On February 15 2016 the UK Takeover Panel published Public Consultation Paper 2016/1, setting out a number of proposed amendments to the Takeover Code relating to the communication and distribution of information during an offer by a bidder or target. The purpose of these proposals is to provide greater clarity on the rules governing equality of information to shareholders, and to update the Takeover Code to reflect recent developments in the use of social media and other forms of electronic communication by corporates.

Equality of information

Rule 20.1 currently states that information about parties to an offer must be made equally available to all target shareholders as nearly as possible at the same time and in the same manner. In the consultation, the panel makes the following proposals:

  • Rule 20.1 should be amended to clarify that it also applies to information and opinions relating to an offer.
  • Where material new information or significant new opinions relating to an offer or a party to an offer are published by the bidder or target, such information or opinions must be announced via a regulatory information service at the same time. Similarly, this is the case where such information or opinions are provided to any shareholder (or other person interested in securities) of the bidder or the target, any investment manager, adviser or analyst – each a 'relevant person' – or the media.
  • Any presentation or other document relating to an offer or a party to an offer provided to, or used in any meeting with, a relevant person should be published on a website promptly after it is so provided or used. Any written communication relating to an offer or a party to an offer provided to the media must be published on a website promptly following its publication by the media.
  • At the same time as publication of the above documents on a website, a regulatory information service announcement should be made to note that such documents have been published on such website with the relevant webpage links.

The panel has recognised that there are certain circumstances where it would be appropriate for information or opinions to be provided in confidence by a party to an offer to a relevant person. Accordingly, the panel is proposing to amend the Takeover Code to provide as follows:

  • Before the start of an offer period, material new information or significant new opinions relating to an offer or a party to an offer may be provided in confidence by the bidder or target to a relevant person. However, this is subject to the provision in Rule 2.2(e) that an announcement is required when discussions relating to a possible offer are extended to include more than a very restricted number of people.
  • During the offer period – but before the announcement of a firm or revised offer – the panel may consent to the provision of such information or opinions in confidence to one or more relevant person.
  • Any such information or opinion provided to a relevant person in such circumstances must be published in – or by no later than the date of – the announcement of the firm or revised offer. However, where the information or opinion is provided by the target and the target board is not recommending the offer, such information or opinion is to be published in (or by no later than the date of) the first substantive announcement made by the board in response to the announcement of the hostile offer.
  • Any presentation or other document provided to a relevant person in such circumstances must be published on a website promptly after the announcement of the firm or revised offer. However, where such document is provided by the target and the target board is not recommending the offer, such information is to be published on a website promptly after the first substantive announcement made by the board in response to the announcement of the hostile offer.

Advertisements and use of videos and social media

Rule 19.4 currently provides that the publication of advertisements connected with an offer is prohibited, unless the advertisement falls within an exception to this rule. Rule 19.2(a) provides that such advertisement (where permitted) must include a statement by the relevant directors accepting responsibility for the information in such advertisement. The panel is proposing to amend these rules by:

  • widening the scope of this prohibition so that it applies to all advertisements published during the course of an offer;
  • deleting the following exceptions to the prohibitions:
    • advertisements communicating information relevant to holders of bearer securities;
    • advertisements comprising a tender offer under Appendix 5 of the Takeover Code;
    • advertisements which are notices relating to a scheme of arrangement; and
    • advertisements published with the specific prior consent of the panel; and
  • removing the requirement for a responsibility statement, as it is considered unnecessary.

The panel has noted that the Takeover Code contains no specific provisions on the use of videos or social media by the bidder or target as a means of communicating information or opinions relating to an offer. The panel is proposing that a video published by the bidder or target which includes such information or opinions must comprise only a director or senior executive reading from a script or participating in a scripted interview. Any such video may be published only with the panel's consent and must be published on a website.

In addition, the panel is proposing that any information or opinions relating to an offer published by a bidder or target via social media should be limited to the information and opinions which have been published via a regulatory information service announcement or on its website. Such information or opinions must be prepared with the highest standards of care and accuracy and must be adequately and fair presented.

Meetings and telephone calls

Note 3 on Rule 20.1 currently provides that meetings between the bidder or the target and a relevant person may take place before or during an offer if no material new information is forthcoming and no significant new opinions are expressed. Such meetings must in general be attended by the financial adviser or corporate broker to the bidder or the target (as appropriate), who is responsible for confirming in writing to the panel that the meeting held was in compliance with Note 3 on Rule 20.1. The panel is proposing to relax these requirements to reduce the circumstances in which the financial adviser or corporate broker must report back to the panel.

Comment

In most cases, the panel's proposals are a codification of its current practices. One significant departure from current practice is the proposed relaxation of the rules on the policing of meetings by the financial adviser or corporate broker to the bidder or target. The panel's consultation closes on April 15 2016.

For further information on this topic please contact Will Pearce or William Tong at Davis Polk & Wardwell London LLP by telephone (+44 20 7418 1300) or email (will.pearce@davispolk.com or william.tong@davispolk.com). The Davis Polk & Wardwell website can be accessed at www.davispolk.com.

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