Footnotes

Chapter 1 - Introduction

[1]           Explanatory Memorandum, paragraph 1.4.

[2]           Explanatory Memorandum, paragraph 7.4.

[3]           See The Amended Proposal for a Thirteenth Council Directive on Company Law, Concerning Takeover and Other General Bids (1997). In the UK and Ireland, the takeover threshold is specified as 30 per cent of the voting equity, and 33 per cent in France. In Germany and in the EC Commission directive, a threshold is not defined in shareholder percentage terms (see Hutson E, An International Comparison of Takeover Regimes, February 2000, commissioned by the Securities Institute of Australia and tabled at the PJSC hearing on 15 March 2000).

[4]           For recent discussion of the MBR see Bergstrom C, Hogfeldt P and Molin J, “The Optimality of the Mandatory Bid Rule”, Journal of Law, Economics and Organisation, Vol 13, 1997, pp 433-451;  Corporate Law Economic Reform Program: Proposals for Reform: Paper No. 4: Takeovers, 1997; Calleja N, “The Equality Principle and Prohibited Benefits in Takeovers”, Australian Business Law Review, Vol 27 (5), October 1999, pp 342-363; and Brown P and da Silva R, “Australia’s Corporate Law Reform and the Market for Corporate Control”, Agenda, Vol 5 (2), 1998, pp 179-188.

[5]           Mr Peter Lee, Committee Hansard, 15 March 2000, CS 1.

[6]           Section 611 item 5(e).

[7]           The mandatory bid must be fully unconditional unless approved by the Australian Securities and Investments Commission under its power to exempt and modify a takeover offer (section 655A).

[8]           A number of the above conditions were incorporated in the then draft Corporate Law Economic Reform Bill 1998 following a submission from the Australian Securities and Investments Commission to Treasury, in response to the Corporate Law Economic Reform Program: Proposals for Reform: Paper No. 4: Takeovers, 1997.  See Australian Securities and Investments Commission, Submission 3, which includes an extract of the submission to Treasury.

[9]           Journals of the Senate, No 15, 10 December 1998.

[10]         See Parliamentary Joint Statutory Committee on Corporations and Securities, Report on the Corporate Law Economic Reform Program Bill 1998, May 1999.

[11]         Parliamentary Joint Statutory Committee on Corporations and Securities, Report on the Corporate Law Economic Reform Program Bill 1998, May 1999, pp 11-12.

[12]         Hansard, Senate, 13 October 1999, P9253.

Chapter 2 - The mandatory bid rule

[1]           See Corporate Law Economic Reform Program Strategy Document, March 1997.

[2]           Corporate Law Economic Reform Program: Proposals for Reform: Paper No.4: Takeovers, The Treasury, 1997, p 7.

[3]           Corporate Law Economic Reform Program: Proposals for Reform: Paper No.4: Takeovers, The Treasury, 1997, p 22.

[4]           The arguments used in favour of the MBR are referred to in the literature. See, for example, Easterbrook F H and Fischel D R, “The Proper Role of a Target’s Management in Responding to a Takeover Offer”, Harvard Law Review, Vol 94, 1981, pp 1161-1177.

[5]           Corporate Law Economic Reform Program: Proposals for Reform: Paper No.4: Takeovers, The Treasury, 1997, p 22.

[6]           Australian Securities and Investments Commission, Submission 3, p 3.

[7]           Australian Securities and Investments Commission, Submission 3, p 4.

[8]           Australian Securities and Investments Commission, Submission 3, pp 5-7.

[9]           Australian Securities and Investments Commission, Submission 3, p 7.

[10]         Australian Securities and Investments Commission, Submission 3, p 3.

[11]         City Code Introduction, 1 The Code, A1.

[12]         Securities Institute of Australia, Submission 6, p 2.

[13]         Mr Peter Lee, Committee Hansard, 15 March 2000, CS 2.

[14]         Mr Peter Lee, Committee Hansard, 15 March 2000, CS 5.

[15]         Mr John Green, Committee Hansard, 15 March 2000, CS 15.

[16]         Mr Peter Lee, Committee Hansard, 15 March 2000, CS 3.

[17]         Mr Ted Rofe, Committee Hansard, 30 March 2000, CS 54.

[18]         The bid is conditional only upon the bidder receiving 50 per cent acceptance (this condition is required to be included in the mandatory bid): City Code, Rule 9.3. See also Mr Peter Lee, Committee Hansard, 15 March 200, CS2.

[19]         Farrar J H, Furey N E and Hannigan B M, Farrar’s Company Law, London, 1991.

[20]         Mr Peter Lee, Committee Hansard, 15 March 2000, CS10.

[21]         See The Amended Proposal for a Thirteenth Council Directive on Company Law, Concerning Takeover and Other General Bids (1997).  The first proposal for the takeovers directive was presented in 1989 and amended in 1990.  A streamlined framework directive was presented in 1996 and amended in 1997.  A reservation by Spain concerning Gibraltar prevented adoption of a political agreement, at the June 21 1999 Internal Market Council, on a common position in respect of the Commission’s proposal.

[22]         Hutson E, An International Comparison of Takeover Regimes, February 2000, p 14 quoting from EC Company Law.

[23]         EC, Internal Market, Company Law, Accounting and Auditing: Proposed Takeovers Directive – Questions and Answers, p 7.

[24]         The earlier 1990 amended proposal contained a mandatory bid threshold.  This was set at 33 per cent of the voting rights, although member states were allowed to fix a lower threshold.

[25]         Begg P F C, Corporate Acquisitions and Mergers: A Practical Guide to the Legal, Financial and Administrative Implications, Vol 2, Kluwer Law International, London, 1996, 7.58.

[26]         See Hutson E, An International Comparison of Takeover Regimes, February 2000, pp 20-22.

[27]         See Hommel U, “Regulating the Market for Corporate Control: Lessons from Germany”, International Journal of Business, 3(1), 1998, p 101.

[28]         Hutson E, An International Comparison of Takeover Regimes, February 2000, p 19.

[29]         Australian Securities and Investments Commission, Submission 3, p 3.

[30]         Mr Alan Cameron, Committee Hansard, 30 March 2000, CS 63.

[31]         Mr R Levy, Submission 4, p 1.

[32]         International Banks and Securities Association of Australia, Submission 9, p 2.  See also Mr Ted Rofe, Committee Hansard, 30 March 2000, CS 56-7.

[33]         Australian Securities and Investments Commission, Submission 3, p 3.

[34]         See Australian Securities and Investments Commission, Submission 3, p 5.

[35]         Mr R Levy, Submission 4, p 1.

[36]         Mr Alistair Lucas, Committee Hansard, 30 March 2000, CS 30.

[37]         Mr R Levy, Submission 4, p 2.

[38]         Mr R Levy, Submission 4, p 2.

[39]         Mr B Dyer and Mr G Hone, Submission 11, p 2.

[40]         Mr B Dyer and Mr G Hone, Submission 11, p 2.

[41]         See Mr Alan Cameron, Committee Hansard, 30 March 2000, CS 62 and Australian Securities and Investments Commission, Submission 3, p 5.

[42]         Deutsche Morgan Grenfell, Submission 12, p 3.

[43]         Australian Securities and Investments Commission, Submission 3, p 2.

[44]         Australian Securities and Investments Commission, Submission 3, p 2.  See also Mr Alan Cameron, Committee Hansard, 30 March 2000, CS 61.

[45]         Mr John Green, Committee Hansard, 15 March 2000, CS 19.

[46]         Mr A Lucas, Submission 5, p 4.

[47]         See for example, Mr A Lucas, Submission 4, p 3.

[48]         Mr Ted Rofe, Committee Hansard, 30 March 2000, CS 60.  The evidence on takeovers supports the view that underperforming companies are more likely to be the target of a takeover than successful ones.  Brown and da Silva report that “the sharemarket evidence unequivocally supports the hypothesis that firms that make takeover bids are, in general, firms that have done well and look to the takeover market as a means of building on their performance.  Target firms, on the other hand, typically display sharemarket returns that rank them firmly in the bottom half of corporate achievers.” See Bishop S P and da Silva R, “Takeovers: Who Win?”, JASSA: The Journal of the Securities Institute of Australia, Issue 4 (Summer), 1997, p 4.

[49]         Mr D Quigg, Submission 1, pp 1-2.

[50]         Mr Alistair Lucas, Committee Hansard, 30 March 2000, CS 29.

[51]         See Centre for Corporate Law and Securities Regulation, University of Melbourne, Submission 2, which attached an article by Bergstrom C, Hogfeldt P and Molin J, “The Optimality of the Mandatory Bid Rule”, Journal of Law, Economics and Organisation, Vol 13, 1997, pp 433-451.

[52]         Bergstrom C, Hogfeldt P and Molin J, “The Optimality of the Mandatory Bid Rule”, Journal of Law, Economics and Organisation, Vol 13, 1997, p 435.

[53]         The willingness to pay rule refers to the situation when the relative proportion of either benefit is greatest thereby intensifying competition for control of the firm.

[54]         Bergstrom C, Hogfeldt P and Molin J, “The Optimality of the Mandatory Bid Rule”, Journal of Law, Economics and Organisation, Vol 13, 1997, pp 441-2.  See also Bergstrom C and Hogfeldt P, An Analysis of the Mandatory Bid Rule, Stockholm School of Economics Working Paper No 32, November 1994.

Chapter 3 - Conclusions and recommendation

[1]           Corporate Law Economic Reform Program: Proposals for Reform: Paper No.4: Takeovers, The Treasury, 1997, p 23.

[2]           For a list of conditions contained in the Bill see the Introduction to this Report, paragraph 1.7.

[3]           Explanatory Memorandum, paragraphs 7.4, 7.5 and 7.7.

[4]           Arnold Bloch Leibler, Submission 7, p 3.  See also Mr Ted Rofe, Committee Hansard, 30 March 2000, CS 56-7.

[5]           Deutsche Morgan Grenfell, Submission 12, p 3.

[6]           Bergstrom C, Hogfeldt P and Molin J, “The Optimality of the Mandatory Bid Rule”, Journal of Law, Economics and Organisation, Vol 13, 1997, p 446.

[7]           Mr John Green, Committee Hansard, 15 March 2000, CS 15.

[8]           Mr Alan Cameron, Committee Hansard, 30 March 2000, CS 66.