Further to our May 2011 post, the UK Takeover Panel has finalised significant amendments to the UK Takeover Code which, when implemented on September 19, 2011, will herald a substantial rebalancing of power in favour of target boards.
As expected, the principal amendments to the Code are substantially the same as originally proposed by the Panel. This draws a line under the Panel’s protracted consultation process triggered by the political furore arising from the successful takeover by Kraft of Cadbury in 2010.
From a strategic and commercial perspective, the most important changes are:
- the banning of break fees and other common deal protection measures;
- the public identification of all potential bidders at the start of a transaction via a “possible offer” announcement to be made by the target company;
- the imposition of a fixed four week period between the “possible offer” announcement identifying a potential bidder and the announcement of a fully financed firm offer (or a statement that no offer will be made) by that bidder; and
- the requirement for all bidders to disclose details of the financing of the offer (including the refinancing of any existing target company debt) and the fees and expenses associated with the financing in the offer document and to publicly disclose (via a website) the financing documents.
There are very limited exceptions to these new requirements, but in all cases the co-operation and support of the target board will be essential if a bidder is to obtain a dispensation from the Panel and in this way the Panel believes it has achieved its key objective of reducing the tactical advantage that a hostile bidder has over a target company.
A number of the key changes to the Code will impact the initial bid phase and a bidder considering a public offer for a UK company will be under increased pressure to maintain confidentiality for as long as possible and will need to take great care from the outset to avoid limiting its strategic options.