When the price is right: the increasing use of tiered consideration structures
Ahead of the Deal - Australian M&A briefing
Key insights
- Conditional price increases or tiered consideration structures, where a bidder offers a defined price uplift (or uplifts) if specified triggers are met, are appearing in a wider variety of forms across Australian public M&A deals. These structures reflect different commercial strategies, including incentivising acceptance momentum for a takeover bid, responding to rival bids, and targeting specific shareholders whose support is critical to the success of a transaction.
- Recent examples, such as IFM's current takeover bid for Atlas Arteria, show how these structures are being calibrated to address register specific dynamics and bidders' overall deal strategies (including in some instances in conjunction with a bid being declared unconditional and other 'truth in takeovers' statements). Notably, the recent conditional price increase utilised in Fortescue's successful bid for Red Hawk Mining in 2025 had a time based trigger (that is, the conditional price increase was enlivened if Fortescue acquired a relevant interest in 75% or more of Red Hawk shares within 7 days of the offer opening), with Fortescue reaching the 90% compulsory acquisition threshold within 3 weeks of announcement of the bid.
- While in a different guise, two-tiered pricing outcomes are also increasingly arising through the use of concurrent takeover bid and scheme structures albeit typically as price reductions. In these structures, the consideration offered under a scheme is usually higher than the takeover (which is the 'fallback' where the scheme does not proceed) to encourage shareholders to vote in favour of the scheme.
- The Takeovers Panel has previously confirmed that multi-tiered pricing structures are not unacceptable of themselves, where there is adequate disclosure and where shareholders are provided with sufficient time to consider them. Following Atlas Arteria's recent application to the Panel regarding the two-tiered pricing structure proposed under the IFM bid (and should the Panel decide to conduct proceedings), it will be interesting to see if the Panel provides any further guidance in relation to these structures, particularly in light of the prescriptive procedural rules that apply to takeover bids under the Corporations Act.
Conditional price increases: what they are and where we are seeing them
A conditional price increase or multi-tiered pricing structure is a structure where a bidder offers an initial price under a bid (which may be in cash or in scrip), with a defined uplift (or uplifts) payable if specified conditions are met. The trigger might be acceptances reaching a particular threshold (e.g. the 90% compulsory acquisition threshold), a board recommendation, acceptance by the target's major shareholders, the absence of a competing proposal by a stated date, or some combination of these.
These structures are not new, but their use has increased in recent years and the forms they take have become more varied (and often fixed to lower levels of acceptances by target shareholders than the 90% compulsory acquisition threshold). In IFM's current off-market bid for Atlas Arteria (where IFM already held 34.5% of the target on announcement), the bidder’s statement set a base price of A$4.75 per stapled security, rising to A$5.10 if the bidder’s relevant interest is at least 45% before the offer period closes. The higher price is described by the bidder as ‘best and final’ in the absence of a competing proposal. Additionally, the bidder has stated that it will not acquire Atlas Arteria securities at a price higher than this higher consideration for at least 12 months following close of the offer, in the absence of a superior proposal.
Fortescue’s recent successful bid in 2025 for Red Hawk Mining offered a base cash price of A$1.05 per share, stepping up to A$1.20 if the bidder acquired a 75% relevant interest within seven days of the offer opening. Fortescue acquired a relevant interest of 78% in Red Hawk Mining within the specified window and the price increase was triggered, with all shareholders then automatically receiving the increased offer price. As noted above, Fortescue reached the 90% compulsory acquisition threshold within 3 weeks of announcement of the bid.
In Seven Group Holdings’ (SGH) 2024 bid for Boral, the cash component of SGH's initial proposal was A$1.50 per Boral share, with two contingent A$0.10 cash uplifts that could take the cash component to A$1.70. The first A$0.10 was conditional on SGH achieving at least an 80% aggregate interest in Boral or on a unanimous recommendation from Boral’s Bid Response Committee. The second A$0.10 was conditional on SGH reaching the compulsory acquisition threshold. The bid was ultimately recommended by the Boral board and Boral shareholders received the maximum cash component of $1.70.
Louis Dreyfus Company's (LDC) takeover of Namoi Cotton in 2024 took a different approach. During the contest for control of Namoi Cotton, LDC stated that it would increase the offer price to A$0.77 subject to, and conditional on, STAM (Namoi’s largest shareholder) accepting LDC’s offer in respect of at least 51.3 million Namoi shares by 30 September 2024. STAM accepted LDC's offer within the required timeframe, and the offer price was then increased and the bid ultimately successful.
Finally, Fenix Resources’ 2025 bid for CZR Resources, albeit unsuccessful, demonstrated that conditional price increase structures are not confined to cash offers. Fenix offered initial scrip consideration of 0.85 Fenix shares per CZR share, increasing to 0.98 if Fenix acquired a relevant interest of 75% or more of CZR’s shares. However, the emergence of a competing proposal from the Robe River Iron Associates Joint Venture to acquire CZR’s main asset, the Robe Mesa Iron Ore project, prevented Fenix from reaching the 75% threshold by the required deadline.
While there are guardrails on the use of conditional price increase structures, which are discussed further below, the above examples show that there is significant flexibility available in these structures which allows for calibration to the differing register dynamics, responding to competing bids and levels of target engagement and overall bid strategy.
Two-tiered pricing in another guise: dual scheme/takeover structures
Two-tiered pricing outcomes can also arise where a bidder makes a takeover bid concurrently with, or as a fallback to, a scheme of arrangement. Typically, unlike the conditional price increase structures we have seen in takeover bids, the scheme is priced higher than the takeover (the takeover being the fallback structure if the scheme does not proceed) to incentivise shareholders to vote in favour of the scheme.
Amongst various other recent transactions (including the recent Azure Minerals and Genex Power transactions), this structure was proposed by Credit Corp in its non-binding indicative proposal for Humm in December 2025. Humm announced that the Credit Corp NBIO stated that, if Credit Corp failed to gain shareholder support for a scheme of arrangement at $0.77 per share, Credit Corp may make an off-market takeover offer at $0.72 per share which is conditional on 50.1% acceptances (and which could therefore proceed without the support of the previous Humm Chair who owns 29.4% of the company).
Regulatory considerations
It is possible that the Takeovers Panel may make a declaration of unacceptable circumstances if tiered consideration structures are structured in a way which may not be consistent with an efficient, competitive and informed market and target shareholders are not given sufficient time to consider increases in the consideration under a bid.
This became relevant in Woolworths' bid for Australian Leisure & Hospitality Group (ALH) in 2004 where, in response to a competing bid, at around 2pm on the date the offer was to close, Woolworths announced that it would let its bid for ALH lapse if it did not achieve a relevant interest in ALH in excess of 20% by 6pm on that day and would:
- increase its cash offer to $3.40 per share (from $3.15 per share) if its relevant interest in ALH was in excess of 20% by 6pm on that day; and
- increase its cash offer to $3.50 per share if its relevant interest in ALH was in excess of 20% by 6pm on that day and in excess of 50% by the closing time for the bid.
The announcement did not disclose the automatic extensions to the bid which would result under the Corporations Act from either of the price increases – that is, if within the last 7 days of the offer period the consideration under the bid is varied to improve the consideration, the offer period is automatically extended by 14 days.
The Panel considered that the timing and content of this announcement was unacceptable as it:
- provided shareholders with an unreasonably short period of time in which to consider material developments in the bid; and
- contained an inadequate explanation of the consequences of accepting the bid and of other persons accepting the bid. In particular, in not mentioning the automatic extension of the offer period which would result if the 20% threshold was achieved, the announcement did not highlight to ALH shareholders that they might have a further opportunity to consider and accept the bid after the announcement.
In the ALH Panel proceedings, the Panel considered whether, of themselves, the conditional increases would constitute unacceptable circumstances (for example, regardless of the time periods which were set for achieving the various acceptance levels). The Panel considered whether it was consistent with the existence of an efficient, competitive and informed market for shareholders to be able to accept an offer where they do not know what the bid consideration under the offer will ultimately be and in circumstances where they are forced to accept the risk of lower offer consideration in order to obtain higher consideration. The Panel was of the view that with the provision of adequate information and adequate time to consider that information, the conditional price increases in the ALH matter were of themselves not inconsistent with the existence of an efficient, competitive and informed market. The Panel noted:
"Indeed, the Panel recognised that conditional increases allow bidders to put higher offers on the table than they otherwise might be prepared to put and thus generally facilitate a more competitive market. … the Panel considered that such conditional increases are, and have been for some time, an accepted part of the Australian takeovers market."
As discussed above, Atlas Arteria recently made an application to the Panel in relation to the two-tiered pricing structure proposed under the off-market takeover bid by IFM. Atlas Arteria has submitted that IFM's bidder's statement does not explain how the conditional price increase will be implemented in accordance with section 650D of the Corporations Act (relating to the variation of off-market bids) and does not warn securityholders about the risks of the structure, including that the offer may close at the lower price (that is, if the conditional price increase is not enlivened). Atlas Arteria submitted that the offer structure and deficiencies in the disclosure in the bidder's statement are contrary to the principles of Chapter 6 of the Corporations Act, and sought orders that IFM be restricted from despatching the bidder's statement.
As at the date of writing, the Panel has declined to make the interim order requested by Atlas Arteria to restrain IFM from despatching its bidder's statement in the current form and the Panel is still considering whether to conduct proceedings. However, the application is a reminder that careful structuring of tiered consideration structures is key, particularly in light of the prescriptive rules that apply to the variation and extension of takeover bids in the Corporations Act.
Will we continue to see multi-tiered consideration structures?
As noted above, the Panel has previously confirmed that, provided target shareholders are given sufficient time to consider multi-tiered consideration structures and disclosure is adequate, such structures are not of themselves unacceptable. Given such structures provide an important tactic for bidders in a range of circumstances, we expect to continue to see these in various forms.
Interestingly, in the Panel's reasons for its decision in the Woolworths / ALH matter some 22 years ago, the Panel said that there may be a need for guidance in the market about the terms and timing of conditional increases in the future, and that the Panel would consider whether it would assist the market for it to draft a Guidance Note for consultation with the market on this area. It will be interesting to see whether Atlas Arteria's application to the Panel in relation to the use of a tiered consideration structure in IFM's bid leads to further consideration by the Panel in this regard. In any event, if proceedings are conducted in the Atlas Arteria matter, any comments that the Panel decides to make on tiered consideration structures will be watched with interest given their potential impact on the structuring of conditional price increases in future transactions.
