In July, the Takeover Panel (the Panel) published a public consultation paper (PCP 2014/1 ) which proposed amendments to various provisions of the Takeover Code (the Code). The consultation closed on 12 September, and the Panel has now published its response (RS 2014/1) together with the text of the final changes (Instrument 2014/2). The revised Code will take effect from 1 January 2015.The proposals set out in the original PCP related to a number of different provisions of the Code. Whilst there was no overarching theme to the changes, they were intended to clarify the way in which provisions of the Code currently work, codify existing practice or otherwise improve the way in which the Code is drafted and operates. We summarised the key changes in our August newsletter (click here to see a copy of the article).

Although, in most cases, the Panel has adopted the amendments as proposed in the original consultation, it has, as a result of feedback received, introduced some modifications to some of its proposals. In a couple of instances, this has included new changes to provisions of the Code not covered in the original PCP, although the Panel is keen to point out that it believes these changes do not materially alter the effect of the provisions in question.

The key changes to the original proposals are summarised below.

Clarification of position by potential competing bidders

For contractual offers, the deadline by which a competing bidder must clarify whether or not it will make an offer will be, as proposed, the 53rd day after the publication of the first bidder's offer document. Also as proposed, for offers implemented by way of a scheme, the deadline will be the seventh day prior to the date of the shareholder meetings. However, whilst the Panel will still be permitted, in appropriate cases, to allow the potential competing bidder to clarify its position, the Code will not now specify the time by which such clarification must be made - it was originally proposed that this would be no later than the seventh day prior to the date of the court sanction hearing. Instead, the Panel will be able to determine the appropriate deadline having taken into account the particular circumstances of such a case.

The PCP proposed the introduction of a new provision to make it clear that, where the Panel consented to an extension to Day 60, it would normally also grant an extension to, or re-set, Day 46. Despite this being explained in Practice Statement No 8, the Panel believes that the point remains widely unknown. In responses to the PCP it was suggested that it should also be made clear that it is possible, with the consent of the target board, for a bidder to revise its offer after Day 46, provided that Day 60 is then extended and Day 46 re-set. This point has been accepted by the Panel, resulting in some additional changes to Rules 31.6 and 32.1.

Acquisitions of interests in shares by a former potential competing bidder

The changes have been adopted as originally proposed.

Dispensations from having to make a possible offer announcement

In certain situations, the Code provides that a potential bidder may have to announce that it is considering making an offer (for example, when target is subject to rumour and speculation or its share price increases). However, if the potential bidder can satisfy the Panel that it has actively ceased to consider making a bid, it may be granted a dispensation from the requirement.  If a dispensation is granted, the Panel may nonetheless require an announcement to be made where rumour or speculation continues or is repeated or the Panel considers it necessary to prevent a false market.

The PCP proposed that, in such circumstances, the announcement would usually require the identification of the former potential bidder (which is a reversal of the current provision which stipulates that identification will not normally be required). As all of the respondents who expressed a view on the issue disagreed with the proposal, the Panel is not proceeding with this change.

It is also worth noting that the Panel has recently published a new practice statement (practice statement 28), which explains its practice with regard to consenting to a person who has made a “no intention to bid” statement or whose offer has lapsed or been withdrawn making a single confidential approach to the target board during the restricted periods of six months and 12 months under Rules 2.8 and 35.1 respectively.

Resolution of competitive bid situations

As proposed, the Panel's auction procedure set out in PCP 7 will be incorporated (subject to some changes) into the Code as Appendix 8. This will be subject to some modification as a result of feedback received, most notably, by the exclusion of the provision which would have restricted parties to an offer from making announcements in relation to the terms of the competing offers. On reflection, the Panel has decided that a restriction is inappropriate because the parties to the offer may legitimately wish to make announcements in relation to the terms of the competing offers, particularly given that a competing bidder may wish to introduce a new form of consideration during the auction procedure (as is permitted under the new Appendix 8).

Potential controllers granted a Rule 9 waiver

It was proposed that, in the case of a Rule 9 "whitewash", the shareholder circular should be required to explain that the potential new controller would not be restricted from making an offer for the company following approval of the proposals at the shareholders’ meeting unless it had entered into a standstill agreement or made a statement that it did not intend to make an offer. It was also proposed that full details of the agreement or statement should be disclosed in the circular and that a copy of the agreement or statement should be published on a website. On reflection, the Panel has decided that only standstill agreements need be published on a website.

Due to the changes being made to the Code, practice statement 16 (note 5 on the definition of acting in concert – standstill agreements) will be withdrawn with effect from 1 January 2015.

Disclosure of irrevocable commitments, letters of intent and interests in relevant securities

The proposed amendments are to be adopted with minor changes. However, whilst contemplating these provisions, the Panel has considered the relationship of Rule 30.4 (documents, announcements and information required to be published on a website) and Rule 26 (documents to be published on a website) and has noted that there is a degree of overlap between the two rules. The Panel has, therefore, concluded that the rules should be combined in order to put the requirements with regard to documents, announcements and information which have to be published on a website in one place (with some minor consequential amendments) and to remove duplicative provisions.

In addition, changes have been made so that:

  • where any document, announcement or information which is to be published on a website includes the address of the website on which it will be published, that address must link either to the webpage on which the relevant document, announcement or information may be found or to a webpage which includes a clear link to the relevant webpage; and

  • the current provision which requires a party to an offer to provide another party with copies of the documents to which Rule 26 relates is deleted, as the Panel believes this is no longer necessary, given that the documents in question will be readily available on the relevant party’s website.

The Panel is keen to point out that, whilst it has not consulted on the changes, it believes that they do not materially alter the effect of the provisions in question.

The Panel's disclosure forms are being amended as set out in the original consultation. The revised forms should be used to disclose dealings and positions from 1 January 2015.

Redemptions and purchases by target companies and bidders of their own securities

The changes have been adopted as originally proposed.

Circulars published by persons acting in concert with a bidder or target company

The changes have been adopted as originally proposed.

“No increase” and “no extension” statements

Subject to some minor points of clarification, the amendments have been adopted as originally proposed.

Independent advice provided to the target board

Subject to one minor change, the amendments have been adopted as originally proposed.

Aggregation of interests across a group

The changes have been adopted as originally proposed.

Comment

Whilst the changes set out in the original consultation were sensible in that they clarify a number of provisions of the Code, we are pleased to see that the Panel has taken account of some sensible improvements which have been suggested by the parties who responded.