A fundamental tenet of takeover regulation in the UK is that once a person acquires an interest in shares which carry 30% or more of the voting rights in a company, that person must make an offer for all of the equity share capital of that company. This is the “mandatory offer requirement” contained in Rule 9 of the Takeover Code.
How easy it can be accidentally to stray into Rule 9 mandatory offer territory is illustrated by yesterday’s announcement from Chemring Group plc that Invesco’s holding in Chemring exceeded 30% on 25 November 2011 ”as a result of a purchase coinciding with a share buyback”. I.e., Chemring’s buyback of its own shares, together with Invesco’s purchase in the market, meant that Invesco’s holding went over 30% – and so theoretically triggered the requirement for Invesco to make a mandatory offer.
Fortunately for Invesco, the Panel let them off – as it has discretion to do. From Chemring’s announcement of 30 November 2011:
“This was an inadvertent mistake. Following discussions, the Takeover Panel has confirmed that no mandatory bid under Rule 9 of the Takeover Code for Chemring Group plc is required by Invesco Ltd. Invesco Ltd has taken immediate steps to correct the position by effecting a sale of shares such that its holding in Chemring Group plc decreases to below 30%.”
The problem was already apparent to the market, as on 29 November 2011 this TR-1 (Notificaton of major interest in shares) was released, showing at box 8A that Invesco now had a holding of 30.05% of Chemring’s issued share capital.
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