Takeovers Panel Rejects Challenge to Duxton Farms’ Complex Merger Deal

Background to the Dispute

Duxton Farms Ltd (ASX – DBF) recently announced a significant merger involving four unlisted entities connected to its major shareholders, Richard Magides and Edouard (Ed) Peter. This complex transaction, coupled with a conditional capital placement, prompted an application to the Takeovers Panel alleging undisclosed associations and breaches of takeover provisions.

The applicants, including Grant David Jopling and others, raised concerns about potential contraventions of sections 606 and 671B of the Corporations Act, which regulate control and disclosure in takeover scenarios. The core of the dispute centered on whether the merger and placement altered control dynamics within Duxton Farms.

Details of the Merger and Placement

The proposed merger involves Duxton Farms combining with four private companies; Duxton Bees Pty Ltd, Duxton Dried Fruits Pty Ltd, Duxton Dairies (Cobram) Pty Ltd, and Duxton Orchards Pty Ltd; all entities in which Magides and Peter hold interests. The merger is structured through schemes of arrangement and share purchase agreements, with shareholders receiving Duxton Farms shares valued at $1.25 each and an option to elect up to 20% of their consideration in cash.

To facilitate the merger, Duxton Farms plans a capital placement issuing new shares at the same price to selected institutional investors, including entities associated with Magides and Peter. This placement is conditional on the merger’s completion and requires shareholder approval for related party transactions under ASX Listing Rules.

Panel’s Reasoning and Outcome

After reviewing the application and the complex disclosures, the Takeovers Panel concluded that the transactions did not result in any actual or potential change of control. Notably, the voting power of both Magides and Peter decreased as a result of the merger and placement, undermining claims of undisclosed control shifts.

The Panel also noted that the alleged breaches were outside statutory time limits for action and that the determination of voting exclusions on related party resolutions falls primarily under ASX jurisdiction. Consequently, the Panel found no reasonable prospect of declaring unacceptable circumstances and declined to conduct proceedings.

Implications for Duxton Farms and Shareholders

The Independent Expert’s report described the merger as “not fair but reasonable,” highlighting strategic benefits that justify the transaction despite the premium paid. For shareholders, this means weighing the potential long-term advantages against the immediate dilution and complexity introduced by the merger and placement.

With the Panel’s decision, Duxton Farms can proceed with the merger and capital raising, subject to shareholder approvals. The outcome also sets a precedent on how control and association issues are assessed in multifaceted transactions involving related parties.