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Takeover Panel confirms miscellaneous amendments to the Takeover Code

  • United Kingdom
  • Corporate

13-05-2022

The Takeover Panel (Panel) has published two response statements (links below) following recent consultations on miscellaneous amendments to the Takeover Code (Code).

Overview of changes

The changes to the Code, which are largely technical in nature, include, in summary:

Disclosure of minimum level, or particular form, of consideration required

When a potential offeror is publicly identified, it will have to disclose any minimum price, or particular form of consideration, that it is required to offer under Rules 6 or 11 of the Code, i.e. as a result of purchases already made (and to announce if, during an offer period, it triggers a requirement to offer a prescribed level or form of consideration) (new Rule 2.4(c)(iii)). The Panel has also introduced a new note 4 on Rule 2.4 as a result of consultation feedback, which states that where it is not practicable for a potential offeror to make enquiries of all persons acting in concert with it before the announcement is made, this fact should be stated and any relevant details should be announced as soon as practicable and in any event by no later than the deadline for the potential offeror’s Opening Position Disclosure.

Restrictions on acquisitions of interests in shares by a mandatory offeror at the end of the offer timetable

On a mandatory offer, the bidder and its concert parties will not be permitted to acquire additional interests in target shares in the 14 days leading up to the unconditional date (or the expiry of an acceptance condition invocation notice) (new Rule 9.4(b)). The Panel’s rationale for this is to allow shareholders to make their decision whether to accept an offer with the knowledge of the maximum percentage stake that would be held by the mandatory bidder (and its concert parties) if the offer were to lapse.

‘Look-back period’ for determining the price of a mandatory offer

A new Note 5 on Rule 9.5(b) has been inserted to codify the Panel’s practice of treating the look-back period (for the purposes of determining the minimum price of a mandatory offer) as starting from the date on which the mandatory offer ought to have been announced, had the offeror complied with Rule 2.2.

Chain principle 

A mandatory offer is required under the ‘chain principle’ where a person (A) acquires control of a company (B) and in doing so also acquires or consolidates control of a second company (C). In that situation, A must make an offer for Company C if the interest in shares which Company B has in Company C is “significant” in relation to Company B. In determining the significance of Company C to Company B:

  • the Panel will no longer look at whether securing control of Company C “might reasonably be considered to be a significant purpose” of A acquiring control of Company B; and
  • Company C will be viewed as significant to Company B if it represents more than 30% of the value of Company B. This is a reduction from the current threshold of 50%.

Restrictions following the lapsing of an offer or a statement of no intention to bid

Minor amendments are made to the restrictions following an offer lapsing or a bidder announcing it will not make a firm offer and the circumstances in which a bidder will be allowed to make a new offer following such a statement. Where a bid has lapsed and the bidder has made a ‘no increase statement’ or an ‘acceleration statement’ without reserving the right to set it aside with target board consent, and a competing offer is ongoing, the restriction on the bidder making another bid will generally be extended beyond three months, to the end of the offer period. (Amendments are made to Note 1 on Rules 35.1 and 35.2; and also to Note 2 on Rule 2.5 and Note 2 on Rule 2.8.)

Other minor changes

There are also some additional minor amendments made, as set out in RS 2021/1. These include:

  • renaming ‘whitewashes’ as ‘Rule 9 waivers’, with some minor amendments made to the contents of the circular; and
  • an amendment to the definition of “interests in securities” to clarify that a custodian or depository (which may not be a bank) acting in the normal course of its business will not be treated as having an “interest in” securities that it holds as a result of that activity.

Removal of the restriction on order book dealings

PCP 2022/1 published in December 2021 proposed removing the restriction in Rule 4.2(b) of the Code, which prohibits a bidder and any concert party from acquiring an interest in target securities through an anonymous order book, or any other means, during the offer period, unless it can be established that the counterparty to the transaction is not an exempt principal trader connected with the bidder. In RS 2022/1, the Panel has adopted the proposals described in PCP 2022/1 without modification. The Panel Executive intends to publish a Practice Statement in relation to purchases of target shares by a bidder during an offer period.

Useful links

RS 2021/1 Miscellaneous Code Amendments

RS 2022/1 Response Statement by the Code Committee