Jardine Strategic’s appeal to strike out claims from shareholders seeking arbitrage profit dismissed

THERE is “nothing wrongful, abusive or in bad faith” in arbitrage, ruled the Bermuda Court of Appeal as the three judges dismissed Jardine Strategic’s appeal to thwart the claims of arbitrageurs that bought the formerly Singapore-listed conglomerate’s shares after its buyout was announced.

The president of the Court of Appeal, Christopher Clarke, noted in the Mar 24 judgement that arbitrage in the Jardine Strategic case means that people may be prepared or encouraged to purchase shares after the US$33 price has been announced, in the hope that the fair value which is later determined may be greater than that.

“Arbitrage is a legitimate part of the marketplace and contributes to liquidity; the preparedness of others to purchase may be advantageous to existing shareholders in a variety of differing circumstances…” Justice Clarke added.

Both Jardine Strategic Holdings and Jardine Strategic Limited had appealed to strike out the lawsuits seeking a fair value higher than US$33 apiece by shareholders who had acquired the shares as an arbitrage opportunity, knowing that its amalgamation was a foregone conclusion when they made the purchases.

They said some event-driven hedge funds accustomed to undertaking appraisal arbitrage in other jurisdictions were among the buyers of its shares after the amalgamation announcement.

Their first attempt to strike out claims from dissenting shareholders seeking arbitrage profit was dismissed by the Supreme Court of Bermuda’s Chief Justice Narinder Hargun in April 2022.

Jardine Strategic Limited is the product of an amalgamation between Jardine Strategic Holdings and JMH Bermuda under the Companies Act of Bermuda, where Jardine Strategic Holdings was incorporated.

Under Bermuda law and Jardine Strategic’s by-laws, the amalgamation required the approval of at least 75 per cent of the votes cast by shareholders.

On Mar 8, 2021, Jardine Matheson Holdings announced plans to simplify the structure of the Jardine group, buying out about 15 per cent of the issued share capital of Jardine Strategic Holdings that it did not already own at US$33 a share.

Jardine Strategic had a primary listing in the United Kingdom, and secondary listings in Bermuda and Singapore.

Jardine Matheson had undertaken that it and its wholly-owned subsidiaries, together holding nearly 85 per cent of shares, would support the resolution. The requisite approval was therefore certain to be secured.

Between Apr 12 and Apr 15, 2021, 18 legal actions were filed, seeking to determine the fair value of the shares in Jardine Strategic.

The purpose of the Companies Act is that Jardine Matheson should be enabled compulsorily to purchase shares in Jardine Strategic, provided it pays a fair value for them, Justice Clarke said in the decision by the Court of Appeal.

He added: “The fair value is the fair value as at the date of amalgamation, and is not determined by the date upon which the shareholder purchased his shares (or why he did so).”