DLA Piper: ASX Issues Reverse Takeover Consultation

14 December 2015

DLA Piper New Zealand: ASX Issues Reverse Takeover Consultation

The ASX is seeking feedback on whether reverse takeovers need more regulation, say DLA Piper New Zealand partners Rachel Taylor and Martin Wiseman.

Reverse takeovers occur when a listed bidder offers its shares as consideration for at least half of the shares in the target company.

“Specifically,” says Ms Taylor, “The ASX is seeking views on whether bidder shareholder approval should be required because of concerns that the transaction would dilute bidder shareholders’ interests through the issue of new shares, or would transform the nature of the bidder.”

Global firm DLA Piper Australia has put out a Corporate Alert newsletter to clients, reviewing the need for this regulation.https://www.dlapiper.com/en/australia/insights/publications/2015/12/reverse-takeovers-consultation-paper-updated

Ms Taylor notes that the consultation will be of interest to NZX listed companies that are also listed on ASX.

“For those companies DLA Piper New Zealand believes that increased regulation is not required,” says Ms Taylor.

Ms Taylor says that currently, directors of New Zealand incorporated companies are required to certify that the consideration for new shares is fair and reasonable to the company (being the bidder) and all existing shareholders.

In addition, the NZX listing rules require shareholder approval to share issues where the amount exceeds 20% in any 12 month period. The rules also mirror the ASX rules in requiring shareholder approval if a transaction would change the essential nature of the business of the issuer. Any shareholder approval conditions to an offer will require care to ensure that they do not breach rule 25 of the Takeovers Code (conditions which are within the control of the bidder to satisfy are not permitted).

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