Nielsen Holdings Plc, Re

THE JUDGE: This is a hearing of an application by Nielsen NV (“NV”) and its wholly-owned subsidiary, Nielsen Holdings Limited (“Holdings”), respectively a Dutch and a UK company, for approval of a cross border merger. The transaction is a merger by absorption whereby Holdings will acquire NV. The object is that NV will in substance change its domicile to that of the United Kingdom in order to free itself from certain limitations upon expansion occasioned by the terms of a US-Netherlands tax treaty. The shares in Holdings are intended to be listed on the New York Stock Exchange.

The jurisdiction to approve the merger is that granted by regulation 16 of the Companies (Cross-Border Mergers) Regulations of 2007. On the evidence the six formal preconditions set out in regulation 16 are all satisfied. The only question is whether as a matter of discretion the court ought to approve the completion of the merger. In that connection Mr Moore has drawn to my attention three relevant authorities bearing on particular features of this merger. They are Re Fiberweb Plc [2013] EWHC 4653 (Ch), Re Lombard Medical Technologies Plc [2014]. EWHC 2457 (Ch) and Re International Game Technology Plc and Another [2015] EWHC 717 (Ch). As with all cases concerning the exercise of a discretion, these cases may provide guidelines but of course cannot lay down rules. I have derived the following guidance material to the issues before me from those cases. What follows is sufficient for the purposes of this application and is not intended as anything like a comprehensive summary.

First, the discretion is unfettered. Secondly, the order approving the merger may be made subject to satisfaction of conditions as to the date upon which the merger may take effect. Thirdly, the nature of those conditions is a factor to be taken into account in the exercise of the discretion (alongside the more conventional factors relating to the protection of creditors and employees). Fourthly, the court will normally expect a condition to have as its object the need to ensure that the transaction which is rendered effective is that which the shareholders approved at an earlier stage of the process and has the consequence they intended. Fifthly, because the court will not make an order that is futile, the court must be provided with sound grounds for thinking that the condition will be satisfied, that there is no known obstacle to completion, and that the scheme addresses the possibility of non-satisfaction of the conditions. Sixthly, because the discretion is conferred on the court and on no one else, the court must be satisfied that the condition is not such as to confer some separate decision making power on a third party whether to implement the transaction or not. An example of a condition which is acceptable is the need to secure regulatory approval (which may depend upon the decision of a regulatory authority as to whether regulatory requirements are satisfied, but is not a free standing decision whether or not to implement the transaction).

I have found helpful the guidance that was given by Justice Santo in a New South Wales case concerning schemes of arrangement that the transaction should be self-executing in the sense that certain results follow in certain defined events.

The present scheme is subject to 17 conditions which were set out in clause 11 of the draft terms of the merger. The evidence establishes that all but four of those conditions are satisfied as at the date of the hearing.

The four outstanding conditions fall into two categories. The first relates to listing. Condition 11.2.4 says that the merger remains subject to the condition that the Holdings shares are deemed eligible for deposit, book entry and clearance services by the depository trust company and its affiliates. This is precisely the sort of condition which the court will readily contemplate as remaining outstanding at the date of the approval. The scheme itself provides that in the (at present unforeseen) event that the shares are not deemed eligible in the way contemplated in the condition, then the merger shall not proceed, there being a long stop date for satisfaction.

The second category of condition relates to the receipt of opinions as to certain matters. First, an opinion from Simpson, Thacher and Bartlett LLP in a form and substance reasonably satisfactory to NV that as at the effective date of the merger the matters discussed under the heading “Material Tax Considerations Relating to the Merger” in the statement previously issued remain in substance correct. Second, in condition 11.2.14 that NV shall receive an opinion from Clifford Chance in a form and substance reasonably satisfactory to it , that the matters covered under the heading “Material Tax Considerations Relating to the Merger” continue to be as originally stated. Thirdly, clause 11.2.15, that NV shall receive an opinion from Clifford Chance in a form and substance reasonably satisfactory to it confirming that the matters discussed under the heading “Material Tax Considerations – UK Considerations” remain as originally stated.

These conditions are in my judgment acceptable. They depend upon third party professional opinion. They are confirmatory of matters laid out in the statement originally circulated to shareholders. They have as their objective confirmation that the proposal originally put to shareholders remains true at the date when the merger is said to be effective.

In these circumstances I am satisfied that notwithstanding that there are outstanding conditions the merger is one which I ought to approve. The conditions are in their nature appropriate. On the evidence they are likely to be fulfilled. If they are not fulfilled for some unforeseen reason, the merger will not proceed.