On 5 March 2010, the Code Committee of the Takeover Panel published PCP 2010/1. This proposes a number of amendments to the Takeover Code to make the Takeover Code's approach more coherent and consistent where it requires certain financial information (information in the form of a profit forecast, asset valuations, merger benefits statements or any other quantified statements of effect) published before or during the course of an offer, to be accompanied by a report from one or more third parties. The Code Committee has reviewed Rules 28 and 29 and Note 8 on Rule 19.1 of the Takeover Code as it wants to ensure that they reflect developments in market practice, accounting rules and the Listing Rules, Disclosure and Transparency Rules and the Prospectus Rules (UKLA Rules) relating to the publication of forward-looking or unaudited financial information. As a result of that review, the Code Committee is proposing a relaxation of the requirements in certain circumstances, but has identified other situations not currently covered by the Takeover Code but where the Code Committee considers that reports on financial information should be required.

The main proposals in PCP 2010/1 are as follows:

  • There should be a relaxation, normally in the context of a recommended offer, of the reporting requirements in relation to a statement that would be treated as a profit forecast under Rule 28 or regarded as an asset valuation given in connection with a offer under Rule 29 but which is in fact published in the "normal course" of a company's business and not in connection with the offer and which is not used in the debate on the offer and is not a material issue.
  • The exemptions in Rule 28.6(c) which currently apply to certain unaudited interim and preliminary results which comply with the UKLA Rules should be extended to, in certain circumstances, profits reported in interim management statements and unaudited interim and preliminary results reported on by companies traded on AIM or the PLUS markets.
  • Reports should be provided when a profit forecast is made in respect of part of a business.
  • The requirements in Note 8 on Rule 19.1 relating to merger benefits statements should be extended to other quantified statements of the potential financial effects of a course of action which is put forward during an offer, for example costs savings published by the offeree company as part of its defence, and the circumstances in which reports on such statements are required should be extended.
  • The Code committee is also proposing a number of technical and drafting changes to Rules 28 and 29 to improve consistency and clarity, to bring those Rules up to date and, in some cases, codify existing practice.

Comments on the proposals in PCP 2010/1 are requested by 21 May 2010. The Code Committee intends to make any amendments to the Takeover Code arising from the consultation later in 2010.

(Takeover Panel Consultation Paper 2010/1: Profit forecasts, asset valuations and merger benefits, 05.03.10)