The takeover of Cadbury plc by Kraft Foods Inc. in early 2010 prompted widespread public discussion about the regulation of UK takeovers. Concern was expressed that it was too easy for a hostile offeror to obtain control of an offeree company and that the outcomes of takeovers, particularly hostile offers, were unduly influenced by the actions of “short term” investors. On 1 June 2010, the Code Committee (the “Code Committee”) of the Takeover Panel (the “Panel”) issued a public consultation paper (the “Consultation Paper”) containing suggestions for amendments to the Takeover Code (the “Code”) to address these concerns.

In its formal response to the consultation published on 21 October 2010, the Code Committee has decided to implement certain of the suggested amendments aimed principally at:

  • reducing the tactical advantage obtained in recent times by hostile offerors and redressing the balance in favour of the offeree company;
  • ensuring greater account is taken of the position of persons affected by takeovers in addition to offeree company shareholders, most notably employees; and
  • increasing transparency and improving the quality of disclosure.

Although it welcomed the Code Committee’s proposals for seeking to redress the balance between the offeror and the offeree, the UK Government has responded by launching a consultation of its own. The purpose of the Government’s consultation is to determine whether more can be done to promote long-term growth rather than short-term financial gain by examining the economic issues underlying takeovers and the corporate law framework governing takeovers. The outcome of this consultation will be keenly awaited to see whether it will result in further changes to the UK takeover regime.

A summary of the amendments proposed by the Code Commmittee is set out below. The proposed amendments have not yet come into effect and will form the basis of one or more future consultation papers to be issued by the Code Committee. Therefore, break fees for example, which the Code Committee has recommended be prohibited, will continue to be permitted until specific rules prohibiting them are introduced following such further consultation. However, it is likely that the Panel Executive will be keeping a closer eye on compliance with certain other existing Rules affected by the Code Committee’s recommendations, such as the employee information and other disclosure requirements contained in the Code Committee’s recommendations, such as the employee information and other disclosure requirements contained in the Code regarding the Offeror’s plans for the oferee and its employees. In addition, put up or shut up deadlines could be shortened.  

Please click here to view table

The suggested amendments contained in the Consultation Paper which the Code Committee does not “currently” intend to implement are as follows (these include many of the more fundamental suggestions mooted in the Consultation Paper):

Please click here to view table