Back to the Future? Bigshop 2 and Defensive Tactics in Takeovers

In 2000, the basic regulatory structure of Australian takeover law was radically altered, when the role of arbiter of takeover disputes was shifted from the courts to a specialist commercial body, the Takeovers Panel. In an early decision in 2001, Pinnacle No 8 (discussed in Hill and Kriewaldt, quot;Theory and Practice in Takeover Law - Further Reflections on Pinnacle No 8quot;, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=942896), the Takeovers Panel held that conduct of the board of directors of a target company, which breached bid conditions in a takeover offer, must be approved by shareholders in general meeting. lt;brgt;lt;brgt;Pinnacle No 8 potentially created a paradigm shift, constraining the board's former autonomy and discretion through use of shareholder consent as a regulatory mechanism for defensive tactics. This paper discusses the later decision, In the Matter of Bigshop.com.au Ltd (Bigshop 2), which arguably reveals a deep ambiguity, at both a practical and theoretical level, in the approach to regulation of takeovers in Australia. Whereas traditional fiduciary principles examine the motives of the target board in responding to a hostile bid, a quot;frustrated intentionquot; analysis diverts attention from the target board's conduct to the effect of that conduct on the bidder's intentions. The paper discusses the implications of the dichotomy between a fiduciary duty analysis and a quot;frustrated intentionquot; analysis and its implications for the direction of Australian takeover law, the balance of power between shareholders and directors, and the concept of an efficient market in the takeover context