Takeover Code consultation on statements of intention and related matters

13 / 10 / 2017

On 19 September 2017, the Takeover Panel, the UK regulatory body that enforces the Takeover Code, published PCP 2017/2, a public consultation paper (the Paper) in relation to a bidder’s statements of intention with regard to the target’s business and related matters.

Statements of intention

In the offer document, a bidder is currently required to state its intentions and strategic plans with regard to the business, employees and pension schemes of the target. In order to address “the lack of specificity of certain statements of intention”, the Paper proposes to amend this rule by requiring the bidder to make specific statements of intention with regard to:

  • the target’s research and development functions,
  • the balance of the skills and functions of the target’s employees and management, and
  • the location of the target’s headquarters and headquarters functions.

As regards the timing requirements for bidder statements of intention, the Paper proposes that the statements of intention be first made at the time of the firm offer announcement rather than, as is the case at present, in the offer document. The rationale for this amendment is to allow target employee representatives and pension scheme trustees sufficient time to form and prepare an opinion on the effects of an offer, especially in the case of a recommended offer, thereby allowing the target board to take into account the views of employee representatives and pension scheme trustees when preparing its own opinion on the offer.

The statements of intention would need to be included in both the firm offer announcement and the offer document.

Publication of offer document

Rule 24.1 of the Takeover Code requires a bidder to publish an offer document within 28 days of the firm offer announcement, which is sent to, inter alia, the shareholders in the target company.  A bidder usually publishes an offer document as soon as possible following the firm offer announcement.  There are various reasons for this, including reducing the time for a potential competing offeror to prepare an offer and, in the case of a unilateral (or “hostile”) offer, to increase the pressure on the board of the target as the board is currently required to publish its response document within 14 days of the offer document.

The Code Committee proposes to amend this Rule so as to provide that a bidder must not publish an offer document for 14 days from the firm offer announcement without the consent of the target board.  This is so that the target, especially in the context of a hostile bid, has more time to formulate the opinion, reasons and views that it is required to publish.

Post-offer undertakings and statements

Rule 19.5 of the Takeover Code requires that a bidder or target which gives a “post-offer undertaking” (being a published commitment to a course of action after the end of the offer period) must comply with the terms of the undertaking for the period of time specified in the undertaking and must submit reports to the Takeover Panel on its compliance. The Code Committee proposes that any such reports on post-offer undertaking compliance should be published in all cases and not only at the discretion of the Takeover Panel as is the case at present, and that, where the post-offer undertaking has a duration of longer than a year, such reports be published at least annually.

In addition, the Paper proposes that, where a bidder or target made post-offer statements of intention, it should publish a confirmation about what course of action it has or has not taken in this regard after 12 months from the end of the offer period.

Comments

Comments on the Paper can be submitted until 31 October 2017.

For further information please contact Kamalprit Lally at klally@wedlakebell.com.