Expro International Group Plc, Re Companies Act 1985 & 2006

When deciding whether to adjourn a scheme-sanction hearing, the court must consider any material change in circumstances since the shareholder meeting. It must also consider the information available to shareholders when they voted, the commercial certainty of the approved scheme, and the risk that an adjournment would prolong uncertainty.

Where shareholders approved a scheme knowing of a possible competing bid and an agreed cut-off date for any firm offer, the court may refuse a further adjournment intended to preserve an opportunity for that bid. The court should apply the established principles governing schemes of arrangement and should avoid allowing the scheme procedure to reintroduce uncertainty which the Takeover Code is intended to reduce.

Expro International Group plc applied for court sanction under Part 26 of the Companies Act 2006 to a takeover scheme involving Umbrellastream Limited. The scheme had been approved by the requisite shareholder majorities.

Halliburton had expressed interest in making a competing offer but had not announced a firm intention to do so by the agreed deadline. It instead made a rule 2.8 statement reserving a possible offer if the court declined to sanction, or delayed sanctioning, the Umbrellastream scheme.

Shareholders holding approximately 15 per cent of the issued share capital sought an adjournment of the sanction hearing to give Halliburton a further opportunity to bid. The central issue was whether the court should permit that adjournment in light of the possible competing offer, the shareholders’ prior knowledge of the position, and the need for certainty.

1. Application refused. The application to adjourn the sanction hearing was refused.

2. The court accepted that a material change of circumstances between the shareholder meeting and the sanction hearing must be taken into account when deciding how to proceed. The possibility of a competing Halliburton bid was not, however, a sufficient reason for adjournment. That uncertainty had existed throughout the scheme process and had been clearly explained to shareholders.

3. Shareholders had been told that the court hearings would not be postponed unless an independent competing offeror announced a higher cash offer under rule 2.5 of the Takeover Code by 20 June 2008. They approved the scheme on that basis. The court therefore gave substantial weight to the shareholder vote and to the company’s compliance with the position communicated to shareholders.

4. The directors’ assessment of the competing proposal was not flawed. They were entitled to weigh the certainty and prompt effectiveness of the Umbrellastream offer against the transactional risks of Halliburton’s proposal, including possible delay, antitrust clearance and the risk that Umbrellastream would not participate in a subsequent auction.

5. An adjournment would perpetuate uncertainty and could disadvantage shareholders. Although the Takeover Panel’s rules applied to schemes as well as conventional offers, the court approached the application on its merits under the established principles governing schemes. It nevertheless regarded it as undesirable for scheme procedure to permit a level of uncertainty which the Takeover Code had reduced in ordinary bids.

Not stated in the judgment.