Court sanctions scheme of arrangement for company takeover

High Court approves UK music company's acquisition by US-based global business. 7digital Group, a leader in digital music solutions, is set to be acquired by Songtradr Inc after court is satisfied that all legal requirements are met.

The High Court has sanctioned a scheme of arrangement under which a UK music company can be acquired by a worldwide business based in the United States. The case involved the 7digital Group, a global leader in business-to-business end-to-end digital music solutions. The company wanted its shares to be transferred to Songtradr Inc, a business-to-business music licensing company incorporated in Delaware. The proposed scheme was between the company and the holders of its ordinary shares. For every scheme share held and transferred to Songtradr, a shareholder would receive 0.695 pence in cash, which represented a premium of approximately 114% at the closing share price. The 7digital Group directors unanimously recommended the proposed scheme. On 27 February 2023, an ICC judge granted permission to convene a single meeting of the scheme shareholders which took place on 23 March. The resolution was passed by a majority of 84.7% in number, representing 99.11% in value. 

The court granted the application. It held that before sanctioning a scheme of arrangement, consideration had to be given to the following checklist: 

• the court had to be satisfied that the statutory provisions had been complied with 
• it had to be satisfied that the class of shareholders who were the subject of the court meeting, were fairly represented by those who attended, and that the statutory majority were acting bona fide and were not coercing the minority to promote interests adverse to the class they purported to represent
• that an intelligent and honest person, who was a member of the class concerned and acting in respect of his own interest, might reasonably approve the scheme
• that there was no blot on the scheme.

All those requirements were met in this case; therefore, it was appropriate to sanction the scheme of arrangement.

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