Australia: Lessons From the ALH Takeover Contest

Last Updated: 16 December 2004
Article by Rodd Levy

The recent takeover contest for control of Australian Leisure & Hospitality Limited (ALH) between Bruandwo (the Woolworths/Mathieson vehicle) and CMM Hotel & Retail Investments (the Coles Myer/Macquarie Bank vehicle) generated extensive media coverage in Australia as the two bidders competed for control of the company pushing the price well beyond the range assessed by the independent expert.

In this brief article, we examine some of the tactical lessons that emerge from that contest.

Scheme v Bid

Prior to the bid, it was generally thought that a scheme of arrangement was too cumbersome to be effective to compete against a takeover bid, particularly an unconditional bid which could offer immediate payment (as was the Bruandwo bid). The ALH takeover suggests that this will not always be the case.

The CMM scheme proposal was 'unconditional' in the sense that it only required shareholder approval (50 per cent of the shareholders voting and 75 per cent of shares voted at a meeting) and court approval. CMM was taking all other risks, such as material adverse changes and any regulatory and third party approvals.

The key hurdle was whether CMM could gain the 75 per cent of votes needed.

Voting at scheme meetings in Australia depends to a large degree on the level of interest (or apathy) amongst shareholders. Generally, approximately 50 per cent to 70 per cent of shares on issue are voted at scheme meetings. On that basis, Bruandwo's 16 per cent stake might have been seen as potentially a blocking stake which would mean that successfully proposing a scheme or arrangement would be extremely difficult.

However, in this case, the concentration of shares in the hands of a relatively small number of institutions and arbitrageurs meant that CMM proposal (and the earlier Newbridge acquisition proposal) had a good prospect of achieving the necessary votes. To counter the Bruandwo stake, votes in favour of the scheme would have been required from 48 per cent of issued shares (that is, three times 16 per cent to ensure the votes of 75 per cent of the shares voted were obtained). Given the state of ALH's register, this target was achievable. In fact, within less than two days after Bruandwo's bid was successful, Bruandwo received acceptances which took its holding to over 73 per cent of issued shares, which emphasised the concentration of shares in ALH.

What about immediate payment? It was claimed that Bruandwo's offer was worth five cents per share more than the CMM proposal purely on the time value of early payment. However, this overstates the importance of the factor, as delayed payment means the bidder enjoys the time value of the consideration, enabling it to compete on price.

Therefore, the ALH contest provides an illustration of a scheme proposal being a realistic alternative to an unconditional takeover bid.

A Starting Stake Of 16 Per Cent Is Good, But 19 Per Cent Is Better

Bruandwo's pre-bid stake of approximately 16 per cent would have prevented a rival bidder achieving the 90 per cent threshold to effect compulsory acquisition following a takeover bid. However, given the concentration of shareholdings on the ALH register, it was not enough to deter a scheme of arrangement.

A larger stake would have put Bruandwo in a stronger position, particularly if its stake had been more than 19 per cent. In that case, Bruandwo would have also been able to use the three per cent in six months creeping rule and could have crept to up to 22.9 per cent by the time of any scheme meeting proposed by CMM. That would have meant the chances of a scheme being successful would have greatly diminished.

Conditional Variations Are Acceptable If Clearly Explained

At several points in the contest, Bruandwo announced that, if it achieved an acceptance level of 20 per cent or 50 per cent, it would increase its offer from $3.15 per share to either $3.40 or $3.50 per share. The legitimacy of this tactic was challenged by CMM in the Takeovers Panel on the basis that, given the bid was unconditional, promoting Bruandwo's bid as a $3.50 bid was potentially confusing to shareholders who may not have appreciated that they would only receive the original price of $3.15 if the threshold was not met.

In considering this technique for the first time, the Panel decided that, provided the effect and risk of such informal variations are clearly articulated, there is nothing unacceptable per se with such a variation. However, the Panel is considering these techniques further and may issue further guidance to the market.

Undue Time Pressure Is Unacceptable

Bruandwo announced, at one point, that if it received acceptances of more than 20 by 6.00 pm that day, it would increase its bid and, if it did not, it would close its bid and then seek to frustrate the proposed CMM scheme of arrangement. As this announcement was made at 2.15 pm, shareholders and the market had less than four hours (at most) to react.

During the four hour period, CMM complained to the Takeovers Panel, which met and decided that this time pressure was unacceptable. A key objective of the legislation is to give shareholders a reasonable time to consider proposals. The Panel forced Bruandwo to extend its bid for seven days.

In light of this example, it will be risky for bidders to try to impose time limits of less than seven days, unless there are exceptional circumstances that would make such a time limit reasonable.

Acceptance Facilities

Part of the Takeovers Panel proceedings concerned the need to disclose any acceptance facility that Bruandwo or its agents or advisers had in place. An acceptance facility is an arrangement whereby shareholders may authorise an intermediary to effect an acceptance on their behalf once a particular condition is satisfied (generally the bidder reaching a particular shareholding threshold).

In this case, the Panel considered these facilities for the first time and decided that the use of them was acceptable, provided there was a high level of detail disclosed about the facility's operation and the number of shares accepted under the facility. This was consistent with the daily obligations on a bidder to disclose 1% movements in holdings during a bid period.

Disclosure Of Rival Bids

One point taken by Bruandwo in the Panel proceedings was that CMM should be required to respond to the latest Bruandwo bid at least three business days before the close of the Bruandwo bid. It was argued this was consistent with the objective of ensuring a reasonable time for shareholders to consider a bid, particularly as CMM had announced it would respond before Bruandwo's bid closed and urged ALH shareholders not to accept the bid in the meantime.

The Panel rejected this argument on the basis that there was sufficient commercial pressure on CMM to respond in sufficient time or risk ALH shareholders accepting Bruandwo's rival bid and that this was not a part of Australian takeover practice. Therefore, the Panel did not see fit in this case to invoke any regime governing the finalising of rival bids at the end of a long takeover period (as is the position in the UK).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.