Takeovers Panel Rejects Challenge to Duxton Farms’ Contested Merger

Background to the Dispute

Duxton Farms Ltd (ASX – DBF), a key player in agricultural production and processing, recently announced a proposed merger with four unlisted entities under the control of its major shareholders, Richard Magides and Edouard (Ed) Peter. This transaction, coupled with a conditional capital placement, sparked an application to the Takeovers Panel alleging undisclosed associations and breaches of takeover provisions.

The applicants, including Grant David Jopling and others, raised concerns that the merger and placement might have contravened sections 606 and 671B of the Corporations Act, potentially affecting control of Duxton Farms. The Panel’s role was to determine whether these transactions warranted further investigation or intervention.

Details of the Merger and Placement

The merger involves Duxton Farms consolidating with four unlisted entities, Duxton Bees Pty Ltd, Duxton Dried Fruits Pty Ltd, Duxton Dairies (Cobram) Pty Ltd, and Duxton Orchards Pty Ltd, all linked to Magides and Peter. The structure includes schemes of arrangement and share purchase agreements, with shareholders receiving Duxton Farms shares valued at $1.25 each, plus an option to elect up to 20% of their consideration in cash.

To support this merger, Duxton Farms plans a capital placement issuing new shares at the same price to selected institutional investors, including 400,000 shares to entities associated with Ed Peter and 2 million shares to those linked with Richard Magides. These transactions require shareholder approval, particularly for related party dealings under ASX Listing Rules.

Panel’s Reasoning and Outcome

After reviewing the complex disclosures and transaction structure, the Takeovers Panel concluded that the merger and placement did not result in any increase in control by the major shareholders. In fact, their voting power is set to decrease, Magides from 35.92% to approximately 22.36–23.71%, and Peter from 23.69% to around 13.54–14.61%, depending on cash or scrip elections.

The Panel noted that any potential effect on control would have justified further inquiry, but the evidence did not support such a scenario. Additionally, the alleged breaches were considered outside the statutory time limits for action. The Independent Expert’s report, while stating the merger was "not fair but reasonable," highlighted strategic benefits and the absence of better alternatives, lending further weight to the Panel’s decision.

Implications for Duxton Farms and Shareholders

This decision clears a significant regulatory hurdle for Duxton Farms, allowing the company to proceed with its merger and placement plans. The reduction in voting power for the major shareholders may also reassure other investors concerned about concentration of control. However, the "not fair but reasonable" assessment suggests some shareholders may still scrutinize the valuation and strategic merits closely.

Shareholders will soon vote on the resolutions required to implement the merger and placement, with the outcome likely to shape Duxton Farms’ future growth trajectory in the agricultural sector.