International Game Technology Plc & Ors, Re

The court has jurisdiction under Companies (Cross-Border Mergers) Regulations 2007, regulation 16, to approve a cross-border merger by a conditional order. Conditionality is a matter for the court’s discretion. The court should consider whether the order would be futile, whether shareholders would receive something materially different from what they approved, and whether the conditions leave a third party free to decide whether the merger will proceed or permit material variation of its terms. A conditional order is appropriate where the transaction remains commercially committed, completion is highly probable, and the conditions do not prevent the court from assessing the merger. The court may frame the condition by reference to the parties’ agreement that contractual conditions have been satisfied or waived, provided the merger takes effect at the specified date and cannot subsequently be declared null and void.

International Game Technology Plc, an English company, applied jointly with GTECH S.p.A., an Italian company, for approval under regulation 16 of the Companies (Cross-Border Mergers) Regulations 2007. The proposed merger formed part of a wider transaction involving the merger of a United States gaming business under Nevada law.

The applicants sought an order providing for the merger to take effect on a specified future date, subject to contractual conditions being satisfied or waived and termination rights not having been exercised. The central issues were whether regulation 16 permitted a conditional order and, if so, how the court’s discretion should be exercised and the order framed.

1. The court made the order approving completion of the cross-border merger. The statutory preconditions in regulation 16(1) were satisfied, and there were no employee-participation issues.

2. Regulation 16 permitted a conditional order. Its express wording contained no restriction on that jurisdiction. The Directive implemented by the Regulations likewise did not exclude conditional approval. Recitals 2, 3 and 4 supported an interpretation facilitating complex cross-border mergers and allowing terms beyond the common draft terms. The two-stage structure, including the period before the merger consequences took effect, was consistent with conditionality, although it did not independently establish the jurisdiction.

3. The discretion had to be exercised so that the court did not act in vain. Conditionality was only one factor. The court had to consider whether the order would be futile, whether shareholders were being required to accept something materially different from what they had approved, and whether a condition gave a third party control over whether or when the merger would operate or permitted material variation of its terms.

4. The principles applied in scheme-of-arrangement cases, including Re Fiberweb Plc and Lombard Medical Technologies Plc, were equally applicable. The conditions here did not confer an unfettered decision on a third party or allow material alteration of the merger. The parties were bound to use reasonable endeavours to complete, funds were available, and completion was highly probable.

5. The order was properly framed so that the consequences of the merger took effect on 7 April 2015 if, by that date, the parties had agreed that the contractual conditions were satisfied or waived and the agreement had not been terminated. This did not conflict with regulation 16(3). Once effective, the merger itself could not be declared null and void, although contractual rights and remedies might remain.

First-instance decision. No appellate history was stated in the judgment.