Mergers and Takeovers: Financial Analysis Report for Institutions

This report delves into the intricacies of mergers and takeovers, examining key concepts such as associate relationships, regulatory frameworks, and the role of expert reports. It analyzes specific cases, including MYOB Limited, Yancoal Australia Limited, Just Group, and Lepidico Limited, to illustrate the practical application of financial principles and legal requirements. The report explores the applicability of ASIC regulations, particularly ASIC RG 25, and the mandatory requirements for the preparation of expert reports, emphasizing the importance of fairness, reasonableness, and independent analysis. Through these case studies, the report highlights potential conflicts, regulatory contraventions, and the consequences of misleading information in the context of mergers and takeovers, providing a comprehensive overview of the financial and legal considerations involved.

MERGERS AND TAKEOVERS
Course
Name
Institution Affiliation

MERGERS AND TAKEOVERS
Question 1
1. Associate
An associate is regarded as an individual or corporate who owns a percentage of the total
votes in the body corporate. They therefore include subsidiaries of the same company or
associations through relevant agreements such as controlling the composition of the body of
the board.
2. Associate Relationship
a) MYOB Limited
MYOB limited was listed in the Australian Stock Exchange. Archer capital announced a
takeover bid for MYOB in order to increase its portion of shareholding and also have some level
of control of the composition of the board. This relationship might be an association but it aimed
to reduce the possibility of a takeover. MYOB was then involved in a share buy back in order to
rectify the situation.
b) Yancoal Australia Limited
Yancoal Australia Limited is a company that operates in the coal industry that operates in
various sites in Australia. In 2008, the company applied to merge with Gloucester Coal Limited.
The takeover was however subject to arious legal conditions under the section 25 (A) of the
Foreign Acquisitions and Takeovers Act (1975). Yancoal had needed a large funds injection in
2013 and their request for a merger was accepted and Yanzhou subscribed for shares which
increased its shareholding. In this case, Yanzou qualifies as an associate. Also, Rio Tinto which
is Yancoal’s subsidiary is also its associate. Also in terms of board control Senrigan and Noble
are associates since they control the board’s composition to some extent.

MERGERS AND TAKEOVERS
Question 2
Applicability of the ASIC 25 – Takeovers – Just group Limited
In this case, Just group was a publicly listed company. Premier introduced an off market
takeover bid for Just Group in March 2008 by offering cash and share consideration. The
Chairman of Premier group told the press that they had confidence in Just group accepting the
offer. These statements contravened the ASIC regulatory guide 25 since the statement
communicated that the bid was well received by the institutions and that it was close to minimum
acceptance was misleading to the holders and the market. Also, the chairman was specific on the
percentage terms offered and according to ASIC 25, it is required that the bidder identifies the
substantial holder and provides details of what was told.
The Just Group therefore sought a declaration of unacceptable circumstances since the bidder not
only exaggerated the value of the proposed bid but also included misleading information about
the shareholder participation. They argued that the comments were capable of misleading the
shareholders and the market and therefore the chairman of premier was to retract the statement or
make clarified disclosures.
Question 3
1. Mandatory Requirements for the Preparation of Experts Report
First, the Expert should engage in an analysis of transactions. He should be able to outline the
methods and assumptions made in the generation of the report. Also, the expert report should
contain clear and concise communication. He should be able to provide statements in a
supportive manner. He should also provide required disclosures.

MERGERS AND TAKEOVERS
2. Expert Definition
It is the person that issues the independent report
3. Fairness and Reasonableness
Fairness means that the case would have handled in a similar way had there been other applicants
of the case. Reasonableness considers that the expert gave the opinion with a reasonable aspect
in mind in that it was logical to believe that the situation led to certain results and that a similar
conclusion could be arrived at by others still.
4. Lepidico Limited
In this case, there was conflict in the acceptability of the independent expert report. In 2017,
Lithium has announced a bid for Lepidico Limited. Lepidico released a target statement that
recommended its shareholders to reject the bid. BDO Corporate Finance prepared an
independent expert report which was of the opinion that the bid was not fair neither was it
reasonable. Lithium engaged Leadenhall to undertake a review of the expert report and they
wrote a bidder statement that Leadenhall finds that the takeover was indeed fair and reasonable.
However, Leadenhall noted that this conclusion was arrived at and based on the content of BDos
report and that it had not conducted any independent analysis. Leadenhall was therefore in
contravention of the ASIC Rg 111 since they did not have sufficient expertise and resources to
provide a thorough independent report. It was therefore required that Leadenhall provides
Lithium with a retraction statement, dispatch updated disclosures to Lepidico and that Lithium
provides withdrawal rights to Lepidico shareholders. Leadenhall provided a statemenet which

MERGERS AND TAKEOVERS
was misleading to shareholders especially since it had not conducted an independent analysis in
order to come to the conclusion.