Flinders Mines Limited
Flinders Mines Limited (Flinders) is a public mining company which is listed on the Australian Securities Exchange (ASX). The majority of Flinders’ share capital (~56%) is owned by a sole shareholder TIO (NZ) Limited (a subsidiary of Todd Corporation Limited) (TIO).
On 13 December 2018, Flinders announced on the ASX (Announcement):
- their intention to delist from the ASX and confirmed that an application had been made to the ASX
- an on-market buy-back for up to 10% of their issued shares which is to be funded by a loan from a subsidiary of the majority shareholder TIO (subject to delisting approval) (Buy-back)
- an unmarketable parcels sale process (subject to delisting approval), and
- a pro-rata rights issue following the Buy-back to repay the loan to the majority shareholder.
(collectively, ‘Proposed Transaction’)
On 24 December 2018 ASX advised it had provided approval for Flinders to delist, subject to certain conditions being met. One of these conditions required Flinders to obtain shareholder approval to delist via ordinary resolution. An ordinary resolution requires more than 50% of shareholders to vote in favour of the resolution. Flinders advised that the majority shareholder intended to vote in favour of the delisting.
The directors of Flinders recommended that the delisting be approved by shareholders and outlined their reasons for making this recommendation in the Announcement and notice of meeting lodged on ASX on 21 December 2018. Shareholders are encouraged to review the relevant announcements.
Takeovers Panel applications
Two (2) separate applications were made to the Takeovers Panel on 10 and 11 January 2019 respectively. The applications raised concerns that, amongst other things, the Proposed Transaction were designed to avoid the protections of the takeover provisions of the Corporations Act 2001. On 11 February 2019, the Takeovers Panel announced that it had made a declaration of unacceptable circumstances in relation to the applications. On 14 February 2019, the Takeovers Panel advised that it had accepted undertakings from Flinders and TIO in lieu of making orders, including that:
- Flinders agrees not to request ASX to remove Flinders from the official list of ASX except on the terms, or substantially on the terms, set out in the undertakings.
- Flinders will seek ASX formal approval of the de-listing but will only do so after a copy of Flinders and TIO’s undertakings and the Takeover Panel's published reasons for its decision are provided to ASX.
- Subject to the shareholders of Flinders approving the removal of Flinders from the official list of ASX, Flinders will instead of its proposed on-market buy-back propose a limit based equal access scheme off-market buy-back of its shares of up to the 10/12 limit under the Corporations Act 2001 (Cth) at a fixed price of $0.075 per share (unfranked) with a pro rata scale back.
- Flinders will prepare and issue a new notice of meeting to its shareholders in relation to the de-listing.
- Flinders will:
- provide appropriate guidance to its shareholders on the tax consequences of the buy-back in the form of an opinion from its lawyers in the buy-back booklet; and
- state in the buy-back booklet that it is seeking (and will endeavour to promptly obtain) an ATO tax ruling and expects the tax ruling to reflect the tax consequences described in the opinion.
- Flinders will extend the period of trading post shareholder approval and pre implementation of the de-listing to the date which is approximately four weeks after the announcement to ASX of the results of the buy-back, including any scale back.
- On request by TIO NZ, Flinders will provide reasonable assistance to place any ‘excess shares’ (as defined in the undertakings) required to be sold by TIO NZ at the buy-back price.
- In substitution for Flinders' previously proposed rights issue, Flinders and TIO NZ will agree to extend the term of their proposed loan to 3 years on terms which are no more favourable to TIO NZ than arm's length terms (which will include capitalised interest at a rate to be agreed and specified in the new notice of meeting).
- The loan amount will be increased such that it equals the amount required to fund the buy-back (up to A$25.3 million) plus A$3 million for Flinders' working capital and in the unlikely event of Flinders' incurring a franking deficit tax liability in connection with the unfranked dividend component of the buy-back, increased to the extent of that franking deficit tax liability, up to a further A$4.6 million.
- Flinders will use reasonable endeavours to seek alternative means by which Flinders' retail shareholders may trade their shares after the de-listing, provided the cost and compliance burden of such trading platforms do not exceed the benefits.
- Flinders agrees to amend the loan and its previously agreed 'Commitment Agreement' with TIO NZ to reflect the above.
- Flinders will make supplementary disclosures in the form of an ASX announcement regarding the changes to the de-listing, buy-back, loan, Commitment Agreement and rights issue arising as a result of the above matters.
On 13 February 2019 it was announced that Flinders lodged an application seeking a review of the Takeovers Panel’s declaration of unacceptable circumstances. This was subsequently withdrawn by Flinders on 20 February 2019.
On 4 March 2019, the Takeovers Panel released its reasons for its decision, which is available on its website.
Further details of the Takeovers Panel proceedings, including the declaration of unacceptable circumstances, the Panel’s reasons for its decision and full details of the undertakings, can be found on the media releases page on the Takeover's Panel website.
On 20 February 2019, Flinders noted the conclusion of the Panel proceedings and the undertakings. Flinders advised that the shareholder meeting to vote on the de-listing (previously scheduled for 26 February 2019) is now cancelled and the company will call a new meeting for the de-listing, further details of which will be included in a new notice of meeting to be sent to shareholders.
Revised delisting application
On 19 March 2019, Flinders made a revised application for de-listing to the ASX in accordance with the undertakings it provided to the Takeovers Panel. Following this, ASIC was involved in detailed communications with ASX in relation to this matter. On 10 April 2019, Flinders announced that it had withdrawn its revised de-listing application and will provide shareholders with an update on its future strategy in due course.
Questions on Notice
ASIC received Questions on Notice in relation to the affairs of Flinders. ASIC’s responses were submitted to the Senate Estimates Committee, which are publicly available on the APH Website (note: search for “Flinders Mines”).
What ASIC is doing
ASIC has considered the concerns shareholders have raised with us and we have also been in contact with Flinders and ASX.
ASIC was a participant in the Takeovers Panel proceedings and made various submissions to the Panel, details of which can be found on the Panel’s website. As a participant in the Takeovers Panel proceedings, ASIC is subject to confidentiality requirements and is not able to comment further in relation to these.
Following Flinders’ revised application to de-list on 19 March 2019, ASIC was involved in detailed communications with ASX.
ASIC continues to closely monitor developments in relation to Flinders. In line with ASIC's Information Sheet 152 Public comment on ASIC's regulatory activities (INFO 152), we only comment publicly on our activities in limited circumstances, as doing so may prejudice our enquiries.
ASIC will provide updates on our website as public information becomes available.
Shareholder communication with ASIC
ASIC has set a dedicated email address (firstname.lastname@example.org) to receive correspondence in relation to concerns about Flinders and the Proposed Transaction.
We ask that you direct any future correspondence in relation to this matter to this address as it is the most efficient manner for us to receive and consider the concerns raised.