On 9 December 2009, the Takeover Panel published a consultation paper proposing amendments to Rule 5.2(c)(iii) of the Takeover Code.

Rule 5.2 (Exceptions to restrictions) sets out certain exceptions to Rule 5.1 (Restrictions), the provisions of which restrict a person (together with persons acting in concert with him) from acquiring interests in shares in a company which, when aggregated with shares in which he is already interested, would carry 30% or more of the voting rights in that company or, if the person already holds 30% or more of the voting rights but less than 50%, from acquiring any further shares carrying voting rights.

Rule 5.2(c)(iii) currently provides that these restrictions do not apply where the person has announced a firm intention to make an offer (which is not subject to pre-conditions) and where:

  • the first closing date of the offer (or any competing offer) has passed and
  • either it has been announced that the offer (or any competing offer) will not be subject to a full "phase II" investigation by the Competition Commission or the European Commission, or the relevant offer does not come within the statutory provisions for possible reference to the Competition Commission or the European Commission.

The Panel considers that it is no longer appropriate to restrict an offeror from acquiring interests in shares beyond the first closing date of an offer (or a competing offer) until it is confirmed that the offer (or competing offer) will not be the subject of a phase II investigation by either the Competition Commission or European Commission (or is outside their jurisdiction or scope).

The Panel is therefore proposing to amend the exception in Rule 5.2(c)(iii) to enable acquisitions of relevant interests in shares in a company to be made by a person who has announced a firm intention to make an offer (which is not subject to pre-conditions) once the first closing date of the offer (or any competing offer) has passed, notwithstanding that any continuing possibility of a competition reference might lead to the company's shares being traded at a discount to the price at which the shares might otherwise be traded.

The Panel has also indicated that it intends in due course to undertake a more general review of Rule 5 in order to establish whether there might be a case for further amending or deleting certain (or even all) of the provisions of Rule 5.

The current consultation remains open for comment up to 29 January 2010.

View the Takeover Panel's consultation paper (17 page pdf).