Cornwalls advises Webcentral Limited (ASX:WCG) on merger with 5G Networks Limited (ASX:5GN)
Cornwalls has advised ASX listed Webcentral Limited (ASX:WCG) (Webcentral) on its merger with ASX listed 5G Networks Limited (ASX:5GN) (5GN) by way of a court and member approved scheme of arrangement under Part 5.1 of the Corporations Act 2001. 5GN was advised by Norton Rose Fulbright.
Pursuant to the Scheme, Webcentral acquired 100% of the fully paid ordinary shares in 5GN – meaning 5GN has become a wholly owned subsidiary of Webcentral. Existing 5GN shareholders received 2 Webcentral shares for each 5GN share.
The Scheme became effective on 12 November 2021 following approval by the Federal Court of Australia and was implemented on or around 23 November 2021.
5GN shareholders now hold approximately 52% of the merged entity and Webcentral shareholders the remaining 48%.
Webcentral and 5GN operate complementary businesses and the merger will result in a market leading full-service online digital solutions provider that delivers strong value and growth opportunities to shareholders, drawing on the synergies generated between the two entities. The combined entity has a market capitalisation of $200m.
Cornwalls Melbourne team advised Webcentral on all aspects of the Scheme and its implementation. This included undertaking due diligence on the merger, advising on the structure of the merger, drafting and negotiating the Merger Implementation Agreement with 5GN, contributing to the preparation of Scheme documents (including the Scheme Booklet), convening and holding a Webcentral shareholders meeting (at which Webcentral shareholders passed various resolutions relating to the Scheme), and associated preparation for the Scheme’s implementation.
The key challenges faced by the legal teams (of both Webcentral and 5GN) regarding the Scheme included:
- The Scheme was effected between July and November 2021, including the convening of two court hearings, a scheme meeting by 5GN and a shareholders meeting by Webcentral – notwithstanding the associated ongoing challenges of the COVID-19 pandemic and intermittent lockdowns in Victoria. The legal teams were required to be flexible and adaptable to electronic and virtual processes for these activities.
- Webcentral was a controlled entity of 5GN (following a successful off-market scrip takeover bid by 5GN for Webcentral in 2020), holding approximately 45% of the shares on issue in Webcentral when the Scheme was announced. Therefore, the Scheme constituted a reverse takeover and required 5GN to seek regulatory relief from ASIC from section 259C(1) of the Corporations Act, which prohibits a transfer of shares of a company to a company it already controls.
- Several of Webcentral’s Board members were also Board members of 5GN. As a result, both entities established Independent Board Committees to advise their respective entities on the transaction; and an Independent Expert’s report was required to be commissioned to assess the fairness and reasonableness of the Scheme.
- Along with the typical conditions and components of a scheme of this nature, the Scheme was also conditional upon Webcentral shareholders passing:
- a resolution under ASX Listing Rule 7.1 (reverse takeover resolutions) permitting the issue of Webcentral shares as consideration under the Scheme, constituting a reverse takeover of Webcentral; and
- resolutions under ASX Listing Rule 10.1 (substantial asset resolutions) approving the acquisition by Webcentral of 5GN shares from various related parties of Webcentral and their associates.
The Cornwalls Melbourne team advising Webcentral included Simon Jay (Partner), Michael Wilton (Partner) and Jake Erman-Keogh (Associate).
Mr Jay said:
‘We have enjoyed working closely with Webcentral’s board, senior management team and its other advisers on this significant transaction, and were delighted to help Webcentral secure a positive result for its shareholders.’
For further information please contact the author, or any member of our Corporate & Commercial team.
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.