The Takeover Panel ("Panel") has published changes to the Takeover Code as a result of its last three consultations. The changes relate to (a) the effect that a dividend declared by a target may have on a bidder's offer price, (b) the definition of "voting rights" so that shares which have voting rights restricted or suspended are nonetheless included, and (c) additional presumptions to the definition of “acting in concert”. The changes being implemented are largely as set out in each consultation, although there are some modifications to the proposals concerning dividends. All changes take effect from 23 November 2015.

The effect of target dividends on offer price

The Panel proposed changes to the Code to deal with the effect that a dividend declared by a target may have on a bidder's offer price in May 2015 (PCP 2015/1). For an outline of the proposals, see our June 2015 newsletter article.

The Panel is largely adopting the proposals as set out in the PCP, although it has altered the proposal that, if a bidder does not reserve the right in its possible offer announcement to decrease its offer price in the event that the target declares a dividend, it would lose the right do so (unless it later increased its offer price and included a reservation at that stage). The Code will now be amended so that bidders must:

  • in a possible offer announcement,
  • in their firm intention announcement, and
  • in their offer document,

state that they have the right to reduce their offer price by the amount of any dividend (or other distribution) which is paid or becomes payable by the target, unless, and to the extent that, they expressly state that target shareholders will be entitled to receive all or part of a specified dividend in addition to the bidder's consideration.

The other key change to the proposals is that, whereas the original consultation referred to dividends declared by a target, the Code will now be amended on the basis that the changes relate to dividends or other distributions.

When the consultation was published, the Panel also published a draft Practice Statement to sit alongside the revised rules. However, following the revisions made to the proposals, the Panel has decided that the proposed Practice Statement is not currently necessary.

To read the full response statement (RS 2015/1), click here. The changes to the Code will be implemented by Instrument 2015/3, and take effect from 23 November 2015.

Widening the definition of voting rights

In July 2014, the Panel published a consultation (PCP 2015/2) proposing that the definition of "voting rights" be changed so that shares which have their voting rights restricted or suspended are nonetheless included. This would impact the assessment of whether thresholds are reached which determine whether a mandatory offer must be made, or a "whitewash" sought. For an outline of the proposed changes, see our August 2015 newsletter article.

The Panel has announced in Response Statement 2015/2, that it will adopt the changes as proposed with only minor modifications. The changes to the Code will be implemented by Instrument 2015/3, and take effect from 23 November 2015.

Any company which has suspended voting shares in issue is advised to consult the Panel in order to obtain a ruling regarding the application of the revised Code to it, taking account of the facts of the particular case.

Additional presumptions of "acting in concert"

In July 2015 the Panel also consulted on proposals to introduce three new presumptions to the definition of “acting in concert” (PCP 2015/3). The proposals were intended to codify existing practices of the Panel. For an outline of the proposed changes, see our August 2015 newsletter article.

The Panel has announced in Response Statement 2015/3 that it will implement the changes as set out in its original proposals with effect from 23 November 2015. The changes will be brought into force by Instrument 2015/3.