Re Inmarsat

The court sanctioned a scheme of arrangement under Part 26 of the Companies Act 2006 to implement a recommended takeover of Inmarsat plc by Connect Bidco Limited. The court applied the familiar "fairness" test, namely whether an honest and intelligent member of the class could reasonably approve the proposal, and examined whether the Explanatory Statement complied with the requirement in section 897(2) to explain the effect of the arrangement. The Explanatory Statement was held to be clear, fair and sufficient in relation to the commercially contingent Ligado co-operation agreement and the material risks to future receipts. The court found the scheme meeting to have been properly convened and conducted, the statutory majorities achieved, and the majority acting bona fide. The court also concluded that events since the meeting, including press speculation and representations to the FCC, did not amount to a material change of circumstances warranting refusal of sanction.

This was a sanction hearing for a scheme of arrangement under Part 26 of the Companies Act 2006 to implement a recommended cash offer by Connect Bidco Limited for Inmarsat plc. The principal factual background concerned an important but commercially contingent income stream under a Co-operation Agreement with Ligado, deferred payments under that agreement and Ligado's pending application to the US Federal Communications Commission to modify spectrum rights. The proposed takeover reflected a substantial premium to market, and the scheme was recommended by the Inmarsat board.

The main parties objecting at the sanction hearing were Kite Lake, Rubric and Oaktree, who raised three core challenges:

• that the Explanatory Statement did not give sufficient information about the Ligado arrangements and the valuation of the related payment flows, contrary to the duty under section 897(2) of the Companies Act 2006;
• that a contingent value right should have been incorporated into the deal to address the possibility of a favourable FCC modification for Ligado; and
• that there had been a material change in circumstances after the scheme meeting, notably press speculation about FCC progress and subsequent communications from government and agencies, such that the court should not rely on the May meeting result.

The court's reasoning was as follows: the Explanatory Statement and materials incorporated by reference were found to satisfy the statutory requirement to explain the effect of the arrangement and to give shareholders sufficient information to vote, following the principles in Re Heron International and Re Dorman Long; the scheme meeting had been properly convened and the required majorities achieved, with no suggestion of oppression or lack of bona fides; the objectors' suggested contingent value right sought to improve commercial terms but did not demonstrate that the presented scheme failed the fairness test; expert evidence adduced by objectors did not comply with CPR Part 35 and was not given weight; and subsequent events, including government letters opposing Ligado and ongoing uncertainty about FCC approval, did not amount to a material change of circumstances. For these reasons the court sanctioned the scheme.

The scheme of arrangement is sanctioned. The court held that the Explanatory Statement complied with the requirement in section 897(2) of the Companies Act 2006, the scheme meeting was properly convened and conducted, the statutory majorities were achieved, the majority acted bona fide and there was no material change of circumstances since the meeting which would require refusal of sanction. The fairness test was therefore satisfied.