The Takeover Panel has published a new consultation paper (PCP 2017/2, available here ) proposing changes to the rules relating to statements of intention and timing of both these and the publication of hostile offer documents. Key changes proposed include:

  • Additional intention statements: As well as those statements of intention currently required, bidders would be required to make specific intention statements regarding: (1) the target's R&D functions; (2) any material change in the balance of the skills and functions of the target's employees and management; and (3) the likely repercussions of the bidder's strategic plans for the target's business on the location of the target's headquarters and headquarters functions;
  • Timing of intention statements: Bidders would be required to make intention statements earlier than is currently the case, namely in the Rule 2.7 announcement, as well as in the offer document. This is primarily to enable a target's employee representatives and pension fund trustees to form a view on the offer and give their opinions in time for such opinions to be appended to the offer documentation;
  • Timing of publishing offer documents: Bidders would be prohibited from publishing offer documents less than 14 days after their Rule 2.7 announcement except with the consent of the target's board. The rationale for this is threefold: 1) it enables the target board to have a minimum of 28 days (rather than the current 14 days if the Rule 2.7 announcement and offer document are published on the same day) to prepare its response document; 2) it extends the restriction in Rule 5.1 on the bidder and its concert parties acquiring (except from a single shareholder) interests in target shares carrying over 30% of the voting rights to a minimum period of 35 days from the date of the Rule 2.7 announcement (the 14 days before the offer document can be published plus the minimum 21 days until the first closing date); and 3) it increases the minimum time available for the target board to prepare its final "Day 39" response circular, which time may be needed if it wishes to include profit forecasts/quantified financial benefits statements and/or to make acquisitions or disposals; and
  • Reports on post-offer undertakings and intention statements: Both bidders and targets would be required to publish reports on any post-offer undertakings and intention statements they give during the course of the offer (as opposed to giving private reports to the Panel on these) and, where post-offer undertakings have a duration of longer than a year, the reports must be at maximum intervals of 12 months.

The paper also states specifically that bidders should avoid trying to qualify intention statements by using the terms "current" or "present" intentions and that such words would not be regarded as qualifying the intention statements.

The deadline for responses to the consultation is 31 October.

Comment: The proposals in the consultation paper seem to some extent to be politically driven. The Panel states expressly in the paper that the proposals take into account both "recent commentary and public discussion in relation to takeovers and mergers" and suggestions made by "various parties including [BEIS]". In practice, bringing forward the timing of the intention statements so that they are included in the Rule 2.7 announcement is unlikely to have much impact on usual practice (bidders usually are clear on what their intention statements will say by the time of the Rule 2.7 announcement and often include some or all of such statements in that announcement). Similarly, the requirements to make additional intention statements and to make public reports on any post-offer undertakings and intentions statements are unlikely to be viewed as "game changing". Perhaps the most significant change proposed is the prohibition on hostile bidders publishing offer documents less than 14 days after the Rule 2.7 announcement - this represents a material worsening of the tactical position of a hostile bidder in terms of increased exposure to interloper risk and reducing pressure on target boards and may be an additional deterrent to the already challenging prospect of making a hostile bid.