Panel gives detail on its proposed changes to the Takeover Code


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Following Panel Statement 2010/22 in October 2010 on the regulation of takeover bids (Statement), the Takeover Panel today produced its consultation paper setting out in detail the proposed changes to the Takeover Code. Today’s consultation puts flesh on the bones of the Statement including the detailed text of the rule changes.

In its Statement, the Panel concluded that in recent times, hostile bidders have been able to obtain a tactical advantage over a target and its shareholders and the Panel is seeking to redress the balance. It also aims to make changes to take greater account of other parties (in addition to target shareholders) affected by takeovers.

Today’s consultation paper contains the Panel’s proposals for changes to the text of the Code and in large part tracks the general approach of the Statement as we previously reported. There are however some modifications to the detail. For instance, the Panel had previously concluded that a bidder should be held to a statement in an offer document regarding the target business and target employees for a year. The Panel now believes that the bidder should be held not only to such statements in the offer document, but also to all such statements (whether made in the offer document or not) made during the offer period.

The consultation paper also provides clarification in a number of areas. There is detail for instance on the proposed prohibition on deal protections and inducement fees including what dispensations the Panel might consent to (for example inducement fee arrangements for “white knight” offerors or in a formal public auction process).

The Statement set out proposals for an announcement that commences an offer period to identify any potential offeror. From our discussions with clients and intermediaries, such provisions would appear to be unpopular. Whilst the consultation paper seeks to introduce this proposal, it also sets out an alternative approach where the decision as to the identification of the potential offeror would generally rest with the target board. Although the Panel has decided on balance not to pursue the alternative approach, it nevertheless does ask for comments on it. It will be interesting to see how the Panel reacts to the responses it receives and whether it considers moving to implement the alternative approach.

For more information you can read the consultation paper. The Panel has asked for comments by 27 May. It will then publish a response statement which will include the final text of amendments to the Code. The Panel has stated that it does not envisage a long gap between publication of the response statement and the implementation of the changes.


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