John Bridgeman lodged bidder’s statements for its bids for both the companies in which John Bridgeman stated that Voting Directors of both the companies unanimously recommended the shareholders to accept the offer in the absence of a superior proposal. Both BHD and HML requested JBL to amend this statement to reflect the conditionality of the recommendations.

On 22 November 2018, following discussions with ASIC, JBL lodged supplementary bidder’s statements and offered withdrawal rights to BHD and HML shareholders who had previously accepted the bids. Later on 27 November 2018, the voting Directors of both the companies recommended to their shareholders that they take no action in relation to the JBL bids prior to the release of their respective target’s statements.

As per the Takeovers Panel, the circumstances in relation to each company are unacceptable based on a number of factors. According to the Takeovers Panel, the bidder’s statements (as supplemented) did not adequately disclose information material to the acceptance of the bids, including the various relationships and transactions between JBL, BHD, HML and JBFG and the financial position of JBL and JBFG.

As per the panel, it was not acceptable when BHD and HML agreed in advance and without qualification to early dispatch of the bidder’s statements. According to the panel, JBL, BHD and HML failed to promptly correct the misrepresentation of the conditions of the voting director’s recommendation in the bidder’s statements. BHD and HML delayed in giving clear advice to shareholders to take no action in relation to the bids before considering the target’s statement and independent expert’s report.

BHD’s shares are currently suspended on ASX, and they were last traded at 0.710 as on 30 July 2018.


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