Amendments to the Takeover Code have been proposed to clarify and update provisions dealing with the treatment of dividends during an offer. If implemented as suggested:

  • a bidder who has made a “no increase” statement as to the finality of its offer, must reduce the value of its offer by the amount of any dividend subsequently paid by the target, unless a specific reservation is included in the “no increase” statement providing that target shareholders are, in addition to the offer consideration, entitled to dividends; and
  • any other bidder will not normally be able to reduce the value of its offer by the amount of any dividend subsequently paid by a target unless it has reserved the right to do so in each of (i) any statement in relation to a possible offer, (ii) its firm offer announcement, and (iii) the offer document. 

The impact of dividends on establishing a minimum offer price will also be clarified, including dealing with the situation where shareholders are not entitled to receive a dividend in addition to the offer consideration (currently the provisions only deal with shareholders who are entitled to receive dividends).

The consultation also includes a new draft practice statement on the Panel’s practice in relation to the application of the Code to the payment of dividends by a target.

Impact – the proposals are intended to ensure greater alignment of the Code with the practice of the Panel, rather than introduce new substantive requirements. Clarification and codification of the treatment of dividends during an offer will provide greater certainty to bidders.