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The current state of the Australian economy has led to an increase in investment in Australia and interest in investing in Australia.  Particularly, from the US and Euro.  But one of the things that investors are finding is the strength of our currency raises issues for them.

In the year before the global financial crisis, CMEX made an audacious bid for Rinker for whom I acted, it was the largest hostile takeover bid at the time, um 18 billion dollars and for the first time, they offered US currency, rather than Australian dollars.  Um, they were taken to the takeovers panel and a number of issues were raised but left unresolved.  But last year, our firm acted for a Canadian company that was incorporated in Australia, that had Canadian assets and a large number of Canadian shareholders, and that’s the first scheme of arrangement that has offered foreign currency.

Now, it made sense then because of the shareholders and because of the assets.  We used a scheme of arrangements, under which Australian shareholders got Australian dollars but converted from Canadian dollars and Canadian shareholders got Canadian dollars.  That was the first time that a scheme of arrangement had been used using foreign currency.  Ok, the deal made sense because of the assets and because of the shareholder base of the company, which was also listed on the Toronto stock exchange.  A lot of it was possible, because a scheme of arrangement, unlike a takeover bid, goes to Court and our judiciary has some flexibility in the way that they adapt the rules and the way they adapt disclosure to protect target shareholders.

The Court sits in as arbiter on what is disclosed to shareholders and so they can dictate disclosure that is adapted for foreign currency, and both our regulator and the Court had a number of suggestions on what should be done, but that transaction was executed and the acquirer was very happy with the result.

It is not just limited to resources companies though, currently we are acting for a consortium of private equity investors and they are acquiring an Australian target, but it is an unusual target, because 75% of its business is actually in the US, now the investment bankers for that consortium came up with a brilliant structure, which involves Australian shareholders getting Australian dollars and within a band of movement between the Australian and the US dollar they’re protected, but outside that band, the acquirer is protected from foreign exchange movements, which is a top of mind, because the Australian dollar is at historic highs.

Now this sort of technology is not going to be applicable in all cases, but where you have got a resources company, where commodities are denominated in US dollars, such as gold, where you’ve got a company that has got its business overseas or has got a lot of Australian shareholders but also foreign shareholders, you are going to end up in a situation where this could be the difference of being able to execute a deal and not being able to execute a deal.