Takeovers Panel demands derivatives disclosure

Author: | Published: 1 Aug 2005

The use of cash-settled equity swaps is relatively novel in some Australian M&A transactions, but their successful application in a number of recent high-profile deals has generated heightened focus on the ways they can be used.

Now, however, the decision by the Australian Takeovers Panel in the Austral Coal matter announced on July 1 suggests that one of the potential uses of swaps during takeovers of Australian companies might be curtailed.

Until the Panel's decision, the (untested) conventional wisdom had been that compulsorily cash-settled swaps did not have to be disclosed to the market. Subject to certain exceptions, the Australian Corporations Act essentially requires the disclosure of interests over 5% or more of the voting shares in a listed company or listed unit trust. In Austral Coal, the Panel has ruled that a failure to disclose certain interests in a takeover target company held through cash-settled equity...