Foreign takeover deals to come under tighter scrutiny

THE Foreign Investment Review Board is expected to take a more hardline approach to foreign takeovers following the formation of a minority government in which independent MPs have more of a say on government decisions.

Lou Caruana

But companies should be ready for takeover offers and be prepared to anticipate the increasing level of merger and acquisition activity from both foreign and Australian companies, Freehills mergers and acquisitions partner Tony Damian told the Excellence in Mining and Exploration conference in Sydney.

“My one observation on FIRB is that it’s an interesting political environment in Canberra at the moment,” he said.

“While the people at FIRB may be rational, the world they live in is political.

“You’ve got to be prepared for more deals that are controversial.”

Last year, the FIRB made a highly contentious decision regarding embattled OZ Minerals.

OZ Minerals’ $US2.6 billion takeover deal with China’s Minmetals was blocked by the FIRB because OZ’s Prominent Hill copper mine lies within the Woomera Prohibited Area.

By April 2009, OZ and Minmetals had negotiated a deal that excised Prominent Hill, leaving the mine under the control of OZ, while Minmetals purchased the rest of the company’s Australian assets for $1.39 billion.

Companies should be prepared to anticipate and “head off takeovers at the pass rather than be surprised when it’s too late”, Damian said.

“Preparation pays dividends,” he said. “If no one approaches you, that is fine, you will not suffer.”

Companies bidding for another company should institute measures that control risk, including due diligence, expansion payments and warranty insurance.

Hidden risks could include misleading or deceptive conduct, the information memorandum and forward looking statements, he said.