Australian companies need to be prepared for the possibility of an approach by shareholder activists, according to the lead partner acting for Antares Energy Limited in a bid by a US hedge fund to force a spill of the company's board.
Allens Partner Tim Lester said the attempt by Lone Star Value Investors, LP to remove two existing Antares directors and to elect five of its own nominees to the board showed that the trend of shareholder activism, long prevalent in the United States, has now reached Australian shores. The aim of today's meeting was to provide Lone Star's nominees with five out of the seven places on the board.
Mr Lester said it was an unusual potential position of influence given Lone Star only held approximately 6 per cent of shares in Antares.
'The Antares Board clearly saw this as an attempt to gain effective control of the company without paying a premium to shareholders for such control,' he said.
'For this, and other reasons, Lone Star's proposals were strongly rejected as being contrary to the best interests of shareholders. Lone Star ran a very aggressive strategy and campaign to win the hearts and minds of Antares shareholders, through direct communication, press and media interviews and articles, and through a targeted website.
'Many listed companies in Australia know and have plans in place to deal with takeover offers, but very few have a plan in place to deal with an activist shareholder, particularly in the manner this campaign was undertaken,' Mr Lester said.
Various statements made by Lone Star were contested as being defamatory by Antares. In addition, Lone Star threatened court proceedings relating to the meeting and commenced court proceedings seeking pre-action discovery in relation to certain of Antares' affairs.
Allens Litigation Partner Kim Reid, who supported the Allens deal team, noted: 'It is important for boards to have a plan in place for dealing with the challenges presented by shareholder activists. Litigation in this context can escalate rapidly, so boards need to act quickly and decisively so as to minimise disruption to the company's business. It is also important to be ready for the multi-pronged nature of a shareholder activist campaign'.
Tim Lester added: 'Being unprepared is likely the biggest trap for boards, so early planning and consultation with key advisers is the best way to avoid being taken unawares and to ensure shareholders receive correct, fair and balanced information so as to make an informed decision. These campaigns can tend to become very charged and emotive.'
Antares is an ASX-listed oil and gas exploration and production company focused on the Permian Basin in West Texas.
Lone Star's attempt to gain representation on the board at the Antares general meeting on 22 July proved overwhelmingly unsuccessful.