The 20 second summary
On 14 November, the Code Committee of the Takeover Panel (the “Committee”) published its feedback on miscellaneous changes to the Takeover Code (the “Code”). The aim of the consultation in July (the “CP”) was to provide greater certainty for the parties to an offer as to the applicable timetable, include new restrictions on the acquisitions of interest in shares and other changes designed to clarify and codify existing market practice (see our earlier ebrief). Substantially all of the changes proposed have been adopted. The changes will come into force on 1 January 2015.
Simultaneously the Committee published Practice Statement No. 28 explaining its approach to a person who has made a “no intention to bid” statement or whose offer has lapsed or has been withdrawn making a single confidential approach to the target board during the restricted period of six months (Rule 2.8) and 12 months (Rule 35.1).
New Code provisions
The Committee has, in most cases, adopted its proposed changes. As a result of feedback, further proposed modifications have been made to certain rules:
- Acquisitions of interest in shares and dispensations: in the CP, the Committee proposed that for three months from a dispensation from making an announcement under Note 4 to Rule 2.2, the potential offeror, and any person acting in concert with it, may not actively consider making an offer, make an approach or acquire any interests in the target company’s shares. The potential offeror and its concert parties would also be restricted from doing any of the things set out in Rules 2.8(a) to (e) within six months from the date of the dispensation. These proposals have been adopted but with minor amendments to give the Panel greater flexibility in disapplying the restrictions.However, respondents disagreed with the Committee’s proposals to require any announcement to be made under Note 4(b) to Rule 2.2, to identify the former potential offeror. The Committee has decided only to require the former potential offeror to be identified in the announcement where it has been specifically identified in rumour and speculation.
- Modified form of auction procedure: as proposed, there will be a new five business day auction procedure where a competitive situation continues to exist after Day 46 of a competing offer.
- Disclosure of irrevocable commitments, letters of intent and interests in relevant securities: - the proposed changes in the CP required irrevocable commitments and letters of intent procured before an offer period to be disclosed by noon on the business day following the date of the announcement that first identifies it as a (potential) offeror. This will be extended to apply to a target company which has procured irrevocable commitments or letters of intent not to accept an offer, although this is rare in practice;- as proposed in the CP, the rules will reinstate the requirement on an offeror to disclose interests and short positions in the relevant securities of the target company, together with any irrevocable commitments and letters of intent which it has procured, in its firm offer announcement; and- as proposed in the CP, the rules will remove the requirement for details of irrevocable commitments and letters of intent to be disclosed in an Opening Position Disclosure if they have been disclosed in a firm offer announcement or under Rule 2.11 (irrevocable commitments and letters of intent).
- Independent advisers: the new rules will clarify that the role of the rule 3 adviser is to advise the target company board as to whether the financial terms of the offer, including alternative offers, are “fair and reasonable”. Feedback suggested that by prescribing the form of advice given by an independent adviser, the Panel is concerning itself with the financial or commercial advantages or disadvantages of a takeover. The Panel stipulates that this is not the case; it is for the offeror to decide the offer price and for the target company shareholders to decide whether to accept the offer, having been provided with sufficient information to do so.
Practice Statement No. 28 – entering into talks during a restricted period
The Panel Executive has confirmed that:
- where a “no intention to bid” statement has been made under Rule 2.8, making an approach to the target company would fall within the restriction in Rule 2.8(e). However, the Executive will normally consent to a relaxation of this Rule to enable a potential offeror to make a single confidential approach to the target board during the six month restricted period to ascertain whether it would be interested in entering into talks. If an approach is made and rejected, the potential offeror will not normally be permitted to make any further approaches for the remainder of the six month restricted period;
- if the target board agrees to enter into talks, the restrictions in Rule 2.8 will be set aside for the period of the talks and if those talks end, the restrictions will apply to the potential offeror for the remainder of the restricted period;
- where a “no intention to bid” statement is made after the announcement by a third party of a firm intention to make an offer, the potential offeror who made the statement will be permitted to make a single confidential approach only if the third party offer has been withdrawn or lapsed in accordance with Note 2 on Rule 2.8;
- where the Panel has granted a dispensation from Rule 2.2 and the potential offeror is subject to the restrictions in Rule 2.8, the Panel will normally consent to a potential offeror making a single confidential approach during the second three month period only;
- any possible offer announcement under Rule 2.2(c), following a single confidential approach, will not normally be required to specify a put up or shut up (“PUSU”) deadline as the target board could end the talks at any time in which case the restrictions in Rule 2.8 would continue until the end of the restricted period. However, the announcement should explain the reasons why a deadline is not given and if talks continue after the end of the restricted period, a PUSU deadline will need to be announced; and
- it will normally apply the same approach to Rule 35.1.