McCarthy & Stone Plc, Re

This was an application under Part 26 of the Companies Act 2006 for the court's sanction of a scheme of arrangement to effect the acquisition of McCarthy & Stone Plc by Mastiff Bidco Limited. The court applied the established fourfold enquiry (statutory compliance; fair representation; whether an intelligent and honest member might approve; and whether there were any blots on the scheme) and was satisfied on each point.

• Statutory requirements of Part 26 were complied with: the meeting was convened with an explanatory statement and approved by the requisite statutory majority.
• The class was fairly represented at the meeting and the statutory majority voted bona fide.
• On the merits, an intelligent and honest member could rightly approve the scheme because the directors unanimously recommended it, the scheme was explained in the documents, independent financial advisers were engaged, and the scheme was approved by a strong majority.
• No blots were identified; irrevocable undertakings given by directors and shareholders did not create a class issue because no additional consideration was received.

All relevant conditions had been satisfied or waived and the purchaser provided the necessary undertaking to be bound; accordingly the court sanctioned the scheme.

Background and relief sought: McCarthy & Stone Plc applied for the court's sanction under Part 26 of the Companies Act 2006 of a scheme of arrangement by which Mastiff Bidco Limited, a wholly owned indirect subsidiary of Lone Star Real Estate Fund VI LP, would acquire the entire issued and to-be issued share capital. The scheme provided for cash consideration of 120 pence per scheme share and valued the company at approximately £647 million.

Procedural posture: Permission to convene the requisite meeting had been granted by Judge Prentis on 16 November 2020. The court meeting took place on 7 December 2020 and the scheme was approved by over 75 per cent in value of those voting. The applicant returned to court to seek the formal sanction of the scheme.

Issues framed by the court:

• Whether the provisions of the statute (Part 26) had been complied with;
• Whether there had been fair representation of the class at the meeting;
• Whether an intelligent and honest member of the class might rightly approve the scheme (the merits test); and
• Whether there were any blots on the scheme which would cause the court to refuse sanction.

Evidence and findings: The judge reviewed the scheme documents, the chairman's explanatory statement and report, witness statements about dispatch of documents, and the voting statistics (184 in favour holding 362,849,735 shares; 79 against holding 60,796,088 shares; turnout 35.67% in number and 78.78% in value). The directors unanimously recommended the scheme and were advised by Rothschild & Co and Deutsche Bank. No objectors attended the sanction hearing. The purchaser gave an undertaking to be bound and the relevant scheme conditions were satisfied or waived.

Reasoning and conclusion: Applying the principles summarised in Re TDG Plc and the fourfold enquiry, the court was satisfied that Part 26 formalities had been met, the class was fairly represented, an intelligent and honest member might approve the scheme, and there were no blots. The judge also considered and rejected any class issue arising from irrevocable undertakings because no extra consideration had been given. On that basis the court made an order sanctioning the scheme of arrangement.

The court sanctioned the scheme of arrangement. The judge concluded that the requirements of Part 26 of the Companies Act 2006 had been satisfied: the statutory procedures had been followed, the class was fairly represented, an intelligent and honest member could properly approve the scheme, and there were no blots. All conditions had been satisfied or waived and the purchaser provided an undertaking to be bound.