The Australian Takeovers Panel has received another application into the ongoing acquisition of Webcentral Group by 5G Networks, this time with bidding withdrawal rights being pushed for over claims of “clear unacceptable circumstances”.
The application comes from financial services firm Keybridge Capital, which previously flagged issues with the acquisition on claims of “coercive shareholder pressure” in late October to the Takeovers Panel.
After the Takeoves Panel decided not to pursue the claims a week later, Keybridge appealed that decision. The bid closing on 10 November, with the Takeovers Panel declined to review their decision later that month.
Keybridge’s recent application claims that prior to the start of the 5GN bid, Webcentral agreed to pay a $1.9 million success fee to its financial adviser if a 50.1 per cent interest in Webcentral was achieved, with capital raising take place that “appeared to be to pay an undisclosed success fee for the 5GN Takeover… and to reduce the recently advanced 5GN debt”.
However, the existence of the success fee or the intention to conduct capital raising were allegedly not disclosed in Webcentral’s target statements of 5GN’s bidder’s statements.
As a result, Keybridge claims that Webcentral shareholders relied on materially deficient disclosure between it and 5GN. If such disclosure has taken place, the firm alleged that shareholders would have likely made a different decision surrounding 5GN’s bid.
Therefore, Keybridge is seeking final orders that Webcentral shareholders to be provided with withdrawal rights under the 5GN bid, or that the bid be withdrawn, as well as for Webcentral and/or 5GN to make corrective disclosures.
It is important to note that while the application has been received by the Takeovers Panel, a sitting Panel has not been appointed, no decision has been made and the Panel is yet to make any comments on the merit of the application.
According to the Takeovers Panel in its latest statement on the matter, Webcentral announced on 13 November that it had received commitments for an equity subscription package worth roughly $5.6 million before expenses.
This consisted of $3.1 million before costs by way of placement to institutional and sophisticated investors at $0.17 per share and $2.5 million in issues shares, also at $0.17 per share, to entities associated with two of the directors of Webcentral who are also directors of 5GN.
In addition, Webcentral looked at issuing 10 million performance rights and two million director options to two potentially related parties of 5GN, subject to shareholder approval.
Both the package and performance rights were subject to shareholder approval, which was given on 18 December.
Within Keybridge’s submission, the Takeovers Panel also claims the firm alleged that the payment of the success fee in circumstances where 5GN obtained less than 100 per cent of Webcentral “represents clear unacceptable circumstances”.
Furthermore, the firm alleged that shareholders that “unwittingly did not accept the bid have been saddled with this material expense”, while those that did accept the bid without being aware of the success fee may have voted otherwise if they had known.
Keybridge’s submission stated that it is “very reasonable to infer” that the intent to raise capital was known to both Webcentral and 5GN before the end of the bid.
The firm also alleged that the design of the agreement to purchase shares by 5GN associates less than two days after the close of the bid, without adequate disclosure during the bid, “flies in the face of the purpose of s621 of the Corporations Act”.
Additionally, the firm also alleged the failure to disclose the success fee and Webcentral’s intent to raise capital and issue securities to potentially related parties 5GN after the bid closed represents multiple breaches of the Corporations Act 2001, with Webcentral allegedly breaching sections 638 and 644 and 5GN allegedly breaching sections 636 and 643.