In December 2009 the Takeover Panel issued Panel Consultation Paper 2009/3 (PCP 2009/3) on amendments to Rule 5.2(c)(iii). PCP 2009/3 proposed that Rule 5.2(c)(iii) be amended such that Rule 5 (Timing restrictions on acquisitions) would permit acquisitions of interests in shares in the offeree company by a unilateral offeror following the first closing date of its offer.
On 5 March 2010 the Code Committee of the Takeover Panel issued its response to PCP 2009/3 and Instrument 2010/1 which includes amendments to the Takeover Code introduced as a result of RS 2009/3. The Code Committee has adopted the changes proposed in PCP 2009/3 and the amendments to the Takeover Code will take effect on 8 March 2010.
Rule 5.1 of the Takeover Code restricts a person from acquiring interests in shares in a company when that acquisition would result in him, together with persons acting in concert with him, being interested in shares carrying 30 per cent or more of the voting rights of that company. The Code Committee comments that the primary purpose of Rule 5.1 is “to provide an opportunity for the board of directors of the offeree company to consider an offer and give advice to the company’s shareholders before a person can obtain or consolidate effective control of the company”. Rule 5.2 sets out certain exceptions to the restrictions in Rule 5.1. In particular, Rule 5.2(c)(iii) provides that an offeror may make acquisitions that would otherwise be restricted by Rule 5.1 provided that:
(a) the first closing date of its offer or of any competing offer has passed; and
(b) confirmation has been received that either its offer or any competing offer will not be the subject of a "phase II" investigation by the Competition Commission or the European Commission (unless the offer, or any competing offer, falls outside the jurisdiction of the UK and EC competition authorities).
The Code Committee comments that this restriction, which is based on the fact that there are outstanding competition issues, is no longer appropriate on the basis that the board of an offeree company would have adequate opportunity between the announcement by a unilateral offeror of its firm intention to make an offer and the first closing date of the offer to give its advice to shareholders.
In addition, the Code Committee understands that there are difficulties in establishing with certainty that an offer falls outside the jurisdiction of the UK competition authorities, so that particular limb of the exception in Rule 5.2(c)(iii) is, in effect, redundant.
The PCP therefore proposed that Rule 5.2(c)(iii) be amended to permit acquisitions of interests in shares by a unilateral offeror following the first closing date of the offer irrespective of whether:
(a) it has been confirmed that the offer (or competing offer) would or would not be referred to the competition authorities; or
(b) the offer (or competing offer) fell within the jurisdiction of the UK or EC competition authorities.