Changes to the Takeover Code will come into force on 19 September 2011
The Code Committee of the Takeover Panel yesterday published the final version of the amendments to the Takeover Code that will take effect on 19 September 2011. This final version is set out in Appendix B of the Committee’s Response Statement RS2011/1, which can be read here. The accompanying Code Committee announcement is here.
The Response Statement follows the public consultation paper (PCP 2011/1) issued by the Committee on 21 March 2011. PCP2011/1 set out proposed changes to the Takeover Code with the overall aim of:
- reducing the tactical advantages available to hostile offerors and redressing the balance of the takeover regime in favour of offeree companies; and
- improving the offer process and taking more account of the position of persons who are affected by takeovers in addition to offeree company shareholders.
The contents of the Response Statement and changes from PCP 2011/1
Yesterday’s Response Statement contains the Code Committee’s responses to the points made by the 57 respondents to PCP2011/1. The outcome is that the Code Committee has adopted the amendments to the Code that it proposed in PCP2011/1 without material amendment, although the Committee has made modifications to certain of the proposed amendments. The most interesting of those modifications are:
- Inducement fees may be entered into by an offeree company with more than one “white knight” offeror, with the consent of the Panel. The aggregate of all inducements fees must still not exceed 1% of the value of the offeree;
- Where the offer is made by scheme of arrangement, the parties can state specific dates by which certain events in the scheme process must have occurred;
- An express reference to Day 50, when a potentially competing bidder must “put up or shut up”; and
- Where an offeror or offeree has made a statement of intention during an offer period, that party would be expected to adhere to that statement for 12 months (or such period as it specified), but the party can be released from that adherence requirement if there is a material change of circumstances.
The changes between the proposed Code wording in PCP2011/1 and the changes made by the Response Statement are set out in mark-up in the main text of the Response Statement. A mark-up of the Code, comparing the new version that will be adopted on 19 September 2011 against the version of the Code presently in force, is set out in Appendix B of the Response Statement.
The Committee intends to review the operation of the amendments to the Code 12 months after the amendments come into effect.
The transitional arrangements that will apply to offer periods which straddle the 19 September 2011 implementation date are set out in the Committee’s Statement 2011/18, which we discussed in this post.
Overview of the changes to the Code
The Response Statement summarises the changes that are being made to the Code as being to:
“(a) increase the protection for offeree companies against protracted “virtual bid” periods by requiring potential offerors to clarify their position within a short period of time;
(b) strengthen the position of the offeree company by:
(i) prohibiting deal protection measures and inducement fees other than in certain limited cases; and
(ii) clarifying that offeree company boards are not limited in the factors that they may take into account in giving their opinion and recommendation on an offer;
(c) increase transparency and improve the quality of disclosure by:
(i) requiring the disclosure of offer-related fees; and
(ii) requiring the disclosure of the same financial information in relation to an offeror and the financing of an offer irrespective of the nature of the offer; and
(d) provide greater recognition of the interests of offeree company employees by:
(i) improving the quality of disclosure by offerors and offeree companies in relation to the offeror’s intentions regarding the offeree company and its employees; and
(ii) improving the ability of employee representatives to make their views known.”
Other recent news about takeovers is available in our “Takeovers” category.
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