On 12 January 2015, the Takeover Code was amended by the introduction of a new framework to regulate statements made by bidders and targets about any particular course of action they commit or intend to take (or not take) after the end of the offer period. The new framework distinguishes between:
- post-offer undertakings (POUs) – statements relating to any particular course of action that a bidder or target commits to take (or not take) after the end of the offer period and with which it will be required to comply for the period of time specified in the undertaking, unless a specified qualification or condition applies, and
- post-offer intention statements – statements relating to any particular course of action that a bidder or target intends to take (or not take) after the end of the offer period, and which must be accurate statements of the party’s intentions at the time they are made and based on reasonable grounds.
The new framework was consulted on in September 2014 (see our October newsletter article for more information) and the final rule changes were set out in Response Statement 2014/2. Having considered the responses to the consultation, the Panel has, in most cases, adopted the amendments proposed in its original consultation, PCP 2014/2, although there are some variations. We set out the main changes to the original proposals below, all of which relate to POUs - the provisions in respect of statements of intention were not subject to any material change.
Use of deed polls etc
The consultation proposed that a commitment given directly to one or more identified parties, including a government agency such as the Competition and Markets Authority, would not be subject to the POU framework. This was because any commitment given directly to one or more identified parties should be enforced by that party or parties through the appropriate contractual or other regime applicable to the commitment in question.
During the consultation, it was queried whether a deed poll entered into unilaterally by a bidder or target to confer rights on one or more persons would fall within the POU regime or not.
In its response, the Panel explains that the provisions of the new Rule on POUs (Rule 19.7) provide a clear framework under which a bidder or target may commit to a course of action or state of affairs after the end of the offer period. Accordingly, the Panel states that it would not, generally, be appropriate for a bidder or a target to make a commitment by means of a method other than a POU - for example, a deed poll. The original proposals have, therefore, been amended to provide that:
- where a party to an offer wishes to make a commitment other than by way of a POU, the Panel must be consulted in advance so that the Panel can consider whether the proposed commitment would more appropriately be made as a POU and, therefore, be subject to the requirements of the new framework including enforcement by the Panel, and
- if, with the agreement of the Panel, a bidder or target makes a commitment other than by way of a POU, it should normally be required, when referring to that commitment, to make clear that it has not been made as a POU in accordance with Rule 19.7, and that it is, therefore, not enforceable by the Panel.
Qualifications and conditions
Whilst POUs can be subject to qualifications and conditions, they must meet the standards set out in Rule 19.7(c). A new Note on Rule 19.7 has been added to ensure that a person who has made a POU subject to certain qualifications and conditions is not able to avoid compliance with the POU by orchestrating events so that a condition or qualification is triggered.
A provision has also been added to require that a person who has made a POU subject to any qualifications and conditions must refer to those qualifications and conditions each time it refers to the POU.
Supervisors' reports and fees
Rule 19.7 has been amended so that, where the Panel requires a written report produced by a supervisor appointed to monitor compliance with a POU to be published, it is clear that this may be in whole or in part – this will enable, for example, any commercially sensitive information to be withheld.
The Code provides that both bidders and targets must disclose certain fees and expenses expected to be incurred in connection with the offer. The Panel has clarified that it was not its intention that the fees of supervisors appointed to monitor compliance with a POU should fall within this disclosure requirement. A new Note to Rule 24.16 has been added to deal with this.
While we do not expect to see a high volume of POUs, the amendments made to the new framework as a result of the consultation have clarified a number of points and should help bidders and targets to understand what is expected of them should they decide to make a POU. Under the old provisions, if an intention was stated, the person making the statement was held to it for 12 months. Statements of intention were, therefore, effectively treated as commitments. By distinguishing statements of intention from commitments (POUs), and making statements of intention subject to less onerous provisions than POUs, the new framework should facilitate improved disclosures about intentions.