English Law Schemes Of Arrangement: Class Composition

Focus on the AB InBev and SABMiller merger

Having received the sanction of antitrust regulators in Europe, the U.S., China and South Africa, the planned merger of brewing giants AB InBev and SABMiller was scrutinised this week by the High Court in London on a topic very familiar to those acquainted with English law restructurings: class composition. The outcome of the hearing, that not all members of SABMiller should be considered to be in the same class for scheme voting purposes, raises some interesting questions around class composition because of the unusual circumstances of the proposed merger.

Background

The merger, valued at a British record of £79 billion, is set to be carried out by an English law scheme of arrangement. Similar to their use in the restructuring market, schemes are frequently used in mergers because of their ability to force dissenting members to sell their shares whether or not they vote in favour of a scheme, thereby offering certainty of acquisition of 100% of the target for the bidder.

The issue of class composition is very important: in order for any proposed scheme to be approved, each separate class of members1 must vote in favour by a majority in number representing 75% in value of the members or class of members voting. Non-consenting classes cannot be affected by the scheme and thus dissenters wishing to thwart a takeover may try to claim they (or another member or group of members) constitute a different class, thereby splitting the vote and making the voting threshold harder to reach.

Class test

Class composition...