In a request to the Australian Government Takeovers Panel, Sandon Capital has sought to have a restriction on 6.83% of shares lifted in relation to its proposed board spill vote of Southern Cross Media Group Limited (SCA).
As Radioinfo reported earlier this week, Sandon executed notices under section 203D of the Corporations Act seeking to remove non-executive directors Heith Mackay-Cruise, Ido Leffler, Carole Campbell and Marina Go from the SCA board at the next general meeting.
There is an order in place currently restricting 6.83% of SCA shareholders from voting, except in limited circumstances. The Takeover Panel release to the Stock Exchange today says: “The final orders made in Southern Cross… included an order restricting ARN Media Limited from voting 6.83% of SCA shares, except in limited citcumstances.”
Sandon seeks an end date to be applied to that restriction so that those votes might be included at the next general meeting.
The order is quite a technical, aimed at avoiding a conflict of interest that arose because unlisted fund manager Allan Gray is a shareholder in both Southern Cross and ARN. The conflict would have arisen when ARN was proposing to take over SCA, because Allan Gray could have ended up siding with one or other of the shareholder groups in a vote. One of the other shareholders in SCA, Keybridge, lodged objections over the matter for consideration by the Australian Government’s Takeovers Panel. Keybridge submitted that the ARN Acquisition was unacceptable, because:
It has likely had the effect of limiting complying competitors’ access to a substantial stake in Southern Cross and has otherwise caused the concentration of control into the hands of a party with their own control ambitions. In rebuttals, ARN submitted that this was not so because there are a number of other substantial or large shareholders in Southern Cross, including Allan Gray, from whom a substantial stake in Southern Cross could be acquired by a competitor to ARN.
The Takeovers Panel considered “that the circumstances surrounding the ARN Acquisition were unacceptable as they constituted or gave rise to contraventions of section 606 and section 671B. We also consider that the Allan Gray Acquisitions contributed to the unacceptability.”
To avoid the potential conflict of interest the Takeover Panel decided that Allan Gray could continue to hold the two lots of shares, but could only vote in a restricted way. The decision said that Allan Gray must:
Vote the Relevant Shares in favour of a competing scheme of arrangement that is recommended by the majority of (non-conflicted) Southern Cross directors.
That means that Allan Gray shares would have to be voted in the same way as the majority of non-conflicted shareholders votes in any baord spill. Given that it is likely that those non-conflicted shareholders would vote against the board spill motion, Sandon Capital is trying to get the restriction lifted presumably with the hope of convincing the Allan Gray investment company to vote in its favour for the spill motion.
SCA said when the initial notice was executed that Sandon had not asked yet for that general meeting to occur, with Sandon possibly working to shore up additional votes before it does so.
No decision has been made by the Takeovers panel on the current request from Sandon Capital at this stage.
Jen Seyderhelm is a writer, editor and podcaster for Radioinfo.