On 22 April 2013, the Code Committee of the Takeover Panel published its Response Statement (RS 2012/2) to the consultation (PCP 2012/2) it published on 5 July 2012.

Changes are made to the Takeover Code from 20 May so that trustees (or managers) of DB pension schemes of the target company (or its subsidiaries) must be informed and allowed to present their view (in the same way as employee representatives).

The new obligations under the Takeover Code are summarised below:

  • A bidder will be required to state its intentions regarding any funded defined benefit pension scheme sponsored by the target company or any of its subsidiaries (including overseas schemes that have trustees or managers). Defined contribution schemes will not be covered by the Takeover Code.
  • The bidder will be required to provide the pension trustees with:
    • financial information about itself;
    • details of how the offer is being financed; and
    • appropriate disclosure about the bidder’s intentions regarding employer contributions into the scheme, benefit accruals for current members and the admission of new members (if there are no changes intended this must also be disclosed).
  • Trustees of any of the target’s pension schemes will have the right to provide the target’s board of directors with their opinion on the effects of the offer on the pension scheme and to have their opinion appended to the target’s circular (or published on a website if the circular has already been published).
  • The target company’s pension scheme trustees will be entitled to receive the same documents that the bidder and target are required to make available to employee representatives. Copies of these documents will not be required to be sent to the Pensions Regulator.
  • Any agreement between the bidder and the trustees of a target’s pension scheme will be treated under the Takeover Code in the same way as other agreements entered into by the bidder in connection with the offer. This means if the agreement between the bidder and the trustees of a target’s pension scheme] is a material contract of the bidder, it will need to be disclosed and published on a website. Future funding agreements will be excluded from the meaning of an ‘offer-related arrangement’.

Two proposals were not carried forward:

  • The bidder will not be required to state its view regarding the impact of the offer on the employer covenant (ie an assessment by the bidder of the future ability of the target to meet its funding obligations to the pension scheme will not be necessary).
  • There will not be a requirement for the bidder to reach agreement with the pension scheme trustees regarding the funding of the target’s pension schemes by a specific date. Nor will there be a requirement to involve the Pensions Regulator if an agreement cannot be reached. Any decision to seek clearance from the Pensions Regulator will remain a matter for the bidder.

All amendments are explained in full in RS 2012/2 and Instrument 2013/2.

The amendments to the Takeover Code take effect from, and relate to offer documents published on or after, 20 May 2013. Notably, this includes the requirement for the target board to append the pension trustee’s opinion to the target’s circular (or publish it on a website) even if the offer documents were published before 20 May 2013.

The Takeover Code applies to listed companies which have their registered offices in the UK, the Channel Islands or the Isle of Man, as long as they have securities listed on a regulated market in the UK or on any stock exchange on the Channel Islands or the Isle of Man. It also applies to unlisted public companies and certain private companies registered in the UK, the Channel Islands or the Isle of Man.