Australia: Wraps and broker valuations - Southcorp Panel decision

Last Updated: 11 April 2005
Article by Fiona Gardiner-Hill

The Takeovers Panel has considered in detail for the first time the use of a 'wrap' document and given greater focus to the use of broker valuations by bidders.

The key aspects of the Panel's recent decision regarding Foster's bid for Southcorp relate to:

  • a 10-page wrap that Foster's proposed to bind with the bidder's statement to be sent to Southcorp shareholders but did not lodge with ASIC with its bidder's statement; and
  • Foster's use in the wrap of an average value for Southcorp shares derived from the numerical average of the nine most recent stockbroker reports on the value of Southcorp shares before Foster's announced that it had acquired an 18.8per cent interest in Southcorp.


When Foster's lodged its bidder's statement with ASIC and sent it to Southcorp and ASX, it did not lodge any wrap with it. However, following correspondence between the solicitors for Foster's and Southcorp, Foster's indicated that it intended to include a wrap with the bidder's statement to be dispatched to Southcorp shareholders. An advanced draft of the wrap was provided to Southcorp one week after the bidder's statement had been lodged.

The wrap was 10 pages and included important dates, a letter from the Foster's Chairman to Southcorp shareholders, pages headed 'Features of the Offer', 'Why You Should Accept' and 'What you Should Do' and the table of contents of the bidder's statement. It included a statement on the premium of the offer price above the 'average broker valuation' for Southcorp. This was supported by a note explaining that the average broker valuation was based on the valuation published by nine brokers in the most recent broker research reports available to Foster's prior to the day it announced the purchase of the 18.8per cent stake.

Foster's had released information on broker valuations before it lodged its bidder's statement with ASIC.

Southcorp's contentions

Southcorp contended that the wrap contained information which the Corporations Act required to be included in the bidder's statement lodged with ASIC one week earlier and that, as a result, the directors of Southcorp had not had a reasonable time to consider all material information that should have formed part of the bidder's statement.

Southcorp also maintained that:

  • the statements regarding broker valuations were material information which should have been included in the bidder's statement
  • Foster's should have obtained the consent of the brokers to use the valuations in the wrap
  • the statements were misleading and deceptive as they were not accompanied by a discussion of the brokers' methods, assumptions and qualifications and the average broker valuation should have been updated when the brokers updated their reports.ASIC 'strongly supported' its stated policy position that the brokers' consents should have been obtained to the issue of a statement based on their views.

The Panel's decision—only a 'rap' on the 'wrap'

The Panel considered that Foster's should have lodged the wrap with the bidder's statement, and that 'unacceptable circumstances' existed when Foster's lodged the bidder's statement with ASIC and gave it to Southcorp without the wrap. However, the Panel ultimately decided that the unacceptable circumstances no longer existed and that it would not be in the public interest to make any declaration of unacceptable circumstances or any orders.

Following concern expressed by the Panel during the proceedings, Foster's undertook to send to each Southcorp shareholder a clarifying letter explaining the period over which the broker reports had been issued and stating the range of the valuations.

The Panel concluded that Foster's was not required to obtain the consent of the nine brokers to include the average valuation in the wrap and that the use of the average valuation without further information (such as the brokers' identities and the assumptions and methodology of their valuations) did not constitute unacceptable circumstances.


Section 636(1)(m) of the Corporations Act requires a bidder's statement to set out 'any other information that is material to the making of the decision by a holder of bid class securities whether to accept an offer under the bid' and 'is known to the bidder'.

Section 633(6) of the Corporations Act contemplates that a bidder can send additional information to target shareholders with its bidder's statement, provided the information is also sent to ASIC, the ASX and the target company, at the time the bidder sends the bidder's statement to the target shareholders.

The Panel considered that part of the wrap was clearly material to a shareholder's decision and that Foster's (despite its arguments to the contrary) also clearly considered it to be material, given the prominence and presentation of the wrap. Under the principle that target directors should have reasonable time to assess the merits of a takeover, Southcorp directors should have had that information in the form that it was proposed to be presented, no later than they had received the bidder's statement.

The Panel accepted that a bidder can send separate documents with the bidder's statement under section 633(6). However, the Panel said that that was subject to the proviso that any information or statements in the wrap which were material to a Southcorp shareholder's decision should also have been included in the bidder's statement. Further, the presentation of the additional information should not be materially different from the way the information was presented in the bidder's statement lodged with ASIC.

Although the Southcorp directors did not receive the full two weeks normally required for them to consider the information in the bidder's statement, the Panel was not inclined to make orders delaying dispatch of the bidder's statement solely on the basis that the wrap had not been lodged at the same time as the bidder's statement. The time available to the Southcorp directors (one week) was sufficient given their previous exposure to the content and the fact there were only three substantive pages they needed to address.

The Panel made it clear that this decision does not stand for the proposition that broker valuations will always be material information required to be disclosed under section 636(1)(m).

Broker valuations

The Corporations Act requires a bidder to obtain the consent of a person to the use in a bidder's statement (or accompanying document) of a statement said to be made by the person or to be based on a statement made by the person.

The Panel recognised ASIC's strong support for its stated policy that brokers' consent should have been obtained. However, it regarded the use of the broker reports as resembling the use in a bidder's statement of market prices, and not as resembling an independent expert's report. The Panel considered that because the average valuation does not convey something said by any one of the nine brokers, consents of the brokers were not required for Foster's use of the average valuation, nor the use of the end points of the range of broker's valuations in the explanatory letter to shareholders.

The Panel found that the use of the average value without the brokers' identities and assumptions and methodologies of their valuations did not constitute unacceptable circumstances.

The Panel noted that the policy behind section 636(3) is to prevent a bidder from shielding themselves from liability for a statement by attributing that statement to someone else, unless that person accepts liability by consenting to the use of their statement in that context. However, the Panel was of the view that this policy has no sensible application to the averaged broker valuation, as it could not meaningfully be attributed to any one of the brokers and for which no one of them could meaningfully take liability.

The Panel also commented that:

  • bidders and targets should be free to use aggregated valuations as a useful (but not infallible) indicator of market sentiment where it is useful information for shareholders
  • care should be taken in presentation of broker valuations (such as the disclosure of the range of values) and relevant and current valuations excluded only for good and specific reasons
  • bidders should disclose carefully the period from which the valuations come and the bidder's reasons for choosing the period
  • in the particular circumstances, there was no requirement for Foster's to update the average broker valuation and that if Southcorp considers there has been a material change in the average value it was open to provide its view of the correct value to Southcorp shareholders
  • although it was not misleading or deceptive to include a note inviting shareholders to request copies of the broker reports, this was counterproductive if shareholders would not be able to obtain the reports if not already a client of the broker.

The Panel's concern with the use of broker forecast averages without the further information subsequently sent out by Foster's was that they may suggest that there was a greater consensus among analysts than was actually the case.

In particular, the broker valuations used by Foster's had a range of $2.00 to $4.00 and were prepared over a period of five to six months.

The Panel indicated that it would refer the issues raised in the proceedings concerning the use of broker valuations and consent to the wider Panel with a suggestion that a guidance note on the subject be considered.


The Southcorp decision says that material information should go into a bidder's statement, not an unlodged wrap. But more importantly it sets the test of materiality not just in terms of contents but also in terms of how it is presented. The more the information is presented as important to a shareholder, the greater the risk that it will be found to contain information which is material to a shareholder's decision whether to accept the offer. Given the 'selling' purpose of a wrap, this leaves limited scope for it to contain information which is not also set out in similar form in the lodged bidder's statement. While the Panel did not make an order of unacceptable circumstances in the context of the Foster's wrap, now that the Panel has given some guidance, it seems likely to give more than a 'gentle rap' next time.

On 21 January, ASIC has released a draft replacement to Practice Note 55, which concerns consents to quote statements in disclosure documents. The consent area is clearly one to watch.

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”

Related Video
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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

    By clicking Register you state you have read and agree to our Terms and Conditions