TOV: Agency Group 02 - Panel Receives Application

MEDIA RELEASE
                                                                         No: TP20/87
                                                        Thursday, 17 December 2020
      The Agency Group Australia Limited 02 – Panel Receives Application

The Panel has received an application from Magnolia Equities III Pty Limited
(Magnolia) in relation to the affairs of The Agency Group Australia Limited (AU1).

Details of the application, as submitted by the applicant, are below. Further
background details are set out in the Panel’s media release relating to AU1’s
application in The Agency Group Australia Limited (see TP20/85).

A sitting Panel has not been appointed at this stage and no decision has been made
whether to conduct proceedings. The Panel makes no comment on the merits of the
application.

Details

On 29 October 2020, AU1 made an ASX announcement regarding AU1 and its
subsidiaries securing an $11 million funding package which is made up of: (i) $5
million of convertible notes to be issued to Peters Investments Pty Ltd (Peters
Investments); (ii) $1 million of convertible notes previously issued to Peters
Investments in May 2020; and (iii) a $5 million Macquarie Bank primary secured debt
facility (reduced from $12 million and subject to shareholder approval of the
Convertible Notes) (October Announcement).

On 18 November 2020, Magnolia sent a letter to AU1 referring to the October
Announcement stating, among other things, that Magnolia considered any notice of
meeting to approve the Convertible Notes should include a voting exclusion
statement, in accordance with ASX Listing Rule 7.3.9, prohibiting any shareholder
who had provided a personal guarantee to the Macquarie Bank debt facility from
voting at the meeting.

On 24 November 2020, AU1 dispatched a notice of Annual General Meeting to be
held on 23 December 2020 (AGM). The notice of AGM attached an Independent
Expert Report (IER) prepared by Nexia Australia (Nexia) in relation to the potential
issue of fully paid ordinary shares in AU1 to Peters Investments if the Convertible
Notes were converted and/or if the 12 million options to be issued to Peters
Investments and the 2 million existing options on issue to Peters Investments were
exercised.

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On 4 December 2020, Magnolia stated (by way of a letter to the ASX and AU1) that it
intended to make an off-market takeover bid for AU1 (Bid) and on 8 December 2020,
AU1 made an announcement on the ASX with respect to the Bid (Bid
Announcement).

On 11 December 2020, AU1 dispatched an addendum to the notice of AGM and a
Supplementary IER which had been updated by Nexia following announcement of
the Bid.

Magnolia submits (among other things) that:

•    the IER and Supplementary IER (the Reports) are deficient

•    the Bid Announcement is incorrect and misleading in respect of a number of the
     reasons that AU1 list for not considering the Bid to be “a credible “Proposal” or
     constitute a legitimate alternative to the proposed issue of the [Convertible Notes]” and

•    certain shareholders will receive a material benefit from the issue of the
     Convertible Notes, different from the benefits which shareholders in general
     will receive and it is unclear whether AU1 proposes that these persons will vote
     on the resolution to approve the issue of the Convertible Notes at the AGM
     (Resolution 6).

Magnolia seeks an interim order that the AGM be adjourned to a date not less than
14 days after the conclusion of the Panel proceedings.

Magnolia seeks final orders including orders that:

•    Nexia address in a replacement IER any defects identified by the Panel in the
     Reports

•    AU1 send the replacement IER to AU1 shareholders together with a statement
     identifying the shareholder/s who will be excluded from voting on Resolution
     6

•    AU1 adjourn all parts of the AGM relating to the issue of the Convertible Notes
     to a date not less than 14 days after the dispatch of the replacement IER

•    AU1 make an ASX announcement retracting and correcting the defects in the
     Bid Announcement and

•    if Resolution 6 is voted on at the AGM on 23 December 2020, AU1 publish a
     voting exclusion statement excluding shareholders and their associates who
     will obtain a material benefit as a result of the issue of the Convertible Notes
     from voting on the resolution.

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Allan Bulman
Director, Takeovers Panel
Level 16, 530 Collins Street
Melbourne VIC 3000
Ph: +61 3 9655 3500
takeovers@takeovers.gov.au

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