Joe Demase (5G Networks)
The Australian Takeovers Panel has declined to conduct a review into another application on the acquisition of Webcentral by 5G Networks (5GN), this time focusing on claims of “unacceptable circumstances”.
The application, which came from financial services firm Keybridge Capital, was made in January and pushed, in part, for bidding withdrawal rights over claims of “clear unacceptable circumstances”.
Then, in early February, the Takeovers Panel declined to make a declaration of unacceptable circumstances and considered that it would not be against public interest to decline that declaration.
Keybridge then applied for the review into that decision less than a week later, to which the review Panel stated on 26 February that it agreed with the initial decision and that there were no appropriate orders available.
To recap the latest installment into the Webcental acquisition saga, Keybridge claimed that a $1.9 million success fee would be paid to Webcentral’s financial adviser if a 50.1 per cent interest in the digital services provider was achieved, with capital raising taking place afterwards — two aspects that Keybridge claimed were not disclosed in Webcentral’s target statements or 5GN’s bidders statements.
If they were disclosed, the financial services firm alleged that shareholders would have likely made a different decision around the bid, and as a result, sought for shareholders to have withdrawal rights, or for the bid to be withdrawn, as well as for Webcentral and/or 5GN to make corrective disclosures.
While the Takeovers Panel did say that the decision not to disclose the success fee was of sufficient seriousness that it could have been unacceptable circumstances, it decided not to extend the time under section 657C under the Corporations Act 2001 for the making of the application, which states that, outside of an extension granted by the Panel, such applications need to be made within two months of the circumstance in question.
In addition to the delay in the application being made, the Takeovers Panel also stated there were no satisfactory remedies available.
This is the second major attempt by Keybridge to quash 5GN’s acquisition of Webcentral, with the financial services firm previously flagging issues with the acquisition on claims of “coercive shareholder pressure” in late October to the Takeovers Panel.
After the Takeovers Panel decided not to pursue the claims a week later, Keybridge appealed that decision. The bid closed on 10 November, with the Takeovers Panel declined to review their decision later that month.
The decision from the Takeovers Panel also follows Webcentral’s financial results for the 12 months ending 31 December 2020, which saw its revenue from ordinary activities and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations both take a hit, declining 37.5 per cent to $52.3 million and 58.7 per cent to $6 million, respectively. Meanwhile, its after tax loss deepened by 28.2 per cent to $58.9 million in the red.
That loss, according to financial documents listed to the Australian Securities Exchange (ASX), includes a loss on disposal of its Enterprise business of $1.6 million, as well as a reversal of $9 million in revenue in relation to the settlement of a customer dispute.
