Lookers plc ruling anticipates the introduction of the 28 day period in which a potential offeror must make an offer
The Code Committee of the Takeover Panel (the Panel) is currently conducting a final consultation on its proposed changes to the Takeover Code (the Code). We discussed these changes in March 2011 in this post.
One of the principal aims of these changes is to increase the protection given by the Code to potential target companies against protracted “virtual bid” periods, so that targets are not exposed to uncertainty and disruption whilst a potential offeror decides whether to make a bid.
In a ruling released on 6 May 2011 following the announcement on 3 May 2011 by a consortium of investors (the Consortium) that it had made an approach that may lead to an offer for Lookers plc (Lookers), the Panel anticipated one of these changes by requiring the Consortium to announce within just over a four week period either a firm intention to make an offer for Lookers or that it does not intend to make an offer for Lookers
The current Code position on “put up or shut up”
At present, Rule 2.4(b) of the Code provides the Panel with the ability to impose such a “put up or shut up” deadline on a potential offeror at the request of the board of the target company, but does not automatically impose such a deadline by which an offer has to be made once the potential offeror has been identified.
The proposed changes
The proposed changes to the Code would see this “put up or shut up” regime amended so that, within 28 days of being publicly identified, a potential offeror must:
- announce a firm intention to make an offer;
- announce that it does not intend to make an offer, in which case the potential offeror would be restricted from making an offer for the target company for a period of at least six months; or
- together with the board of the target, obtain an extension from the Panel to the 28 day deadline.
Interest groups whose members may make Code-governed offers have opposed this change, arguing that a 28 day period does not give the potential offeror sufficient time to arrange any financing required for the offer or to conduct adequate due diligence. See, for example, this research note from the British Venture Capital Association.
The consultation that the Code Committee is conducting does not end until 27 May 2011. It is expected that the changes to the Code will be made in mid to late summer 2011. The Panel’s ruling on Lookers indicates that it is already moving its approach on “put up or shut up” towards the 28 day rule that will apply once the Code changes come into force. Equally, recent Code-governed offers have seen a reduction in deal protection measures (such as matching rights and non-solicitation agreements) and inducement fees that will not be permitted under the amended Code.
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