In the matter of Apiam Animal Health Limited

By Originating Process filed on 17 November 2025, the Plaintiff, Apiam Animal Health Ltd (“Apiam”) seeks orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) (“Act”) in relation to a proposed scheme of arrangement between Apiam and holders of its ordinary shares other than certain excluded shareholders.

By way of background, Apiam is an Australian public company limited by shares and listed on the Australian Securities Exchange (“ASX”). It is a rural veterinary business providing clinical and allied services to the companion animal and livestock industries. On 22 October 2025, Apiam, Pepper BidCo Pty Ltd (“BidCo”) and Pepper HoldCo Limited (“HoldCo”) entered into a Scheme Implementation Deed (“SID”), under which they agreed to implement the proposed scheme subject to the satisfaction, or waiver, of various conditions precedent. The proposed scheme provides for the acquisition of 100% of Apiam's ordinary shares by BidCo, which is a wholly owned subsidiary of HoldCo. BidCo and Holdco are controlled by Adamantem Capital Fund II (“Adamantem Fund”), which is managed and advised by Adamantem Capital Management Pty Ltd (together “Adamantem”).

The proposed scheme permits Apiam shareholders to elect to receive (in each case adjusted for any dividend declared and paid before implementation of the scheme) $0.87 in cash (“Cash Consideration”) per Apiam share (“All Cash Consideration”) or 0.87 fully paid ordinary shares in HoldCo (“Scrip Consideration”) per Apiam share (“All Scrip Consideration”) or a combination of 25% Cash Consideration and 75% Scrip Consideration for all of their Apiam Shares (“Mixed Consideration Option One”); or a combination of 50% Cash Consideration and 50% Scrip Consideration for all of their Apiam Shares (“Mixed Consideration Option Two”). The proposed Scrip Consideration involves “stub equity” in the form of fully paid ordinary shares in HoldCo. Each HoldCo share issued to Apiam shareholders as Scrip Consideration will be a Class B Share in the capital of HoldCo issued at an issue price of $1.00 per share, and Apiam shareholders who elect the Scrip Consideration will be bound by the terms of the HoldCo Constitution, a HoldCo Shareholders’ Deed and a Nominee Deed, unless entitled to hold HoldCo shares directly.

The Scrip Consideration and Mixed Consideration Options will be subject to scaleback arrangements in accordance with clause 5.5 of the scheme so that the total number of shares in HoldCo issued under the scheme does not exceed 24% of the total number of shares on issue in HoldCo. Apiam shareholders with registered addresses outside Australia will also be ineligible to elect All Scrip Consideration or the Mixed Consideration Options, unless HoldCo determines it is lawful and not unduly onerous to issue them with Scrip Consideration (“Ineligible Foreign Shareholders”). Ineligible Foreign Shareholders will receive All Cash Consideration for their shares. On 22 October 2025, fifty employees, officers and consultants of the Apiam business who hold interests in Apiam shares, or other Apiam shareholders associated with such persons, entered into binding commitment deed polls in favour of Apiam under which the holders of those Apiam shares have agreed to make an election to receive either the All Scrip Consideration or one of the Mixed Consideration Options if the Scheme becomes effective.

Under the terms of the SID, the Apiam board is also permitted to declare or determine to pay a fully franked dividend in cash of up to $0.10 per Apiam share prior to implementation of the Scheme. The payment and quantum of any special dividend is at the discretion of the Apiam board, subject to the requirements of the Act. The consideration payable to Apiam shareholders will be adjusted if a special dividend is declared and paid prior to the implementation of the scheme.

I made the orders sought by Apiam at the conclusion of the hearing on 12 December 2025. These are my reasons for doing so. I have drawn on the helpful submissions of Mr Izzo, with whom Mr Ryan appeared for Apiam, in this judgment.

Apiam reads the affidavit dated 17 November 2025 of Mr Luke Hastings, a solicitor acting for Apiam, who leads formal evidence of the SID and a company search for Apiam obtained from the Australian Securities & Investments Commission (“ASIC”) which establishes that Apiam is a Part 5.1 body.

Apiam also reads the affidavit dated 10 December 2025 of Mr Andrew Vizard, its non-executive chairman, which addresses the business and capital structure of Apiam, verification of the information related to Apiam in the proposed scheme booklet; notification to ASIC of the hearing and provision to ASIC of a draft of the proposed scheme booklet and the Scheme more than 14 days before the hearing; consents to act as chairperson or alternate chairperson of the proposed scheme meeting for the purposes of r 3.2 of the Supreme Court (Corporations) Rules 1999 (NSW) (Rules); the amount of the reimbursement or “break” fee contemplated by the SID as a percentage of the equity value of Apiam; the proposed treatment of Apiam performance rights if the scheme becomes effective; and the proposed manner of dispatch of materials to Apiam shareholders and other communications in relation to the scheme.

Apiam also reads the affidavit dated 9 December 2025 of Mr Angus Stuart, a director of Bidco and a managing director of an Adamantem entity, which addresses the proposed arrangements by which Apiam shareholders who made a valid election to receive Scrip Consideration will become bound by the HoldCo Constitution and the HoldCo Shareholders' Deed and (where applicable) the Nominee Deed; the funding of the Scheme Consideration and execution of a deed poll in favour of Apiam Shareholders; and the verification of the information related to the BidCo Group in the proposed scheme booklet.

Apiam also tenders the proposed scheme booklet, to which I was taken in submissions, and a letter dated 11 December 2025 which reserves its position as to s 411(17) of the Act to the second Court hearing and indicates that it does not propose to appear at the first Court hearing.

The Court’s role at the first Court hearing in respect of a scheme is to determine, in the exercise of its discretion, whether to approve the convening of a scheme meeting and the explanatory statement if it is satisfied of several matters, namely that the plaintiff is a Pt 5.1 body; the proposed scheme is an “arrangement” within the meaning of s 411 of the Act; the scheme is bona fide and properly proposed; ASIC has had a reasonable opportunity to examine the proposed scheme and explanatory statement, to make submissions and has had 14 days’ notice of the proposed hearing date of the first Court hearing; the procedural requirements under the Supreme Court (Corporations) Rules 1999 (NSW) (“Rules”) have been met; and there is no apparent reason why the scheme should not, in due course, receive the Court’s approval if the necessary majority of votes is achieved: Re Orion Telecommunications Limited [2007] FCA 1389 at [5]; Re Staging Connections Group Ltd [2015] FCA 1012 at [19]; Re Wridgways Australia Ltd [2010] FCA 1187 at [30]; Re Ellerston Global Investments Ltd [2020] NSWSC 879 at [25]; Re Vocus Group Ltd [2021] NSWSC 630 at [12].

The Court will not ordinarily summon a scheme meeting unless the scheme is of such a nature and cast in such terms that, if it achieves the statutory majority at the meeting, the Court would be likely to approve it. The Court will consider whether the proposed scheme is fit for consideration at the proposed scheme meeting, in the sense that it is of such a nature and cast in such terms that, if it achieves the statutory majority at the meeting, the Court would be likely to approve it on the hearing of a petition which is unopposed; and that members are to be properly informed as to the nature of the scheme before the scheme meeting: F T Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72, approved in Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 504; [1993] HCA 15; Re InvoCare Ltd [2023] NSWSC 1180 at [16]-[17] (“InvoCare”).

In Re Foundation Healthcare Ltd (2002) 42 ACSR 252; [2002] FCA 742 at [36] and [44] (in a passage cited with apparent approval in Re CSR Ltd (2010) 183 FCR 358 at [58]; [2010] FCAFC 34), French J observed that:

The Court is concerned, at the first Court hearing, with whether final approval should be given to the scheme, but whether the scheme is one which is adequately explained to those who have a financial interest in it, and whether there is any obvious flaw in the scheme, such that it would be inappropriate even for it to be submitted for consideration: Re Abacus Funds Management Ltd (2006) 24 ACLC 211 at [23]; [2005] NSWSC 1309; Re Villa World Ltd (2019) 139 ACSR 550; [2019] NSWSC 1207 at [18].

I am satisfied that each of the preconditions to the exercise of the Court’s discretion in s 411 of the Act is satisfied in this case. Apiam is a company registered under the Act and a Pt 5.1 body. The proposed scheme is an “arrangement” within the scope of s 411 of the Act where it involves the acquisition of the shares in Apiam in return for consideration being paid to its shareholders.

The scheme is bona fide and properly proposed, where it provides for the acquisition of shares in Apiam. An independent board committee (“IBC”) has unanimously recommended that Apiam shareholders vote in favour of the scheme, in the absence of a superior proposal, and subject to the independent expert continuing to conclude that the scheme is in the best interests of Apiam shareholders. Subject to the same qualifications, each member of the IBC intends to vote all Apiam shares held or controlled by them in favour of the scheme. The IBC’s recommendation is made on the basis of the Cash Consideration only, and it makes no recommendation in relation to the Scrip Consideration, as is common in stub equity transactions due to the speculative nature of the stub equity and the fact that the suitability of the stub equity depends on the characteristics and risk profile of individual shareholders: Re McGrath Ltd [2024] NSWSC 555 at [16] (“McGrath”). Two other Apiam directors (Mr Dixon and Ms Pepe) also recommend that Apiam shareholders vote in favour of the scheme on the same basis.

The independent expert, Kroll Australia Pty Ltd (Kroll) (“Kroll”), has concluded that the scheme is fair and reasonable and in the best interests of Apiam shareholders in the absence of a superior proposal, where Kroll assessed the value of an Apiam share on a controlling interest basis to be in the range of $0.77 to $0.93, and the Cash Consideration of $0.87 per Apiam share lies within this range. Kroll’s report evaluates the scheme only by reference to the value of the Cash Consideration and expresses the view that it is not possible to reliably estimate the value of a HoldCo share. Again, that position is common in relation to a stub equity alternative in a scheme, due to the difficulty in reliably valuing stub equity: McGrath at [17]. Kroll also expresses doubt as to whether the stub equity alternative is fair, but that does not seem to me to be reason not to convene the scheme meeting, where shareholders would only receive stub equity where they elected to do so and the scheme booklet adequately discloses its risks: Re VGW Holdings Ltd [2025] FCA 715 at [43]ff.

ASIC has also here had a reasonable opportunity to examine the proposed scheme and scheme booklet and to make submissions; it has had the necessary notice of this hearing; and, as I noted above, it has indicated that it does not currently propose to appear to make submissions or intervene to oppose the scheme at this hearing. The applicable procedural requirements under the Rules have generally been met, and, where Apiam proposes to provide notice of the second court hearing to the ASX, I will dispense with compliance with r 3.4 as contemplated by Practice Note SC Eq 4 at [26(f)].

Mr Izzo also addresses several further matters. First, Mr Izzo addresses the alternative forms of consideration involving stub equity. He recognises that ASIC had previously expressed concern about offers of “stub equity” consideration in control transactions where the consideration offered is shares in an Australian proprietary company and accepting shareholders are required to hold the offered scrip consideration through a custodial arrangement: ASIC Consultation Paper 312 Stub equity in control transactions; Re Capilano Honey Ltd [2018] FCA 1568 at [35]–[53]. He notes that ASIC subsequently executed ASIC Corporations (Stub Equity in Control Transactions) Instrument 2020/734 (“Instrument”), which modified the Act to prevent the use of Australian proprietary companies as “stub equity” vehicles, but does not prevent a bidder making a “stub equity” offer by an Australian public company with compulsory custodial arrangements in specified circumstances. I accept that the “stub equity” proposed to be offered to Apiam shareholders complies with the requirements of that Instrument, and I also note that ASIC has not intervened to oppose this application by reference to this matter. Mr Izzo also rightly points out that offers of “stub equity” as scheme consideration, including when held through nominees and where shareholders are required to enter into contractual arrangements such as a shareholders’ deed, have been approved in other schemes, and that scaleback arrangements are a common feature in these situations: Re Aveo Group Ltd and Aveo Funds Management Ltd [2019] NSWSC 1348 at [34]; Re BINGO Industries Ltd [2021] NSWSC 798 at [17]–[21]; McGrath; Re Healthia Ltd [2023] NSWSC 1296 at [16] (“Healthia”). I also note that all shareholders in Apiam are here entitled to elect to receive stub equity in HoldCo, subject to the scaleback provision, and no question here arises as to whether separate class meetings might be required if only some shareholders had access to that alternative: compare Re ThinkSmart Ltd [2022] FCA 1314 at [22]–[23]; Re ELMO Software Pty Ltd [2023] NSWSC 12 at [22] (“ELMO”); Re PSC Insurance Group Ltd [2024] FCA 946 at [38]–[39].

Second, Mr Izzo points out that, as I noted above, fifty employees, officers and consultants of the Apiam business who hold interests in Apiam shares, or other Apiam shareholders associated with such persons, have entered into binding commitment deed polls in favour of Apiam under which the holders of those Apiam shares (“Commitment Shareholders”) have agreed to elect to receive either the All Scrip Consideration or one of the Mixed Consideration Options in respect of all Apiam shares held by them if the scheme becomes effective. Mr Izzo submits, and I accept that, where the option to elect for All Scrip Consideration or one of the Mixed Consideration Options is also available to the other scheme shareholders, this does not require that the Commitment Shareholders should be treated as separate class: see Healthia at [23].

Third, Mr Izzo addresses the questions of performance risk. He points out that the scheme adopts the conventional mechanism of making the transfer of Apiam shares to BidCo conditional on the payments of the Aggregate Cash Consideration into a trust account operated by Apiam and also on the issue of the Scrip Consideration. He submits, and I accept, that Apiam shareholders are therefore protected against the risk that their Apiam shares are transferred without receiving the scheme consideration, and Apiam shareholders have the further protection of the deed poll entered into by HoldCo and BidCo in their favour and governed by New South Wales law. I accept that these are well established means of managing performance risk: ELMO at [27]–[28].

Fourth, Mr Izzo addresses the funding of the Cash Consideration payable in respect of the scheme. Mr Izzo notes that the evidence addresses BidCo’s ability to fund the scheme consideration and refers to paragraphs 28 to 35 of Mr Stuart’s affidavit and section 6.5 of the scheme booklet. In summary, the evidence is that BidCo intends to fund the Aggregate Cash Consideration payable under the scheme through a combination of equity and debt funding; BidCo is a wholly owned subsidiary of the Adamantem Fund which has committed capital of approximately $800 million; BidCo and Apiam have entered into an Equity Commitment Letter under which the Adamantem Fund agrees to provide cash funding to BidCo for the purposes of enabling BidCo to meet its obligations to pay part of the Aggregate Cash Consideration under the Scheme, and the obligation to provide the equity funding is conditional only on satisfaction or waiver of the conditions precedent in the SID; and the Adamantem Fund has uncalled but committed capital from investors in excess of the amount which would be required to fund the full amount under the Equity Commitment Letter. The evidence is also that BidCo has entered into Debt Commitment Letters with several lenders who have agreed to provide a debt facilities in an aggregate amount of up to A$181.15 million which will be available for funding, inter alia, part of the price for the acquisition of the scheme shares, and, on 8 December 2025, these facilities were documented in a definitive long form syndicated facility agreement and related definitive financing documentation and the finance subject to customary conditions which (other than conditions to be satisfied concurrently with drawdown) are expected to be satisfied by the second court date; and the proceeds that will be available to BidCo under debt facilities, together with the amounts available under the Equity Commitment Letter, are in excess of the amount that would be required to fund the maximum cash consideration payable under the scheme. I accept that this evidence sufficiently addresses this issue.

Fifth, Mr Izzo addresses the position as to Ineligible Foreign Shareholders (as defined). He points out that Apiam shareholders with registered addresses outside Australia will be Ineligible Foreign Shareholders unless HoldCo determines that it is lawful and not unduly onerous or impracticable to issue HoldCo shares to that scheme shareholder if the scheme shareholder so elects under the scheme. I accept that Ineligible Foreign Shareholders do not constitute a separate class for the purposes of the scheme meeting: Re Cirrus Networks Holdings Ltd [2023] NSWSC 1298 at [22].

Sixth, Mr Izzo addresses the question of Apiam performance rights. Section 9.2 of the scheme booklet discloses that Apiam operates various incentive plans under which employees and executive management personnel are offered Apiam performance rights which, subject to satisfaction of certain conditions, will, if vested, allow participants to receive fully paid ordinary shares in Apiam. None of Apiam’s directors hold any interest in Apiam performance rights. Broadly, the Apiam board will exercise its discretion to exercise all Apiam performance rights which have not vested by the effective date of the scheme, and holders of those performance rights will receive, for each Apiam performance right, one fully paid ordinary share in Apiam, and will be eligible to participate in the scheme in respect of those shares. This matter provides no reason not to convene the scheme meeting. Mr Izzo also submits, and I accept, that holders of Apiam performance tights who are also Apiam shareholders are not in a separate class of members by reason only that they also hold such rights: Re Foster’s Group Ltd (No 2) [2011] VSC 547 at [38]–[43]; Re Cashcard Australia Ltd (2004) 48 ACSR 738; Re Webster Ltd [2019] NSWSC 1907 at [33]; Re Nzuri Copper Ltd [2019] WASC 189 at [37]; McGrath at [25]..

Seventh, Mr Izzo notes the Apiam directors’ recommendation in respect of the scheme, to which I referred above. Section 9.4 of the scheme booklet and a footnote to the Chairman’s letter in that booklet disclose that the members of the IBC will each receive special exertion fee payments in specified amounts in respect of the scheme. I accept that the interests of the directors in those fees, where fairly disclosed, does not prevent them making their recommendation in respect of the scheme, does not provide a reason not to convene the scheme meeting and does not require they vote in a separate class where all Apiam Shareholders will receive the same consideration under the scheme: : Re Kidman Resource Ltd (2019) 139 ACSR 122; [2019] FCA 1226 at [115]; Re DWS Ltd (2020) 148 ACSR 616; [2020] FCA 1590 at [41]–[49]; Re Pendal Group Ltd (No 2) [2022] NSWSC 1648 at [25] (“Pendal”); Healthia at [22]; McGrath at [25]; Re Viridian Financial Group Ltd [2025] FCA 997 at [91]–[92], [97]. Section 9.4 of the scheme booklet also discloses that the Apiam IBC has approved the payment to a member of Apiam’s management team of a special exertion fee of approximately $111,000 which is not conditional upon the scheme being approved by Apiam shareholders at the scheme meeting and a transaction bonus of approximately $46,000 which is conditional on the scheme being approved by Apiam shareholders at the scheme meeting. Mr Izzo submits, and I accept, that employees who receive discretionary payments such as these are not in a separate class by reason only of such payments: Pendal at [24].

Eighth, Mr Izzo notes that section 6.7 of the scheme booklet discloses that the HoldCo Group has a relevant interest and voting power in 36,604,562 Apiam shares, approximately 19.8% of Apiam’s shares on issue, which arises from a call option held by BidCo over shares owned by CJOEA Family Company Pty Ltd, an entity controlled by Apiam’s founder, Dr Chris Richards, as announced to the ASX. BidCo’s call option includes commitments to vote these shares in favour of the scheme, subject to there being no superior proposal. Mr Izzo also points out that the call option gives BidCo the right to acquire these shares for the same amount as the All Cash Consideration and is exercisable only in specified circumstances. He submits, and I accept, that where the call option provides for the shares to be acquired at a price equivalent to the scheme consideration and is triggered by a competing proposal, this does not give rise to any different interest requiring the relevant shareholder: Re Aston Resources Ltd [2012] FCA 229 at [43]–[48]; Re Damstra Holdings Ltd [2024] NSWSC 284 at [15]. Any implications of that call option on the market for control of Apiam are properly left to the Takeovers Panel, if a contest for control arises, rather than treated as giving rise to a reason not to convene the scheme meeting.

Ninth, Mr Izzo notes that cl 12 of the SID provides that a break fee of $1,650,000 (defined in the SID as a "Reimbursement Fee") may be payable by Apiam to BidCo (“Break Fee”) or by BidCo to Apiam (“Reverse Break Fee”) in specified circumstances. The Break Fee and Reverse Break Fee represent approximately 1% of the equity value of Apiam (on a fully diluted basis) of approximately $163.47 million as implied by the Cash Consideration of $0.87 per Apiam share, which accords with the Takeover Panel’s guidance. The circumstances in which a break fee is payable do not include the failure of Apiam shareholders to approve the scheme at the respective scheme meetings or the failure of the Court to approve the scheme and this provision is not a disincentive to Apiam shareholders in their consideration of the scheme: Re Adelaide Bank Ltd [2007] FCA 1582 at [31]; Re Bolnisi Gold NL (No 2) (2007) 65 ACSR 510 at 513; [2007] FCA 2078. This matter gives rise to no reason not to convene the scheme meeting.

Tenth, Mr Izzo addresses the proposed manner of dispatch of scheme materials to Apiam shareholders, which raises no novel issues. Eleventh, he notes that Apiam will conduct an inbound telephone information line operated by Proxy Advice Pty Ltd trading as PGS Advisers (“PGS Advisers”), through which Apiam Shareholders can ask questions about the scheme or disclosures in the Scheme Booklet. The draft “Q&A script” for the shareholder information line is in evidence. Apiam has also engaged PGS Advisers undertake phone calls to the largest Apiam shareholders and drafts of the “Outbound Engagement Script”, "Discussion Guide" and the “Q&A Script” to be used by PGS Advisers on these calls are also in evidence. Apiam draws the proposed communications to Apiam shareholders to the Court’s attention, although no orders are sought approving them in accordance with current scheme practice: Practice Note SC Eq 4 at [26(k)]; InvoCare at [26]. There were no issues that I considered I needed to raise arising from those communications.

These matters, separately and together, give rise to no reason not to convene the scheme meeting.

Turning now to the wider issues relevant to the exercise of the Court’s discretion whether to convene the scheme meeting, the independent expert expresses the opinion that the scheme is fair and reasonable and therefore in the best interests of Apiam shareholders, in the absence of a superior proposal. As I noted above, the IBC and two other Apiam directors have unanimously recommended the shareholders vote in favour of the scheme, in the absence of a superior proposal and provided that the independent expert does not withdraw its conclusion that the scheme is in the best interests of Apiam’s shareholders. No apparent difficulty arises with the disclosure in the scheme booklet and the verification process adopted in respect of the scheme booklet. I am satisfied that there is nothing in the terms of the scheme or in its effect on Apiam’s shareholders that would otherwise warrant the Court declining to approve the scheme at the second Court hearing, if it receives the statutory majorities required by s 411(4)(a)(ii) of the Act at the scheme meeting.

For these reasons, I made the orders sought by Apiam at the conclusion of the first Court hearing on 12 December 2025.