Acquiring listed companies by scheme of arrangement

Under Australian law there are two main methods of obtaining control of a listed company: takeover bid and scheme of arrangement. For large transactions, schemes have increasingly become the preferred method of acquisition. Advantages of a scheme, as compared with a takeover bid, include that a scheme:

• requires a lower threshold of target shareholder approval in order to attain 100% ownership;
• has more flexibility in terms of the structure of the consideration that can be offered to shareholders;
• is an “all or nothing” structure, giving certainty of outcome; and
• has a more certain timeframe.

A recent example of an acquisition by way of scheme of arrangement was the acquisition of Arrow Energy – valued at A$3.5 billion (US$3.5 billion) – by a joint venture company owned by PetroChina and Royal Dutch Shell. As part of this transaction, Arrow Energy demerged its international assets into a new ASX-listed entity, Dart Energy.

Michael Sheng is a partner in the Shanghai office, and Marie McDonald is a partner in the Melbourne office, of Blake Dawson