On 7 July 2015 the Takeovers Panel (Panel) released a consultation paper and draft guidance note relating to intention statements given by shareholders in the context of a control transaction. An “intention statement” is a statement made by a shareholder of a target regarding its intentions to either accept or reject a takeover bid, or vote in favour or against a scheme of arrangement. Currently, the use of intention statements is governed by the “truth in takeovers” policy set out in ASIC Regulatory Guide 25, “Takeovers: false and misleading statements”.

Background

The need for guidance has been highlighted by two recent decisions of the Panel involving intention statements, the most recent being the application brought by Magnum Hunter in Ambassador Oil and Gas Limited 01 [2014] ATP14.

Magnum Hunter successfully obtained a declaration of unacceptable circumstances in relation to the intention statements given by shareholders of Ambassador which gave the bidder, Drillsearch Energy Limited, a relevant interest in more than 20% of the issued shares of Ambassador. Norton Rose Fulbright acted for Magnum Hunter in those proceedings.

Consultation paper and draft guidance note

The current draft guidance note is thin on detail regarding when an intention statement will give rise to unacceptable circumstances. It also does not adequately explain when an intention statement may give rise to the acquisition of a relevant interest by a bidder in shares owned by the maker of the intention statement. The consultation paper asks a number of questions regarding the position that the Panel should take in relation to intention statements. The key issues on which the Panel is seeking comments are:

  • Whether the guidance note should specify a time period during which a shareholder who has made an intention statement may not act on that statement.
  • Whether details of all shareholders who have made intention statements need to be disclosed. This includes the size of their holding, regardless of how material or otherwise their holding may be.
  • Whether consents of each holder giving an intention statement are required before disclosure in either a bidder’s or target’s statement, or other communication with the market.
  • Whether guidance is needed on when shareholder intention statements may give rise to a relevant interest or associate relationship between the maker of the intention statement and the bidder.

We agree that the Panel should provide guidance on intention statements given the regularity with which such statements are used in control transactions. The guidance, however, needs much greater clarity than is proposed in the current draft, particularly in circumstances where a bidder already holds, or is concurrently acquiring, a pre-bid stake. Clarity on the timing for acceptance by shareholders who have given intention statements would also be particularly useful to market participants so that they can manage their affairs accordingly, and rival bidders can have greater certainty about the circumstances where shares may become available for either acceptance into an alternative offer to vote for an alternative scheme.

Norton Rose Fulbright views

Our view is that:

  • An inference of association should be drawn between the bidder and the maker of an unqualified intention statement.
  • The Panel should discourage the use of unqualified intention statements where the bidder already holds or concurrently acquires a pre-bid stake if the shares the subject of the intention statement would, if acquired by the bidder, take its relevant interest over 20%.
  • Unqualified intention statements should be considered unacceptable where the shares the subject of the intention statement would, if acquired by the bidder, take the bidder’s relevant interest in the target over 20%.
  • Shareholders who make intention statements prior to the opening of an offer which are qualified by the language “in the absence of a superior proposal” should not be permitted to accept the offer until the offer has been open for a minimum of 21 days to allow a reasonable time for a superior proposal to emerge.
  • Clear guidance should be given on when an intention statement will give rise to a relevant interest, using specific examples.