Lock-up devices and tortious interference: could Takeovers Panel decision damage Australian market for corporate control?

The recent Australian Takeovers Panel decision in Pacific Energy Limited is a clear win for target shareholders in the short term, but may ultimately end up harming the Australian market for corporate control by increasing the level of uncertainty faced by initial bidders when looking to put forward change of control proposals.

Consistent with previous decisions where lock-up devices did not stop an auction from unfolding, the Panel found that paying a break fee to a rival proponent (even where it may breach the contractual terms of an existing agreed deal) was not anti-competitive or coercive, but rather necessary to facilitate target shareholders receiving a better offer.

But rubbing salt into the wound, it left the successful bidder in a situation where it ended up paying more, for less.