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Former Slater & Gordon shareholder objects to takeover bid

A former shareholder of Slater & Gordon aired sensational allegations before a court because he objected to a private equity firm’s takeover of almost the entirety of the legal practice’s shares.

user iconNaomi Neilson 14 June 2024 Big Law
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A claim against Slater and Gordon by former shareholder Guojun Jiang and his self-managed superannuation firm Koshib Investment in relation to the takeover by investment fund Allegro has been thrown out after a judge ruled that the law firm was not the proper target for the claim.

In February 2023, the firm entered into a bid implementation agreement with Allegros’ entity, Wright NomineeCo, which would eventually acquire 97.42 per cent of the shares by mid-April.

At the end of the month, the Australian Securities Exchange (ASX) removed Slater & Gordon because its listing rules provided for removal when a compulsory acquisition notice is issued.

 
 

In Jiang’s original concise statement, filed in the Federal Court, he sought an order that his 10,875 shares “not be compulsorily acquired” at $0.55 per share because the price was “not fair value”.

He submitted that while the price was supported by Kroll Report – a market analysis expert – it was not independent because the bidder and Slater & Gordon allegedly already determined the price.

Jiang went on to claim Morningstar valued the shares at $1.15.

The amended concise statement made many of the same submissions but also alleged Slater & Gordon breached its continuous disclosure obligations and the ASX Listing Rules by failing to announce material information relevant to the bid.

Jiang also accused Slater & Gordon’s directors of a breach of their duties by unanimously recommending the bid, misleading shareholders, and facilitating market manipulation for their benefit.

Justice Yaseen Shariff found neither the original nor the amended concise statements had any reasonable prospects of success and summarily dismissed the proceedings.

In the amended application, Jiang asserted the firm breached its disclosure obligations because it failed to disclose that it secured class action settlements against the Commonwealth Bank of Australia, Westpac, and ANZ Bank.

Justice Shariff said the best he could glean from Jiang’s submissions was a claim the firm should have disclosed the settlement “in more specific terms and in a targeted ASX release”.

Slater & Gordon said this was readily and generally available in media statements and articles, and Justice Shariff agreed.

The next of Jiang’s claims was an alleged failure by the firm to disclose the takeover bid because it was “information that would influence investors in deciding whether or not to acquire shares”.

Justice Shariff said there were a number of “difficulties” in this claim, particularly because, as pointed out by Slater & Gordon, the ASX Listing Rules stated that negotiations are incomplete “unless and until a legally binding agreement has been entered into or the entity is otherwise committed to proceeding”.

“To accept Jiang’s contentions would be to ignore what the guidance in the ASX Listing Rules seeks to guard against, being the disclosure of incomplete and confidential negotiations that have not resulted in any binding offer being made,” Justice Shariff found.

Jiang also made a “number of overlapping claims in relation to alleged misleading and deceptive and unconscionable conduct”, but Justice Shariff said he could not “articulate the basis for any of them”.

Justice Shariff said, for example, that Jiang did not disclose why it was said that the director’s opinion to recommend the bid was deceptive.

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