The Takeover Panel has published a new practice statement, Practice Statement 31 (here), dealing with strategic reviews, formal sale processes and other circumstances in which a company is seeking potential offerors. PS31 largely consolidates the position that was set out in previous Practice Statements 6 (Strategic Review Announcements) and 3 (Controlled Auctions), but introduces the following new points worth noting.

  • If a strategic review announcement is made which refers to an offer as one of the options being considered and at the time of the announcement the company is not in talks with, or in receipt of an approach from, any potential bidder, this must be stated in the announcement.
  • PS31 emphasises that the dispensations available in a formal sale process (or strategic review incorporating a formal sale process) from Rule 2.6 (relating to naming the bidder and the 28 day "put up or shut up" deadline) are only available where the board is "genuinely putting a company up for sale". There are then a number of content requirements for an announcement where such dispensations are granted, including in particular confirming whether the target is in in talks with, or in receipt of an approach from, any potential bidder as at the date of the announcement.
  • Where a target has already been in private discussions with one or more bidders and then seeks to announce a formal sale process at a point when an announcement requirement under Rule 2.2 has already been triggered, the Panel will normally require all potential bidders to be identified in the announcement, although other dispensations may be available so that any subsequent potential bidder may not need to be identified whilst there may not be a "put up or shut up" deadline imposed.
  • For the purposes of Rule 21.3 (Equality of information to competing offerors), the announcement of a formal sale process will be treated as equivalent to the announcement of the existence of a potential bidder to which information has been given, so that a target will thereafter be obliged to pass any information released to potential bidders as part of the process also to any potential bidders who do not participate in the process.
  • Targets may require potential bidders to enter into "standstill" arrangements as a condition to participating in a formal sale process. However, targets are prohibited from requiring potential bidders to agree to waive provisions of the Code in order to participate in a formal sale process, except that they can be required to undertake not to make a Rule 21.3 information request until the earlier of (a) a 2.7 announcement by a third party or (b) the end of the offer period.

Comment: This practice statement should make companies considering announcing a strategic review or formal sale process after being in receipt of an approach think more carefully about doing so. The announcements required will give more transparency to the market and should reduce the prospect of a target company "dressing up" a takeover negotiation as a process to try to take advantage of potential dispensations from the Code. The practice statement restriction on targets requiring bidders to waive Code provisions is an interesting aspect which suggests the Panel may be keeping an eye on how much the balance of power has shifted in favour of targets since the 2011 "post Kraft/Cadbury" changes to the Code.