Several Australian companies are reviewing or even terminating takeover deals by using a legal escape route because of the devastating impact of the coronavirus, a template that some lawyers expect to be replicated in other countries, reported Reuters.
Three listed companies this week have triggered so-called material adverse change (MAC) clauses that can be invoked to end or renegotiate deals, as the COVID-19 pandemic has paralyzed businesses and sent markets crashing.
“Companies invoking the Material Adverse Change clauses to call off deals is a question of when not if,” said Nandakumar Ponniya, Asia Pacific head of Baker McKenzie’s international arbitration practice.
On Thursday, March 26, fund manager Centuria Capital Group announced it had withdrawn its AU$174.8 million (US$103.15 million) offer to buy New Zealand property fund Augusta Capital, terminating a takeover agreed in January and for which it had raised AU$80 million. The deal was due to close on March 31.
The deal’s documentation included an MAC clause with specific provisions that protected the bidder if financial markets deteriorated, Chief Executive John McBain told Reuters.
“Since entering into the bid implementation agreement on January 29 there has been an unquestionable deterioration of almost unrivalled magnitude in markets and this and only this caused the clause to be invoked,” McBain said.
Dentist chain owner Abano Healthcare, which has operations in Australia and New Zealand, told the stock exchange on Wednesday that a government order to close its network in New Zealand for four weeks could trigger the restructuring or even ending of an NZ$300 million (US$174.39 million) takeover deal with private equity firm BGH.
Full Content: Reuters
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