Summary: The Code Committee of the Takeover Panel (the “Committee”) has published its response to the consultation papers on statements of intention and asset sales. Respondents were generally supportive of the original proposals and these have been adopted, subject to certain modifications. The changes will come into force on 8 January 2018.

Statements of intention and related matters

Statements of intention

Rule 24.2 is being amended to include a requirement for an offeror to state in the offer document:

  • its intentions for any research and development functions of the offeree company and any material change in the balance of the skills or functions of the offeree company’s employees and management; and
  • the likely repercussions of its strategic plans on the location of the offeree company’s headquarters and its functions.

In addition, an offeror will be required to state its intentions with regard to the offeree company, as required by Rule 24.2, in its firm offer announcement.

If an offeror announces a firm intention to make an offer (Rule 2.7) before 8 January 2018 and subsequently publishes an offer document (Rule 24.1(a)) on or after this date, the offer document must comply with amended Rule 24.2.

Offeror not to publish offer document for 14 days without offeree board consent

To allow the offeree board more time to consider and formulate views on an offer, an offeror will be prevented from publishing its offer document for 14 days from its firm offer announcement without the consent of the offeree board. Therefore, in the context of a unilateral offer, if the offeree board withheld its consent, it would have 28 days from the date of the firm offer announcement to publish its initial response circular; in turn pushing out the dates for Rule 31.1 and any Day 39 circular.

If, prior to 8 January 2018, an offeror has published a Rule 2.7 announcement but has not yet published its offer document, it will only be able to publish its offer document within 14 days of its Rule 2.7 announcement with the offeree’s board consent.

Reports on post-offer undertakings and post-offer intention statements

The Committee is adopting proposals which will require offerors and offeree companies to publish, 12 months after the end of the offer period:

  • reports on post-offer undertakings (currently at their discretion); and
  • confirmations that intention statements given during the course of an offer have or have not been carried out.

Assets sales and other matters

Restrictions on asset sales

The Committee is introducing amendments to the Code to ensure that an offeror should not be able to avoid the restrictions in Rules 2.8 (Statements of intention not to make an offer), 12.2(b)(i) (Competition reference periods) and 35.1 (Delay of 12 months) by purchasing “significant” assets instead of making an offer subject to the Code. In assessing whether assets are “significant”, the Panel will have regard to consideration, assets and profit tests and relative values of more than 75% (previously proposed 50%) will normally be regarded as being significant.

Appendix C of the Response Statement provides a summary of how the restrictions will operate in practice.

Rule 21.1 (Restrictions on frustrating action)

The Committee has decided to amend the Rules so that where shareholder approval is sought at a general meeting for a proposed action under Rule 21.1, the board of an offeree company must obtain competent independent advice as to whether the financial terms of the proposed action are fair and reasonable. In addition, the board of the offeree company must send a circular to shareholders with full details of the proposed action including the board’s opinion on it and the reasons for this.