It was announced on Friday that TPG had withdrawn from an
auction process for Billabong.
Billabong has been the subject of takeover speculation since
February this year and its continuous disclosure during that period
in respect of bear hug approaches by TPG and a second bidder have
been the subject of much commentary.
The two bear hug approaches by TPG, and the entry and subsequent
withdrawal of a second bidder into the auction process were all
announced by Billabong. Billabong also made announcements in
respect of press speculation about TPG's due diligence findings
and its possible withdrawal. On Friday, Billabong announced the
withdrawal of the TPG approach and the end of the auction
The trend for listed companies is to disclose confidential
approaches even though they are typically presented to the company
as confidential, incomplete, conditional and non-binding. The
reasons for this have varied in each case, and decisions have been
driven by risk of a leak, tactical advantage, a board with a desire
for transparency or to mitigate against any future class action
risk. There is also a growing consensus that a "reasonable
person" would expect such approaches to be disclosed despite
the uncertainty of a transaction ultimately emerging, particularly
where there is a credible private equity approach which will
customarily involve lengthy due diligence, management discussions,
negotiations and the involvement of multiple parties including
financiers and advisers.
No doubt scenarios such as this will be the subject of much
discussion in ASX's revised draft continuous disclosure
guidance note which is due out this week.
The Billabong example underlines the importance of stressing to
shareholders, as Billabong did, that no transaction may emerge from
a bear hug approach and that the approaching bear may ultimately
decide to "shut up" rather than "put up".
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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