The Takeover Panel has published a consultation on changes to the provisions of the Takeover Code (the Code) that regulate valuations of assets in the context of an offer, principally Rule 29.
The Panel has said that the purpose of the changes is to bring the relevant Code provisions in line with the way the Panel applies the Code in practice. The Panel is not proposing to alter materially the way in which the Panel Executive currently applies Rules 29.
Broadly speaking, Rule 29 applies when a party to a takeover offer publishes a valuation of its own or another party’s assets in connection with the offer. In those circumstances, the valuation must be supported by the opinion of an independent valuer and (if it is no longer current) updated.
The purpose of Rule 29 is to ensure that shareholders using an asset valuation to decide whether to accept a takeover offer have the benefit of an independent, expert opinion.
The key points to note from the consultation are as follows:
- As at present, the independent valuation regime would apply where a party publishes a valuation of another party’s assets, or where an offeree company or a securities exchange offeror publishes a valuation of its own assets.
- The regime would apply to any asset valuation published either during an offer period or during the 12 months before the offer period.
- It would also apply to a valuation published before then if a party draws attention to it in the context of the offer (unless, in the meantime, it has been superseded by a more recent valuation).
- The requirement would apply to valuations of land, buildings, plant and equipment; mineral, oil and gas reserves; and unquoted investments above a certain threshold. However, the Panel would be able to apply the regime to valuations of other assets if it sees fit. A party to an offer would need to consult the Panel before including a valuation so that the Panel can make a decision.
- If a party publishes a valuation during an offer period, the valuation would need to be in the form of, or accompanied by, a valuation report by a suitably qualified, independent valuer.
- However, if the valuation was published before the offer period began, the party would need to include a compliant valuation report in the first announcement or document published during the offer period that refers to the valuation. If no announcement or document is published that refers to the valuation, the party would need to include the report in the offer document or offeree board circular (as appropriate).
- The valuer would need to be appropriately qualified, have sufficient knowledge of each relevant market, and possess the necessary skills and understanding to prepare the report.
- Rule 29 currently contemplates that a valuer can be assisted by an expert if she or he lacks current knowledge in a particular area. This might happen, for example, if the valuer is being asked to value more than one asset class. Under the Panel’s proposals, this would no longer be possible. Instead, a party would need to instruct separate valuers to conduct separate valuations.
- The report would need to state the date as at which the assets were valued and provide a separate valuation for each category of asset. It may be possible in some circumstances (such as large asset portfolios), to provide a valuation of a “representative sample” of assets.
- The valuation report would need to state the basis of the valuation. This should normally be market value.
- If the report is not published on the date as at which the assets are valued, the party in question would need to obtain confirmation from the valuer that an updated valuation would not be materially different.
- As at present, the report would need to include a statement of any potential tax liability that would arise if the valued assets were sold. The Panel is proposing to clarify that this should be an estimate of the tax liability, and not merely a statement of the tax consequences.
- The valuation report would need to be published on a website.
The Panel has asked for comments by 7 December 2018.