Will Pearce William Tong April 24 2019 Takeover Panel: roundup of recent panel statements Davis Polk & Wardwell LLP | Corporate Finance/M&A - United Kingdom Will Pearce, William Tong Corporate Finance/M&A IntroductionAsset valuationsAmendments to UKLA referencesUnited Kingdom's withdrawal from the European UnionChange of addressIntroductionOn 1 April 2019 the Takeover Panel published a revised version of the Takeover Code to reflect amendments relating to Response Statement 2018/1 (published on 6 March 2019) to the panel's October 2018 consultation on asset valuations (PCP 2018/1) and the Financial Conduct Authority's announcement in Primary Market Bulletin 20 (February 2019) that it will be phasing out the United Kingdom Listing Authority (UKLA) name.In addition, on 4 April 2019 the panel published the rule-making instrument (Instrument 2019/3) in relation to Response Statement 2018/2 (also published on 6 March 2019) to its November 2018 consultation on the United Kingdom's withdrawal from the European Union (PCP 2018/2). The panel has noted that the amendments set out in this instrument will take effect upon the United Kingdom's withdrawal from the European Union.Asset valuationsRule 29 of the Takeover Code provides that where a valuation of assets is given in connection with a takeover offer, it should be supported by the opinion of a named independent valuer. The rationale for this requirement is that shareholders of a target should have the benefit of an opinion on such valuation from an independent and competent valuer, as such valuation is likely to be of importance to their decision on whether to accept the offer. Rule 29 also sets out requirements in respect of:the valuer's qualifications;the basis of the valuation; andthe publication of such opinion.In RS 2018/1, the panel confirmed the adoption of the amendments proposed in PCP 2018/1 (with certain modifications), the purpose of which is to provide a more logical framework for Rule 29 and reflect the panel's current practice (for further details please see "Takeover Panel seeks to clarify rules on asset valuations").Amendments to UKLA referencesIn the revised edition of the code published on 1 April 2019, references to the 'UKLA' and the 'UKLA Rules' have been amended so as to refer to, respectively, the 'FCA' and the 'FCA Handbook' as the FCA will no longer be using the name UK Listing Authority.The panel has noted that these amendments have been made without formal consultation as they have either been made as a consequence of changes to legislation or do not materially alter the effect of the provisions in question.United Kingdom's withdrawal from the European UnionIn RS 2018/2, the panel confirmed that it intends to adopt the amendments proposed in PCP 2018/2. These amendments are set out in Instrument 2019/3.EU Takeovers DirectiveThe EU Takeovers Directive (2004/25/EC) sets out measures for the coordination of EEA member states in relation to takeover bids. Specifically, Section 943(1) of the Companies Act 2006 requires the Takeover Panel to make rules giving effect to the following sections of the EU Takeovers Directive:Article 3.1 (General Principles);Article 4.2 (Shared Jurisdiction);Article 5 (Protection of minority shareholders, the mandatory bid and the equitable price);Articles 6.1 to 6.3 (Information concerning bids);Article 7 (Time allowed for acceptance);Article 8 (Disclosure);Article 9 (Obligations of the board of the offeree company); andArticle 13 (Other rules applicable to the conduct of bids).On 11 February 2019 the Takeovers (EU Exit) Regulations 2019 were made to address the fact that the EU Takeovers Directive would not be applied following the United Kingdom's withdrawal from the European Union (subject to transitional arrangements). Specifically, under the regulations, a new Schedule 1C will be inserted into the Companies Act which will:provide for the application of the principles set out in Article 3.1 of the EU Takeovers Directive to the United Kingdom following EU withdrawal (with some minor changes); andset out provisions equivalent to Articles 5, 6.1 to 6.3, 7 to 9 and 13 of the EU Takeovers Directive (but not Article 4.2 on shared jurisdiction).The regulations will come into force on the date of the United Kingdom's withdrawal from the European Union.The Takeover Panel has confirmed in RS 2018/02 that it will amend the Takeover Code to reflect the above (eg, the removal of the reference to the panel being designated as the supervisory authority to carry out certain regulatory functions in relation to takeovers pursuant to the EU Takeovers Directive and to make the general principles of the Takeover Code conform to the principles set out in the proposed Schedule 1C).Shared jurisdictionArticle 4.2 of the EU Takeovers Directive provides for a shared jurisdiction regime which applies to offers for a company with its registered office in one EEA member state and securities admitted to trading on a regulated market in another member state. In general, the supervisory authority of the EEA member state in which such regulated market is located would have jurisdiction over matters relating to the takeover offer itself. The supervisory authority of the EEA member state in which the target has its registered office would have jurisdiction over matters relating to company law and information to be provided to the target's employees.In RS 2018/2, the Takeover Panel confirmed that it will remove the shared jurisdiction regime such that the Takeover Code would no longer apply to a takeover bid for a company which has its registered office in:the United Kingdon and whose securities are admitted to trading on a regulated market in a remaining EEA member state (ie, not in the United Kingdom) and which does not have its place of central management and control in the United Kingdom, the Channel Islands or the Isle of Man (the residency test); ora remaining EEA member state and whose securities are admitted to trading on a UK regulated market (but not on a regulated market in that EEA member state).In general, the Takeover Code would apply only to offers for a company which has its registered office in the United Kingdom and either:its securities are admitted to trading on a UK regulated market or UK multilateral trading facility; orit satisfies the residency test (even if its securities are admitted to trading on a regulated market in a remaining EEA member state).In terms of shared jurisdiction offers which straddle the date on which the shared jurisdiction regime is removed from the Takeover Code, the Takeover Panel holds that, with regard to offers for a shared jurisdiction company to which the code applies on a shared jurisdiction basis but to which the code will no longer apply following the removal of the shared jurisdiction regime, it will stop regulating such offers from the date of such removal. The code will apply in full from the date of removal of the shared jurisdiction regime (ie, an offer for a company with a UK registered office which satisfies the residency test and whose securities are admitted to trading on a regulated market in an EEA member state, but not on a UK regulated market).Cross-border mergersThe Takeover Code applies to cross-border mergers between UK companies and EEA member state companies undertaken under the Companies Act (Cross-border Mergers) Regulations 2007 (SI 2007/2974), which implemented the EU Directive on Cross-border Mergers of Limited Liability Companies (2005/56/EC). (For further details please see "Cross-border mergers involving UK companies: some key questions and answers".)On 19 February 2019 the Companies, Limited Liability Partnerships and Partnerships (Amendment etc) (EU Exit) Regulations 2019 were made. The regulations will come into force on the date of the United Kingdom's withdrawal from the European Union and will revoke the Cross-borders Regulations. The Takeover Panel has confirmed that it will withdraw its Practice Statement No 18 (Cross-border Mergers), which explains the Takeover Code's application to cross-border mergers.Change of addressOn 27 February 2019 the Takeover Panel announced that, with effect from 11 March 2019, its address would be 1 Angel Court, London EC2R 7HJ instead of 10 Paternoster Square London EC4M 7DY.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 ([email protected] or [email protected]). The Davis Polk & Wardwell website can be accessed at www.davispolk.com.