Cello Health PLC, Re

The court sanctioned a scheme of arrangement under Part 26 of the Companies Act 2006 to enable Pharma Value Demonstration Bidco Limited to acquire the entire issued and to be issued share capital of Cello Health Plc. The judge held that the statutory requirements were complied with, including that the company fell within the meaning of section 895 and the proposal constituted a compromise or arrangement within that section, and that the explanatory statement complied with section 897. The convening order directions were followed and adequate arrangements for an electronic meeting were in place.

The court found the meeting was properly constituted as a single class because all shareholders had the same rights and were offered the same consideration; undertakings given by shareholders did not create a separate class. The statutory majorities were achieved (91.72% by number and 96.7% by value of votes cast in favour) and turnout was such that the class was fairly represented (133 shareholders voting, some 24% by number and 56.75% by value of all shareholders entitled to vote). The judge concluded that an intelligent and honest member might reasonably approve the scheme and identified no objection or "blot" on the scheme. The scheme was sanctioned accordingly.

This was an application by Cello Health Plc to sanction a scheme of arrangement under Part 26 of the Companies Act 2006. The scheme proposed that each scheme share be acquired for 161 pence in cash, a premium of about 43% over the closing price on 30 June 2020. The purpose of the scheme was to effect the takeover by Pharma Value Demonstration Bidco Limited.

The principal issues framed and decided by the court were:

• whether the statutory provisions for a scheme under Part 26 CA 2006 had been complied with (including company status under section 895 and whether the proposal was an arrangement within that section);
• whether the convening order and the explanatory statement complied with the statutory and court directions (including section 897);
• whether the meeting was properly constituted and whether shareholders were correctly placed into classes for voting;
• whether the class attending the meeting fairly represented the class as a whole and whether the statutory majorities were acting bona fide and not coercing the minority; and
• whether an intelligent and honest member of the class might reasonably approve the scheme.

On the facts the judge found: the convening order (made by ICC Judge Burton) had been complied with and the explanatory statement was adequate; arrangements for electronic attendance were in place though not used; a single class was justified because all shareholders had the same rights and were offered the same consideration, and irrevocable undertakings and letters of intent given by shareholders holding 37% did not of themselves create a class issue; turnout and voting figures supported fair representation and bona fides; and the combination of unanimous board recommendation, independent financial advice, overwhelming statutory majorities and a substantial premium to the market price meant the scheme met the test that an intelligent and honest member might reasonably approve it. The court therefore sanctioned the scheme. The judgment records no other problems with the proposal.

The court sanctioned the scheme of arrangement under Part 26 Companies Act 2006. The judge concluded that the statutory requirements (including sections 895 and 897) and the directions in the convening order were complied with, the meeting was properly convened and constituted as a single class, the statutory majorities were achieved and the class was fairly represented, and that an intelligent and honest member might reasonably approve the scheme. No objection or defect was identified.