In brief
- The Takeovers Panel has declined to make a declaration of unacceptable circumstances in the recent New World Resources Limited 02 case, despite concerns about the bidder's delay in disclosing on-market purchases of shares at prices above the agreed bid price.
- This contrasts with the Virtus Health Limited 03 decision, where the Panel required the bidder to immediately announce any such purchases to ensure the market was properly informed.
- The Panel's approach in the New World case indicates a slightly more relaxed stance on the disclosure requirements. This could be explained by the on-market purchases occurring prior to the bid period, but we will need to wait to see the Panel's detailed reasons. In any event, the decision highlights the importance for bidders to clearly reserve their right to purchase shares above the bid price and promptly disclose such transactions to the market.
New World Resources Limited 02
There is an interesting recent Takeovers Panel decision about the ability of a bidder to buy shares on-market at prices above the bid price without first making an announcement to the market.
The decision relates to the contested bid situation for New World Resources Limited. New World agreed a scheme of arrangement with Central Asia Metals Plc pursuant to which Central Asia would acquire New World for 5 cents per share. After the transaction was announced, but before New World had published its scheme booklet, another party, Kinterra Capital, acquired a 12% stake in New World.
In response, Central Asia renegotiated its agreement with New World, increasing the price to 5.3 cents per share and converting the transaction to a concurrent scheme and off-market takeover bid. The revised transaction (and associated formal agreements) was announced before market open on 20 June 2025.
At 11.13am that morning, Central Asia began purchasing shares on-market at a higher price, namely 5.5 cents per share. It did not immediately disclose this change and acquired 5% of issued shares. Eventually, New World announced at 6.03pm that Central Asia had informed it of the purchases after market close. New World said Central Asia proposed to increase the consideration under the concurrent scheme and takeover bid to 5.5 cents per share and that the transaction documents would be amended.
Kinterra (who by this point had made its own takeover bid for New World) complained to the Takeovers Panel, arguing that Central Asia had acquired the shares on 20 June 2025 in contravention of various provisions in the Corporations Act. Consequently, the auction for control of New World was not taking place in an "efficient, competitive and informed" market. Kinterra sought orders requiring Central Asia to dispose of its New World shares.
The Panel declined to make a declaration. Although the detailed reasons are yet to be published, in its press release, the Panel said that while it was "concerned" about the delay in the market being notified of Central Asia's offer price increase, it was not satisfied that the circumstances were sufficient to justify the making of a declaration of unacceptable circumstances.
Virtus Health Limited 03 [2022] ATP 10
The circumstances in New World are similar to those regarding Virtus Health Limited in 2022 (see our article here).
In Virtus, the company was subject to two control proposals, one a concurrent scheme and takeover bid from CapVest and the other a takeover bid from BGH Capital. In its bidder's statement, BGH reserved the right to buy shares on market at prices different to the bid price (without specifying the varied price per share). That was said to comply with rule 5.13.1 of the ASIC Market Integrity Rules, which provides that a bidder must not buy shares on-market during the bid period for a price that varies from the consideration offered under the bid, unless an announcement has been made first. CapVest challenged this in the Panel. It argued that rule 5.13.1 prevented BGH from buying shares on-market at a price higher than the prevailing bid price without first announcing that price to the market. In CapVest's view, this was necessary to ensure the market was properly informed.
The Panel considered that the exact requirements of rule 5.13.1 were not clear, so decided the case based on ordinary Chapter 6 principles. The Panel said Chapter 6 clearly permits on-market purchases during an off-market takeover bid above the bid price without prior disclosure of the increased price. However, the Panel was concerned about the potential delay between such an on-market purchase being made and then disclosed. Accordingly, the Panel required BGH to undertake to immediately announce if it did make any on-market purchases above the bid price. On the basis of BGH giving that undertaking, the Panel declined to make a declaration.
Commentary
The decision in New World shows the Panel taking a slightly more relaxed approach to the issue of disclosing on-market purchases above the bid price. Can this be explained by any difference between the New World and Virtus situations?
In New World, the on-market purchases occurred prior to the bid period (that is, prior to the service of Central Asia's bidder's statement on New World). This means rule 5.13.1 of the ASIC Market Integrity Rules did not strictly apply to Central Asia at the time of the purchases and no prior announcement under those rules was strictly necessary. It also means the on-market purchases did not lead to an automatic variation of the bidder's offer under section 651A of the Corporations Act. However, it is not clear that either of these reasons would justify any change in the Panel's approach.
As mentioned above, Virtus was decided based on ordinary Chapter 6 principles. If anything, the circumstances in New World had more potential to be unacceptable than in Virtus — Central Asia's on-market purchase of a 5% stake at 5.5 cents occurred only a couple of hours after the announcement of the agreed bid at 5.3 cents and was made without Central Asia disclosing any intention to purchase shares above the bid price. Although the purchases did not lead to an automatic variation under section 651A, the minimum bid price rule in section 621(3) had the same practical effect. Most notably, in Virtus, BGH had not actually made any on-market purchases at the time of the hearing, and the Panel effectively decided the case in the hypothetical. In New World, presumably there were in fact shareholders who had sold in the afternoon on 20 June 2025 at a price which they thought was higher than Central Asia's proposed bid. They may have been annoyed to learn Central Asia was now underwriting 5.5 cents with its revised offer (albeit subject to the bid conditions).
We will need to wait for the Panel's detailed reasons to see how these issues were addressed by the parties and whether any mitigating factors were present. However, even if it was not prepared to make a declaration and require Central Asia to dispose of the shares acquired on 20 June 2025 (or permit shareholders who felt they had suffered a loss to apply for compensation), the Panel could have restricted Central Asia from buying any further shares on-market unless Central Asia first announced that it reserved the right to do so and/or required Central Asia to immediately announce any such purchases. This would have emphasised the importance of ensuring the market remains informed, which in a competitive situation is equally important prior to the bid period as it is during it.
After the Virtus decision, ASIC said that it would consult on introducing a rule that required the bidder to announce the increased price before it could purchase shares at a higher price. No consultation has occurred yet, but one thing ASIC could look at is extending rule 5.13.1 of the ASIC Market Integrity Rules to operate from when a bid has been announced, instead of from when the bidder's statement has been served.
Despite the decision in New World, bidders would be well advised to clearly reserve their right to purchase shares at a price above the prevailing bid price when announcing their bid, instead of waiting to do so in their bidder's statement, and to immediately disclose any such purchases. That will reduce the risk of the bidder creating an uninformed market and being challenged in the Panel.
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