Case: Re MIA Group Ltd (2004) 50 ACSR 29
Outcome: referred to
holders of the options are treated as "creditors" in the proposal in accordance with the prevalent view (the authorities were reviewed by Barrett J in Re MIA Group Ltd (2004) 50 ACSR 29 at [3]-[9]) a view from which I will not depart. It is proposed that Eldorado Gold Corporation (Eldorado), a corporation incorporated in Canada, will, through its wholly owned subsidiary, Eldorado Pacific Pty Ltd (Eldorado Pacific), acquire all of the shares in and options issued by Sino Gold. Eldorado is a public company limited by shares with its headquarters in Vancouver (it was originally incorporated in Bermuda but was continued and now exists under Canadian law). It is listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE). Eldorado shares are traded on the TSX and the NYSE. Two schemes are proposed: a Share Scheme and an Option Scheme. It is proposed that there be one meeting of the shareholders (Share Scheme Meeting) but two meetings of the option holders (Option Scheme Meetings). There are two Option Scheme Meetings because those responsible have divided the option holders into two classes according to whether their options are "in-the-money" or "out-of-the-money". They are in-the-money if their exercise price is less than (i) for options with an A$ exercise price A$7.17, and (ii) for options with a C$ exercise price C$6.49. The options are out-of-the-money if their exercise price is equal to or greater than (i) for options with an A$ exercise price A$7.17, and (ii) for options with a C$ exercise price C$6.49. It is not for this Court, when considering an application under s 411(4)(b), to express any view as to whether the procedures and processes of the Court or under the Act are sufficient to satisfy the requirements for exemption to be enlivened: see Re Central Pacific Minerals NL [2002] FCA 239 at [31] per Emmett J; Re Simeon Wines Ltd [2002] SASC 204 ; (2002) 42 ACSR 454 at [21] - [26] per Lander J; Re Permanent Trustee Co Ltd [2002] NSWSC 1177 ; (2002) 43 ACSR 601 at [20] per Barrett J. Exclusivity under the Scheme Implementation Deed Eldorado and Sino Gold are parties to a Scheme Implementation Deed dated 26 August 2009 as amended on 26 October 2009 (SID). Clause 11 of the SID contains "no-talk" and "no-shop" provisions. The period during which those provisions operate is from the date of the SID until the earlier of 31 March 2010 ("End Date") and the termination of the SID. The "sunset date" is therefore 31 March 2010. It follows that the maximum overall period is just over seven months, and the period from the first court hearing to that date is close enough to five months. In Re APN News &amp; Media Ltd [2007] FCA 770 ; (2007) 62 ACSR 400 , I said (at [31]) that I did not regard an overall period of some three and a half months as unreasonably long. In Re MIA Group Ltd (2004) 50 ACSR 29 , Barrett J observed in relation to the Black-Scholes methodology (at [12]): ...its use for pricing purposes (and voting purposes) in the scheme of arrangement context is sufficiently reasonable, at least on a prima facie basis, to allow the proposed scheme in which it plays a part to go forward for optionholders' consideration on the basis proposed. In that case orders were made for the convening of two meetings only: a meeting of members and a meeting of option holders. His Honour noted (at [10]-[14]) that the Black-Scholes methodology took into account the different expiry dates and strike prices of the various series of options with which he was concerned, and that its use militated against the prescription of different classes. However, his Honour noted that it remained open for any question of unfairness to be raised at the second court hearing as an objection to approval. The class issue in the present case Kingsway is the holder of 588,830 in-the-money options. They are some of a series of 777,700 options which expire on 8 August 2012. Their exercise price was originally C$5.63 but, as a result of a consensual amendment, was reduced by 16c to C$5.47. Assif SA holds options in the same series. For all I know, it may hold the remaining 188,870 options in the series. In correspondence, Kingsway and Assif SA contended that in-the-money options should be valued, not according to the intrinsic value methodology, but according to the Black-Scholes methodology so that their holders would enjoy the benefit of the prospect of an increase in the value of Sino Gold shares down to the expiry date of the options, 8 August 2012. Finally, in Re MIA Group Ltd , above, Barrett J stated (at [14]): In the present case, consistent and indiscriminate application of the same pricing or valuation methodology to options having different characteristics in terms of exercise price and expiry, being a methodology that has regard to value criteria in one market at one time, should lay to rest any argument that those different characteristics so destroy community of interest as to indicate different classes. The matter is, to my mind, sufficiently clear to make it appropriate that a single meeting of all optionholders be convened on the basis that separate classes do not exist. Any contrary view can be agitated in due course should anyone see fit to raise it. Barrett J's reference to "consistent and indiscriminate application of the same pricing or valuation methodology" is reflected in the classes that have been adopted in the present Option Scheme: the intrinsic value methodology has been applied to all in-the-money options, while the Black-Scholes methodology has been applied to all out-of-the-money options. Accordingly, it is appropriate to describe the proposed in-the-money class as the intrinsic value methodology class, and the proposed out-of-the-money class as the Black-Scholes methodology class.