In March, the Takeover Panel ("Panel") published a public consultation paper (PCP 2016/1) setting out proposed changes to the Takeover Code ("Code"). The proposals covered the way in which information is communicated and distributed to target shareholders and other relevant persons during an offer – click here to see our March newsletter article for more information.
The Panel has now issued its response (RS 2016/1) summarising the feedback it received. As a result of this feedback, some of the proposals have been revised. Below, we summarise the key changes to what was originally proposed. As a result of the changes to the Code, a number of Practice Statements will be amended. The revised rules, and changes to Practice Statements, take effect on 12 September 2016.
Equality of information provided to shareholders
PCP 2016/2 proposed that, where any announcement is required to be made under the Code, it must be by way of an RIS announcement. It also provided that if the relevant RIS is not open for business it must be distributed to two national newspapers and two newswire services. In response to feedback received, the Panel has dropped the requirement for publication in two newspapers. Additionally, it has amended the rule to expressly provide that the Panel may consent to a derogation. This is on the basis that it may be disproportionate for it to apply to non-material announcements out of business hours.
There was also a proposal that where material new information or significant new opinion relating to an offer or a party to an offer is:
- published by or on behalf of a bidder or target (other than in a document sent to all target shareholders),
- provided to any shareholder in, or other person interested in securities (including debt securities) of, a bidder or target, or to any investment manager, investment adviser or investment analyst, or
- provided to the media,
it should also be published by way of an RIS announcement. The definition of securities in the second bullet point has been narrowed to only cover "relevant securities" (as defined in the Code) and the requirement now only applies to communications with holders of publicly traded debt securities. The provision has also been revised to make it clear that the public disclosure of information provided on an ongoing basis and in confidence to members of a banking syndicate under the terms of a facility agreement or to holders of private placement securities is not caught by the rule.
The consultation proposed that certain types of document should be published on a website accompanied by an RIS announcement that this has been done, regardless of whether or not they contained material new information or significant new opinion (subject to limited exceptions). This provision has been amended to remove the requirement for an RIS announcement stating that the materials have been published on a website. An RIS announcement will now only be required where the materials do include material new information or significant new opinion (although all relevant material must still be published on a website).
The materials in question are:
- presentations or other documents relating to an offer or a party to an offer; and
- articles, letters or other written communications relating to an offer or the financial performance of a party to an offer which are provided to the media.
Meetings and telephone calls
The PCP proposed changes to strengthen the way in which meetings and telephone calls with shareholders and other relevant persons are conducted. In particular, it was proposed that:
- any meeting to which the provisions apply must be supervised by an appropriate financial adviser or corporate broker, and
- no material new information or significant new opinion relating to the offer or a party to the offer may be provided during the meeting.
The consultation noted that in the case of an unscheduled incoming telephone call to a representative of, or adviser to, a bidder or target, the representative or adviser should either arrange for a supervisor immediately to join the call or should terminate the call and arrange for it to be reconvened with a financial adviser or corporate broker in attendance. However, in feedback, it was noted that, in the case of an incoming call to an investor relations officer, this would not always be convenient or practical. As a result, the provision has been amended to provide that the Panel may dispense with the requirements in the case of unscheduled incoming telephone calls to investor relations officers provided that the calls are limited to basic information and are conducted in accordance with a script prepared by a financial adviser or corporate broker and approved by the Panel. The Panel must be consulted in advance in cases where such a dispensation is sought.
The consultation proposed the introduction of a new rule to regulate the use of videos. The proposed rules will now also apply to webcasts and audio-only recordings. The new rules provide that videos, webcasts and audio-only recordings published by or on behalf of a bidder or target which include any information or opinions relating to an offer or the financial performance of a party to an offer must:
- only be published with the Panel's prior consent,
- comprise only a director or senior executive reading from a script or participating in a scripted interview, and
- be published on a website accompanied by an RIS announcement including a link to the relevant webpage.
Advertisements placed during the course of an offer are, generally, prohibited, subject to certain permitted exceptions where the Panel can be approached for a dispensation. The consultation proposed various changes to this regime including the removal of some exceptions. The existing exception for placing corporate image advertisements which do not relate to the offer was, however, to be retained. In response to feedback, the Panel has agreed to relax this exception so that Panel consent is not required for this type of advertisement after the announcement of a recommended firm offer where there is no competitive situation. The exception has also been widened so that it applies to advertisements which do not relate to the financial performance of a party to an offer as well as to the offer itself.
Whilst the consultation proposed retaining the requirement for acceptance forms, withdrawal forms, proxy cards and other forms connected with an offer to be in hard copy only, the clarificatory wording that these must not be published in newspapers was to be removed. This proposal has now been withdrawn and the wording will be retained.
Consequential changes to Practice Statements
As a result of the amendments to the Code made by RS 2016/1, Practice Statement 1 (Rule 20.1 - equality of information to shareholders and the policing of meetings) will be withdrawn and minor amendments will be made to Practice Statements:
2 - Rule 20.2: site visits and meetings with management,
3 - Rule 20.2: controlled auctions,
20 - Rule 2: secrecy, possible offer announcements and pre-announcement responsibilities,
22 - irrevocable commitments, concert parties and related matters,
25 - debt syndication during offer periods,
29 - Rule 21.2: offer-related arrangements, and
30 - Rule 20.2: information required for the purpose of obtaining
The revised versions of the statements are available from the Practice Statements page of the Panels' website. The changes take effect from 12 September 2016.
The amendments to the Code set out in RS 2016/1 (and the changes to the Practice Statements referred to above) will take effect on 12 September 2016, including in relation to ongoing offers. The existing requirements of the Code will continue to apply until that time and the amendments will not have retroactive effect.
The changes result in a number of new provisions as well as a re-ordering of many existing provisions. To make navigating the revised Code easier, the Panel has published tables of origins and destinations. These are available in Appendix C of the response statement. To see the response statement in full, click here.