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