Summary: As reported in our previous ebrief, changes to the Takeover Code came into force yesterday. In addition to the changes, the Panel Executive has published a new Practice Statement and checklist on Rule 21.1 (Restrictions on frustrating action).
New Practice Statement No. 32 (Rule 21.1 – Application following the unequivocal rejection of an approach)
Rule 21.1(a) provides that, during the course of an offer, or even before the date of the offer if the board of the offeree company has reason to believe that a bona fide offer might be imminent, the board must not, without the approval of shareholders in general meeting:
(a) take any action which may result in any offer or bona fide possible offer being frustrated or in shareholders being denied the opportunity to decide on its merits; or
(b) take certain specific actions described in the Rule.
Following receipt by the board of an ‘approach’ regarding a possible offer by or on behalf of a potential offeror, the Panel Executive (Executive) normally considers that the board of an offeree company will have reason to believe that a bona fide offer might be imminent, and that Rule 21.1(a) will apply.
The term ‘approach’ is considered broadly but the Executive normally considers an approach to have been received when a director or representative of, or an adviser to, an offeree company is informed by, or on behalf of, a potential offeror that it is considering the possibility of making an offer (Practice Statement No. 20).
New Practice Statement 32 clarifies that where the board of the offeree company has received an approach and unequivocally rejects it, the Executive normally considers that Rule 21.1(a) will continue to apply until 5.00pm on the second business day following the date on which the approach was unequivocally rejected unless before that time the rejected potential offeror has given the board of the offeree company reason to believe that it continues to be interested in making an offer.
The Executive should be consulted if the board of an offeree company intends to take any action described in Rule 21.1(a) following the unequivocal rejection of an approach.
The Rule 21.1 checklist is to be completed and submitted to the Executive by the financial adviser to an offeree company which publishes a circular or announcement under new Rule 21.1(d)(iii) or Rule 21.1(e).
Read our previous ebrief on the Takeover Panels' response on statements of intention and asset sales