Expro International Group Plc, Re Companies Act 1985 & 2006

The court considered an application by Expro for the sanction under Part 26 of the Companies Act 2006 of a takeover scheme of arrangement and an application by certain shareholders for an adjournment of the sanction hearing to allow a potential competing bid to crystallise. The principal legal issues were the court's approach to adjournments of scheme sanction hearings in the light of a possible competing offer and the interaction between the court's jurisdiction over schemes and the Takeover Code (notably rules 2.5, 2.8 and 32.5 and appendix 7 paragraph 4).

The court held that shareholders had voted on the basis of clear disclosure that the court hearings would not be adjourned unless a rule 2.5 announcement was made by 20 June and that the independent board had properly assessed Halliburton's late proposal, rejecting it because a 10p increase was insufficient when weighed against payment delay and transactional risk. The court refused the adjournment because granting it would perpetuate uncertainty to the potential disadvantage of shareholders and would be inconsistent with the degree of certainty the Takeover Code aims to secure.

Background and parties: Expro applied for the court's sanction of a scheme under Part 26 of the Companies Act 2006 to effect the acquisition of the company by a consortium acting through Umbrellastream Limited. Halliburton had expressed interest and ultimately made a late indicative proposal. Two substantial shareholder groups sought an adjournment of the court sanction hearing to 7 July to permit Halliburton further opportunity to pursue a competing offer.

Procedural posture and relief sought: The applicant company sought sanction of the scheme; certain shareholders applied for an adjournment of the sanction hearing. The Takeover Panel participated and had previously required Halliburton to clarify its position by 20 June under the Takeover Code.

Issues framed:

• Whether the court should grant an adjournment of the scheme sanction hearing in light of a late interest from a potential competing offeror.
• How the court should weigh shareholder certainty and the board's commercial judgment against any material change in circumstances since the shareholder meeting.
• The interaction between court sanction of schemes and the Takeover Code, including the role of the Panel and the Code's auction provisions.

Facts and key findings: Shareholders had been informed, prior to the adjourned shareholder meeting, that the court hearings would not be further adjourned unless an independent competing offeror announced a higher cash offer in accordance with rule 2.5 by 20 June. The scheme was approved at the meeting. Halliburton made a late approach on 20 June proposing £16.25 per share, an increase of 10p over Umbrellastream's £16.15. The Expro independent directors, with financial advice, rejected Halliburton's proposal on grounds that the extra consideration was too small given (a) the delay in payment under any Halliburton offer and (b) transactional risk including possible failure to obtain necessary clearances and the risk that Umbrellastream might not participate in any subsequent auction.

Court reasoning and decision: The court accepted that a material change of circumstances between the meeting and the sanction hearing must be taken into account, but concluded that the uncertainty caused by Halliburton's interest had been fully disclosed to shareholders and addressed in the circulars and that shareholders had voted with knowledge of the 20 June cutoff. The court found no proper criticism of the board's commercial assessment. Granting an adjournment would perpetuate uncertainty and undermine the certainty sought by the Code. The court refused the adjournment, noting the desirability of alignment between court procedure and the Code wherever possible.

The application for an adjournment of the scheme sanction hearing is refused. The court concluded that shareholders had voted with knowledge of the Takeover Code timetable and the cut-off date, that the independent directors had properly weighed the modest higher price offered by Halliburton against delay and transactional risk, and that an adjournment would perpetuate uncertainty to shareholders and conflict with the certainty the Takeover Code seeks to achieve.