Jersey Unreported Judgments

Companies - reasons for sanctioning a scheme of arrangement.

[2013]JRC168

Royal Court

(Samedi)

27 August 2013

Before     :

J. A. Clyde-Smith, Esq., Commissioner, and Jurats Clapham and Blampied.

 

IN THE MATTER OF THE REPRESENTATION BY CAZENOVE CAPITAL HOLDINGS LIMITED

AND IN THE MATTER OF ARTICLE 125 OF THE COMPANIES (JERSEY) LAW 1991.

Advocate O. Passmore for the Representor.

Advocate M. H. Temple for Schroders PLC.

judgment

the commissioner:

1.        On the 1^st July 2013 and pursuant to Article 125 of the Companies (Jersey) Law 1991 ("the Law") the Court sanctioned a scheme of arrangement between Cazenove Capital Holdings Limited ("Cazenove") and its ordinary shareholders whereby the entire issued ordinary share capital of Cazenove is to be acquired by Schroders PLC ("Schroders") for a cash consideration.  We now set our reasons.

2.        The background was described in the judgment of the Court dated 26th June 2013 [2013] JRC 127 in connection with the convening of the necessary meeting of shareholders and can be shortly stated. 

3.        Cazenove provides investment management services.  Its wealth management business manages £1.2 billion on behalf of a wide range of clients and its investment fund business has £5.5 billion of assets under management. 

4.        The company is a public company incorporated in Jersey but resident in the United Kingdom for tax purposes where it carries on its business.  Its shares are not listed on any stock exchange but it operates an internal dealing facility.  The ordinary shares in Cazenove are held by approximately 1,200 individual holders (including past and present employees) with no individual owning more than 2.7% of the ordinary shares. 

5.        Schroders is the UK's largest listed asset management company.  It is listed on the London Stock Exchange and had £212 billion of assets under management as at 31st December 2012. 

6.        Under the terms of the scheme, Schroders will take over Cazenove by acquiring the ordinary shares of Cazenove for a consideration of 135p per share in cash or (other than for certain shareholders residing outside the UK and Jersey) loan notes of equivalent value instead of some or all of the cash consideration.  The board of directors of Cazenove has been advised by Evercore Partners that the terms of the acquisition are fair and reasonable and has unanimously recommended that shareholders vote in favour of the scheme. 

7.        At the hearing on 16^th April the Court ruled, for the reasons given in the judgment of 26th June, that all the ordinary shares should be treated as one class and there was no need to convene any separate class meetings.  The Court meeting of shareholders was duly held in London on 17th May and the matter then came before us for sanction. 

8.        The approach which the Court adopts on such applications is well established.  The Court must consider three issues:-

(i)        whether the provisions of the Law have been complied with;

(ii)       whether the class of shareholders to be affected by the proposed scheme was fairly represented by those who attended the meeting;  and whether the statutory majority are acting bona fide and not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent;  and

(iii)      whether the arrangement is such that an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve.

See for example Re CI Traders Limited [2007] JRC 149A; Re Rambler Media Limited [2010] JRC 034; and Re George Topco Limited [2012] JRC 059.

9.        In Re Vallar PLC [2011] JLR N25 the Court suggested that there was a fourth issue to consider, namely whether, viewing matters in the round, there was any blot on the scheme which might indicate that the Court's discretion should not be exercised in favour of sanctioning the scheme.  We entirely agree that, if there were such a blot, that would be a highly material factor; but we think that this topic falls naturally for consideration under heading (iii) above.  If there is such a blot, it would suggest that the arrangement is not such that an intelligent and honest man might reasonably approve.  Accordingly, we would prefer to see the test on such applications continue to be expressed in its traditional three pronged form, but always accepting of course that the matter is ultimately one for the discretion of the Court having regard to all the circumstances of the scheme, including whether there is a blot of some sort which would suggest that (iii) is not satisfied.

10.      We take each of the three issues in turn.  As to the first, we were satisfied that the requirements of the Law have been complied with.  We had received evidence as to the despatching of the notices convening the meeting and the procedure used to ensure that all shareholders were notified.  We also had the affidavit from Mr David Mayhew, the Chairman of Cazenove who chaired the Court meeting, which showed that the resolution approving the scheme was supported by 98.45% of the votes cast at the meeting.  That of course exceeds the statutory requirement under Article 125 of 75%.

11.      As to the second issue, we had seen the document explaining the scheme which was sent to shareholders.  This was in the form approved by the Court at the convening hearing subject to minor amendments (which have been drawn to our attention). The document sets out the position very fully and fairly.  The shareholders' meeting was attended in person or by proxy by holders representing 78.97% of the ordinary shares in issue and, as already stated, 98.45% of these voted in favour of the scheme.  There is only one class of ordinary shares and we were satisfied that there was no question of coercion of the minority.  We were satisfied on the second issue. 

12.      As to the third issue, the scheme document disclosed that the board of Cazenove had been independently advised by Evercore Partners that the offer was fair and reasonable and also set out other grounds for thinking the price offered was a good one.  We were quite satisfied as to this third issue.

13.      The scheme is subject to certain conditions but we were satisfied from what we were told at the hearing that these had all been satisfied. 

14.      No one appeared at the hearing to object to our sanctioning the scheme. Schroders had undertaken in writing to be bound by the scheme and in the circumstances we saw no reason not to sanction the scheme. Accordingly we make the order requested in the form of the draft submitted to us. 

Authorities

Companies (Jersey) Law 1991.

Representation of Cazenove Capital Holdings Limited [2013] JRC 127.

Re CI Traders Limited [2007] JRC 149A.

Re Rambler Media Limited [2010] JRC 034.

Re George Topco Limited [2012] JRC 059.

Re Vallar PLC [2011] JLR N25.