In the matter of PTB Group Limited

By Originating Process filed on 23 September 2022, the Plaintiff, PTB Group Limited (“PTB”), sought orders under ss 411(1) and 1319 of the Corporations Act 2001 (Cth) (“Act”) that it convene a meeting of its members to consider and vote upon a proposed scheme of arrangement between PTB and its shareholders. By way of background, PTB is an Australian public company limited by shares and its securities are listed on the Australian Securities Exchange (“ASX”) and is a global provider of maintenance, repair and overhaul services for turbo prop aircraft engines, aircraft and engine leasing, and aircraft and engine spare parts. The scheme, if implemented, would result in the acquisition of all the ordinary shares in PTB by a wholly owned subsidiary of PAG Holding Corp (“PAG”) and the subsequent delisting of PTB from the ASX. Under the terms of the proposed scheme, PTB shareholders will receive $1.595 per PTB share, being total scheme consideration of $202.9 million, and PTB could also declare and pay a $0.03 per PTB share fully franked dividend, conditional upon specified matters. By my judgment delivered on 10 October 2022 (Re PTB Group Ltd [2022] NSWSC 1494), I made the orders sought by PTB at the first Court hearing to convene the scheme meeting.

Mr Oakes, who appears for PTB, now submits that PTB has complied with all the procedural requirements set out in the Court’s orders and that the proposed scheme is fit for approval in accordance with the principles ordinarily applied at hearings for approval under s 411(4)(b) of the Act. I made the orders sought by PTB at the second Court hearing. These are my reasons for doing so, in which I have drawn on Mr Oakes’ helpful submissions.

By his affidavit dated 24 November 2022, Mr Oliver Talbot, who is a solicitor in the firm acting for PTB, gives evidence of lodgement of the orders convening the scheme meeting with the Australian Securities and Investments Commission (“ASIC”) and registration of the scheme booklet; that the scheme booklet was provided to Link Market Services Limited (“Link”) for dispatch; and that the notice of meeting and scheme booklet was uploaded to PTB’s website and to ASX’s announcement platform. He also refers to email notifications and documents sent to shareholders in the same form as was tendered at the first Court hearing.

By his affidavit dated 24 November 2022, Mr Craig Baker, a director and chair of PTB, addresses the conduct of the scheme meeting and identifies several questions then asked and the answers given. He addresses the results of voting at that meeting, which were announced on PTB’s website and to ASX on 17 November 2022. Mr Baker also addresses the position in respect of the PTB Permitted Dividend (as defined), as contemplated by the scheme, and the view formed by PTB’s directors that the giving of financial assistance by that dividend does not materially prejudice the interests of PTB or its shareholders or its ability to pay its creditors. He also refers to the PTB board’s resolution at its meeting on 24 November 2022 to authorise the PTB Permitted Dividend with a record date of 1 December 2022 and a payment date of 9 December 2022.

By her affidavit dated 25 November 2022, Ms BeeYen Nah, who is a client relationship manager with Link, refers to Link’s engagement to assist in distributing communications to PTB shareholders in connection with the scheme and in convening and conducting the scheme meeting; the steps taken to dispatch initial documents relating to the scheme; the PTB shareholder information line, which received no inquiries; the receipt of proxies; and the conduct of the scheme meeting. Ms Nah also addresses the process for registration of attendees at the scheme meeting; the number of shareholders attending the scheme meeting by comparison with attendances at earlier general meetings; and the result of the poll at the scheme meeting, where the resolutions were passed with the requisite majorities. She also notes that votes of PTB’s senior management and employees who were entitled to a transaction bonus, if the scheme became effective, were tagged, and the requisite majorities were reached even if those shares were disregarded.

By her affidavit dated 28 November 2022, Ms Alisha Kennedy, who is a partner in the firm of solicitors acting for PTB, gives evidence of publication of notice of the second Court hearing. Ms Kennedy noted that no shareholder had indicated that they would appear at the Court hearing to oppose the scheme, and no shareholder did so.

By his second affidavit dated 29 November 2022, Mr Talbot annexed a letter dated 28 November 2022 from ASIC indicating that it had no objection to the proposed scheme under s 411(17)(b) of the Act and a conditions precedent certificate in respect of the scheme executed by PAG and by PTB. PTB also tendered a notification (Ex P1) that the Commonwealth of Australia had no objection to the acquisition by PAG and its subsidiary of up to a 100% interest in PTB, for the purposes of s 75 of the Foreign Acquisition and Takeovers Act 1975 (Cth).

Mr Oakes submits and I accept that the evidence sufficiently addresses the procedural matters that arise at a second Court hearing for approval of a scheme of arrangement. The evidence proves the lodgement of the scheme booklet with ASIC; the service of the scheme booklet on PTB shareholders; that the scheme booklet as dispatched corresponds with that tendered at the first Court hearing; and that the letters and emails dispatched to shareholders also correspond with those tendered at the first Court hearing. There is also evidence of the receipt of proxy forms and collation of proxies; that the scheme meeting was held on 16 November 2022; and that the requisite statutory majorities were obtained at the scheme meeting. The evidence indicates that the resolution to approve the scheme was passed by 99.29% of votes cast and by 93.50% of Eligible Shareholders (as defined) present and voting and, as I noted above, the exclusion of tagged votes of PTB executives would not have affected the outcome of the meeting. There is also evidence that a deed poll has been executed; the Second Court hearing has been advertised and no shareholder has given notice to appear or appeared to oppose the approval of the scheme; ASIC has issued a letter under s 411(17)(b) of the Act; and there is proof of satisfaction or waiver of the conditions precedent to the scheme.

Mr Oakes also refers to the role of the Court at the second Court hearing as summarised by Beach J in Re Amcor (No 2) [2019] FCA 842 at [7]-[11] as follows:

Mr Oakes also refers to Re Wesfarmers Ltd (No 2) [2018] WASC 357 at [13], [15], where Vaughan J noted that the Court will usually approach its task on the basis that the members are better judges of what is in their own commercial interests than the Court, and that as such:

Mr Oakes also notes that his Honour there described the Court’s task as to ensure that all statutory and procedural requirements in relation to s 411 of the Act have been observed and that the Court must then determine in the exercise of its discretion whether to approve the scheme.

I also summarised the applicable principles in Re AusNet Services Ltd (No 2) [2022] NSWSC 79 at [9]ff as follows:

Mr Oakes in turns submits and I accept that, so far as the statutory and procedural requirements in relation to s 411 of the Act are concerned, PTB is a Pt 5.1 body and has complied with the orders convening the scheme meeting and with the Court Rules and has complied with the disclosure obligations under s 412(1) of the Act; as I noted above, the approval resolution was passed by the requisite majorities required by section 411(4)(a)(ii) of the Act, where 93.50% of Eligible Shareholders present and voting and 99.29% of all votes cast voted in favour of the scheme resolutions; a certificate under cl 3.2 of the scheme implementation deed stating that all of the relevant conditions precedent have been satisfied or waived, other than the condition relating to Court approval of the scheme, has been tendered; and the independent expert’s report has confirmed that the scheme is fair and reasonable and in the best interests of PTB shareholders. Mr Oakes submits and I accept that ASIC’s statement under s 411(17)(b) of the Act is sufficient to address the question raised by that section and the Court should be satisfied that the scheme has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Ch 6 of the Act.

Mr Oakes also points out that, while the concept of voter turnout has no statutory basis, it has become the practice to proffer such evidence in support of the integrity of the process, since a low turnout percentage might suggest a flaw in the procedure for convening the scheme meeting which warrants further consideration. Mr Oakes points out that the total turnout at the scheme meeting was better than the turnout at the past three PTB annual general meetings. I accept that, given the evidence as to the dispatch of the scheme booklet and the voter turnout percentages in comparison to previous annual general meetings, there is nothing to suggest a flaw in the procedure for convening the scheme meeting which should be of concern to the Court.

Mr Oakes also refers to the principles which guide the exercise of the Court’s discretion at the second Court hearing, to which I referred above. He submits and I accept that the Court should exercise its discretion in favour of approving the scheme, given the strong support of the shareholders as reflected in the voting results at the scheme meeting; the independent expert’s opinion that the scheme is fair and reasonable and in the best interests of PTB shareholders; the PTB directors’ recommendation that PTB shareholders vote in favour of the scheme resolutions; the disclosure in the scheme booklet of the potential benefits and disadvantages of the scheme; that there is nothing to suggest that the scheme has been proposed other than in good faith or that the shareholders voted other than in good faith or that any shareholder was oppressed; and the scheme contains measures to protect shareholders against performance risk. Mr Oakes also points out that the form of orders sought is orthodox and PTB seeks an order, commonly made in acquisition schemes, exempting it from the requirement that a copy of the Court’s order approving a scheme of arrangement be annexed to every copy of the company’s constitution issued after the order is made. I am satisfied that order should be made.

For these reasons, I made the orders ought by PTB at the conclusion of the second Court hearing on 29 November 2022.