Re Ophir Energy plc

The court considered an application to sanction a scheme of arrangement under Part 26 of the Companies Act 2006 by which Medco (through Bidco) would acquire Ophir Energy Plc for 57.5 pence per share. The judge applied the established statutory and equitable tests for sanction (compliance with the statute, fair representation of the class, that an intelligent and honest member might reasonably approve the scheme, and absence of a blot) as summarised in Buckley and Re TDG plc.

The principal contested point was whether the Explanatory Statement required by section 897 was inadequate because it omitted certain information identified by a major shareholder (LGIM). The court held that, although the concerns were serious in nature, LGIM had not put its case before the court at the sanction hearing or provided detailed evidence; consequently the court could not conclude that the omissions were materially inadequate. The judge observed that the court has powers to order disclosure or require additional evidence where necessary, but LGIM had not sought such relief.

The court also considered a post-meeting contractual sale of an asset in Mexico announced the day before the sanction hearing and concluded it did not amount to a material change requiring reconvening the meeting. On these bases the court sanctioned the Scheme.

The applicant sought the Court's sanction of a scheme of arrangement under Part 26 of the Companies Act 2006 to effect the sale of Ophir Energy Plc to Bidco (a Medco subsidiary) for 57.5 pence per Scheme share. The Scheme was structured as a transfer for cash. The Company’s board unanimously recommended the scheme and had received advice from Morgan Stanley and Lambert Energy Advisory; certain directors and a significant shareholder (Sand Grove) gave irrevocable undertakings to vote in favour following an increase in the offer from 55 pence to 57.5 pence.

Background and procedural posture:

• The scheme document was posted in accordance with an earlier order. Competing approaches from Soco and Coro had been explored but did not lead to rival offers. A Court meeting on 25 March 2019 approved the scheme by the requisite majorities (around 81.76% of shareholders in number and 89.61% in value of those voting).
• The sanction hearing was before Snowden J on 21 May 2019.

Issues framed:

• Whether the statutory requirements for sanction under Part 26 had been satisfied (statutory compliance, fair representation, bona fides, that an intelligent and honest member might reasonably approve, and absence of any blot); and
• Whether the Explanatory Statement circulated under section 897 was materially inadequate, as alleged by a major shareholder (LGIM), who said the Statement omitted key information needed to judge the fairness of the offer.

Court's reasoning:

1. The court applied the established tests (as drawn from Buckley and Re TDG plc). It found the statutory majorities were obtained, turnout was within norms, the directors had independent advice and recommended the scheme, and no procedural defect or obvious blot was identified.
2. On the adequacy of the Explanatory Statement the court placed weight on the fact that LGIM, despite being well resourced and having raised concerns in correspondence, did not appear at the sanction hearing, did not seek disclosure orders or an adjournment, and did not present focused evidence to allow the court to assess whether the matters it raised were material. The court emphasised it has powers to order disclosure or require additional evidence where appropriate but cannot assess speculative or late-raised complaints without proper exposition and evidence.
3. The court treated LGIM's late, general criticisms as insufficiently particularised and not persuasive evidence of material non-disclosure. The court further noted guidance in Stronghold about the unhelpfulness of generic late objections without supporting evidence and the expectation that genuine concerns will be advanced and argued at the hearing.
4. The court addressed the recent sale agreement for the Company's interest in Block 5 offshore Mexico announced the day before the sanction hearing and concluded it was not a material adverse change since it produced proceeds above book value and had been referenced earlier in the 2018 results; reconvening the meeting was not required.

Relief sought: sanction of the scheme. The court granted sanction after Bidco provided appropriate undertakings to implement the Scheme.

The court sanctioned the scheme. Snowden J concluded that the Part 26 statutory requirements were satisfied, that the Explanatory Statement was not shown to be materially inadequate given LGIM's failure to present focussed evidence or seek disclosure, and that the recent sale of the Mexican asset did not require reconvening the Court meeting; accordingly the Scheme was sanctioned subject to undertakings from Bidco.