Grant Thornton scheme light on disclosures

The 168 eligible shareholders of Grant Thornton Australia Limited (GTAL) might be generally fixated on the windfall coming via their global parent’s offer to buy them out, but that doesn’t mean the proposed scheme of arrangement (Scheme) denies them the chance to gripe.

“This scheme is out of the ordinary in several respects, in that it involves a company operating a professional partnership and differs from the common form of scheme both in the way the consideration payable is structured and in a departure from the customary but not required practice of an independent expert report in the scheme booklet.” Justice Ashley Black.

Last week the parties came before the NSW Supreme Court seeking initial guidance in respect of the draft scheme booklet and planned meeting of shareholders.

Having due diligenced the bejesus out of the scheme booklet in his chambers it wasn’t long before Corporations Judge Ashley Black interrupted the applicant’s counsel to declare that the proposed arrangement was, in the judge’s eyes, somewhat though not fatally, unorthodox.

Firstly, the scheme booklet contained no independent expert report, an inclusion his honour conceded was customary but not required.

Secondly, there was no way for each offer recipient to know how their offer had been calculated in circumstances where each offer was a mix of cash and scrip in the bidder, Turbo Fast Track Bidder Pty Ltd.

Nor did the scheme booklet contain any disclosures in respect of the offers being made to GTAL’s board of directors, all of whom are recommending shareholders accept the deal, or in respect of the specific offer and any incentives being dangled in the direction CEO Said Jahani.

The court heard that the offer being made to four partners freshly minted in January this year would be all scrip, described in the Scheme Booklet as Turbo LP units.

But Justice Black was more interested in the underlying principle employed to show how the ratio of scrip to cash was calculated for each GTAL shareholder’s individual allocation.

“You proceed on the assumption that shareholders receive somewhat different rights under the scheme,” the judge informed GTAL’s counsel.

“It’s not altogether clear that they are informed in the scheme booklet about how their rights might differ in accordance with some clearly identified principle.”

“Having regard to the indicative allocations there are four new partners admitted between 12 January 26 and 9 Feb 26 who are proposed to receive 100 per cent scrip,” GTAL’s counsel said.

“Otherwise, the range of indicative allocations is from 14 per cent cash – 86 per cent scrip up to 56 per cent cash – 44 per cent scrip.

“So that we propose to include in the Scheme Booklet. The numbers will need to be subject to verification and if convenient we’ll provide that evidence at the second hearing,” counsel said.

No doubt the underlying principle has been developed to make the offer as irresistible as possible but given the anonymity in respect of allocations, speculation and envy will be rife around Grosvenor Place’s cafes and pubs.