By Greg Smith, Partner and Paul Wentworth, Special Counsel

On 21 November 2025, the Commonwealth Treasurer, The Hon Dr Jim Chalmers MP, announced that, based on a recommendation from the Foreign Investment Review Board (FIRB), certain subsidiaries of Cosette Pharmaceuticals, Inc. (Cosette) would not be granted what is commonly called “FIRB approval” to acquire Mayne Pharma Group Limited (Mayne Pharma).

The Australian foreign investment regime casts a wide net as to when FIRB approval is required (much wider than, for example, the U.K. regime). If FIRB approval is required, and an acquisition completes without the approval, in addition to imposing significant penalties on the acquirer, the Treasurer has the power to unwind the transaction, [1] which necessarily affects the seller. Accordingly, it is common for M&A contracts to include a condition that FIRB approval is obtained, supported by obligations and rights of the parties and rights in securing it, as in the contract in this instance.

The Treasurer decided to block this transaction on national interest grounds, which is uncommon. Of the thousands of applications in respect of M&A deals (as opposed to property deals) over the past decade, only a handful of proposed acquisitions have suffered this fate; however, it is likely that a number of applications were withdrawn following applicants receiving an indication from FIRB that the application would be rejected or receiving proposed conditions to an approval that were unacceptable to the applicant.

Given the vast majority of applications are approved (with what are seen in the market as relatively “standard” conditions), dealmakers may be lulled into a false sense of security that obtaining FIRB approval is more of a timetable issue than something giving rise to completion risk (in contrast to a no MAC condition, which creates completion risk but no timetable issue). That position may now change.

Below are some of the more salient events of the Cosette / Mayne Pharma deal:

• Cosette’s subsidiaries applied for FIRB approval. That application required the Cosette subsidiaries to set out their intentions regarding the future operations of Mayne Pharma. We understand that the application broadly indicated, that Cosette did not propose significant changes.
• A document explaining the transaction was sent to Mayne Pharma’s shareholders which said substantially the same things as Cosette had indicated to FIRB.
• Cosette purported to terminate the contract relying on, among other things, failure of the no MAC condition (as we have commented on previously [2]).
• After lodging the application for FIRB approval, Cosette communicated to FIRB that “its current intention is to seek to dispose of or close” a significant manufacturing site of Mayne Pharma in Salisbury, South Australia (Salisbury Site).
• Mayne Pharma sought Cosette’s consent to speak to FIRB directly, which was denied.
• An article appeared in the Australian press reporting that the South Australian Premier had formally objected to the acquisition with FIRB, because of plans to close the Salisbury Site. Mayne Pharma was not aware Cosette was engaging with the Premier and had not done so itself.
• Mayne Pharma made an application to the Takeovers Panel, a regulator of acquisitions of listed companies in Australia, in relation to the nature and timing of Cosette’s disclosures to it / its shareholders and those made to FIRB. The Takeovers Panel ordered that Cosette “must agree to any conditions reasonably required by the Treasurer in connection with the Salisbury Site (including conditions reasonably restraining its closure)…”.
• The Treasurer’s announcement said “no conditions could be put in place to adequately mitigate national interest risks, particularly unique risks to the supply of critical medicines”.

Other undisclosed national interest-related reasons would include the potential loss of jobs, and the fact that the Commonwealth had already paid Mayne Pharma $4.8 million for the expansion and modernisation of the Salisbury Site (more than 25% of the $18 million project cost). The Treasurer may also have had in mind the Northern Minerals situation (see footnote 1), and that the risk of a repeat could be better closed off by blocking the deal.

We leave it to readers to form their own view of the events. Mayne Pharma has said that Cosette “failed to comply with its obligations under the [contract] and that failure … contributed to the failure to satisfy the FIRB condition”. Mayne Pharma has not publicly said which obligations were not met under the contract, however these included an obligation on Cosette to provide drafts of communications to Government agencies and not take any action which would materially hinder obtaining FIRB approval.

We expect that these events may cause dealmakers to recalibrate their view of completion risk attached to a FIRB approval condition. This may impact contracts in a number of ways. Obligations on the parties to secure FIRB approval and not take action that might jeopardise obtaining FIRB approval, the rights of the seller in that process, and what should constitute acceptable conditions for an acquirer may all receive (even) more detailed treatment in contracts. This situation may also support a request for a reverse break fee, payable by the acquirer if FIRB approval is not obtained.

[1] In practice, we are not aware of unwinding having happened (yet). There have, though, been steps taken which point in this direction, particularly the divestment orders made against certain shareholders of Northern Minerals. Those orders appear to have been ignored.

[2] For our commentary on this, see: Mayne Pharma versus Cosette – What does the case mean for the use of MAC clauses? – Mills Oakley