Takeovers Panel backs Sequoia in shareholder battle

Following months of jockeying, the Takeovers Panel has backed Sequoia in its battle to keep chief executive Garry Crole and director Kevin Pattison on the board, making a declaration of unacceptable circumstances.

Crole said the Takeovers Panel’s decision “confirms Sequoia’s met its fiduciary duty to act in the best interests of all shareholders and take this matter to the panel”.

“Whilst the exercise to do so was expensive, it was necessary to ensure breaches of the Corporations Act were not left unaddressed,” he said.

“The Takeovers Panel’s decision that sick shareholders breached parts of the Corporations Act at a critical time for the business did show a complete disregard for other shareholders and the employees of the business.

“We hope this decision ends the calls for change and the company can focus on delivering the advice market premium services to allow more Australians an ability to receive high quality affordable advice.”

In April, a group of shareholders sought to oust Crole and Pattison from the board and appoint two replacements of their suggestion in the form of Brent Jones and Peter Brook.

Jones has been the firm’s head of professional services since December 2017. He previously spent 15 years as managing director of InterPrac, which was acquired by Sequoia in 2017. Brook has been chair of Diverger – which was recently acquired by Count – since December 2021, having previously been chair of Xplore Wealth in 2019.

As a result, the firm decided to hold an EGM on 4 June.

However, in May, Sequoia contacted the Australian government’s Takeovers Panel regarding alleged unethical practices by the rogue shareholders.

These allege the shareholders:

• Failed to fully disclose the identity of those who are associated with them, the nature of their association, and the extent of their collective voting power in Sequoia.
• Purchased additional Sequoia shares resulting in increases in collective voting power above 20 per cent in Sequoia, under section 606.

The relevant shares relate to 7,448,378 Sequoia shares (5.6 per cent of the share capital) that were acquired after 31 March 2024 by or on behalf of Glennon Capital Pty, Glennon Small Companies, Cojones Pty or Vonetta Pty.

On Monday, the Takeovers Panel found that the association between the requisitioning shareholders “went beyond convening the meeting and extended to their being associated also in relation to voting at the meeting”.

“By no later than 31 March 2024, for the purpose of controlling or influencing the composition of Sequoia’s board and the conduct of Sequoia’s affairs each of Brent Jones and Anthony Jones and Brent Jones and Glennon Capital: had a relevant agreement and became associated under section 12(2)(b); or were acting in concert in relation to Sequoia’s affairs and became associated under section 12(2)(c),” the panel said.

It added that in its acquisition of shares taking the combined voting power of Unrandom, A. Jones Group and Glennon Capital in Sequoia from approximately 22.20 per cent to approximately 27.84 per cent, the shareholders did not meet any exceptions in section 611 and therefore section 606 was contravened by each of Glennon Capital, Cojones and Vonetta.

The shareholders also contravened section 671B, by failing to give substantial holder notices fully disclosing their association “including their combined voting power in Sequoia” and failed to fully disclose the extent of their association in Sequoia.

Due to this, the panel said the acquisition had not taken place in an “efficient, competitive and informed market”, and the “holders of shares in Sequoia and the market in general do not know the identity of persons who have acquired a substantial interest in Sequoia”.

The panel added it considered the circumstances were unacceptable because “there have been contraventions of s606 and the substantial holder provisions as a result of the acquisition of the relevant shares by Glennon Capital, Cojones and Vonetta in light of the associations referred to above”.

While it has not yet made any orders, the panel said it is “still considering the application in relation to orders”.