The Code Committee of the Takeover Panel published a consultation paper in March 2011 setting out the details of its significant proposals to amend the Takeover Code.

This follows the Panel's review of takeover regulation in the wake of the takeover of Cadbury by Kraft in 2010. Despite lobbying from a number of market participants, including private equity groups, the Panel has not made significant changes of principle to the proposals that it announced in October 2010, although there has been some movement on the detail.  

The consultation paper contains draft rules which together will bring about three significant changes to the Code:

  • Shortening "virtual bids" – if there is a leak about a potential offer and a Rule 2.4 “possible offer” announcement is issued, the identity of the potential offeror must always be disclosed and the potential offeror will have an automatic four week deadline within which it must either pull out or make a binding offer announcement (known as a "put up or shut up" or "PUSU"). There will be scope, by agreement with the target, to apply for an extension, but this will be subject to Panel approval;
  • Banning deal protection – break fees and other deal protection measures will be prohibited (other than in certain limited cases); and
  • Increased disclosure – all advisers fees payable by the bidder and the target in connection with an offer will need to be disclosed in the offer document and/or target board circular. Financial information and details of financing arrangements will need to be disclosed irrespective of the type of offer or consideration for the offer (and of whether the financing is dependent on the target business). In relation to employees, a bidder will be required to make a negative statement if it has no current intentions or plans in relation to employees and, it will be held to any statements relating to employees for 12 months after the offer (unless it specifies a different time period).

The Panel consultation paper containing the new draft Code rules is available on the Panel website.

The Panel announced on 1 July 2011 that the changes are expected to come into effect on 19 September 2011 and has also announced a number of important transitional provisions for potential offers which are announced prior to 19 September. In particular:  

  • the requirement for unnamed bidders to be identified will apply from 19 September. Any target in an offer period on 19 September must, by not later than 5pm on that date, announce the identity of any potential bidder;
  • for potential bidders named on or before 19 September, there will be an automatic PUSU deadline 28 days after 19 September; and
  • the prohibition on break fees and deal protection will apply to any arrangement entered into on or after 19 September. Any arrangement entered into before that date will not be prohibited.  

The Panel expects to publish its final response statement (which will include the final text of the amendments to the Code) by the end of July. The revised Code would then take effect on 19 September. However, if the timing for the publication of the response statement slips, this implementation date may change as the Panel has stated that there will be a period of not less than one month between the publication of the final rules and the implementation date.

The Panel's announcement is available on the Panel website.