The Takeovers Panel (Panel) has sounded a timely warning in relation to the use of shareholder communications campaigns in the recent Lake Technology Limited (Lake Technology) decision. While in that particular matter the Panel declined to commence proceedings, the reasons for its decision provide useful guidance to parties seeking to conduct retail shareholder canvassing by way of telephone campaigns.
The Lake Technology decision concerned a bid by Dolby Australia Pty Limited (Dolby) for Lake Technology. The application to the Panel was made by Mr Robert Catto. Mr Catto alleged unacceptable circumstances in connection with Dolby's bid on the basis of communications made with Lake Technology shareholders by a shareholder relations firm hired by Dolby to assist with its bid. Mr Catto submitted that Lake Technology shareholders were misled in relation to various matters concerning calls made by representatives of the communications firm.
Specifically, Mr Catto complained that the representations made in relation to the compulsory acquisition procedure that could be used by Dolby were misleading, either directly or by omission.
The Panel considered the transcript of the call between the communications representative and Mr Catto as well as a recording of the conversation. The Panel also considered the existing information that was before Lake Technology shareholders, being the various supplementary bidders' statements and other correspondence from Dolby. One of the issues at hand was the threshold at which Dolby had a right to utilise the compulsory acquisition mechanism under Part 6A.1 of the Corporations Act (which in this case was a 96.1 per cent threshold).
The Panel's decision
Having reviewed these matters, the Panel considered that the relevant material did not support a conclusion the representative of the communications firm had made misleading statements in the telephone conversation with Mr Catto. Mr Catto in turn was unable to identify other former Lake Technology shareholders who accepted Dolby's bid on the basis of the telephone calls made by the representatives. The Panel noted that it did not review the script used by representatives during calls to Lake Technology shareholders. While each Panel matter has its unique factual matrix, this statement was interesting. The telephone scripts are in theory what shareholder communications firms use call after call.
Principles going forward
The Panel stated in its reasons that it recognised the right of bidders to communicate with target shareholders through oral communications. The Panel did, however, sound a warning in the area. It noted:
'However, the issues raised in the application highlight the difficulties shareholders can face in comprehending some of the complex legal issues that arise in relation to a takeover offer for their shares. In particular, the Panel notes that communicating clear, balanced and helpful information via telephone canvassing about complex legal issues can be especially difficult.'
The Panel also went on to note that where target shareholders had been provided with clear information in offer documents, persons canvassing shareholders by telephone should direct them to the relevant parts of those documents.
The Lake Technology matter is not the first time that shareholder communications campaigns have come under the spotlight. An application in relation to the campaign in Placer Dome's bid for AurionGold in 2002 was also the subject of a Panel application. In each case, the Panel declined to commence proceedings. However, the Panel's interest in the area and statements in the Lake Technology matter confirm that a bidder who does not pay sufficient attention to the details of a shareholder communications campaign may find itself in dangerous waters.
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The issue of recording telephone calls was recently considered in the Federal Court in Furnari v Ziegert  FCA 1080.
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