Changes to the UK Takeover Code
On 19 September 2011, significant changes were made to the UK Takeover Regime and the Takeover Panel has issued a new Takeover Code. Broadly, the code applies to takovers of public companies in the UK/Channel Islands.
The changes provide increased protection for target companies against protracted and drawn-out virtual bids,strengthen the position of target companies, increase transparency and improve the quality of disclosure and provide greater recognition of the interests of the target company stakeholders. As a result, the UK may no longer be perceived to be a relatively buyer friendly environment for takovers of public companies.
A summary of the changes are as follows:
1. Identifying potential bidders
A target company that starts an offer period must confirm the identity of any potential bidder with which the target is in talks or from which it has received an approach (which has not been unequivocally rejected).
Where the offer period starts with an announcement by a potential bidder, the target company is not required to make an announcement identifying any other potential bidders with which it is in talks unless rumour and speculation specifically identifies a potential bidder that has not previously been identified.
2. Put up or shut up deadline
The “put up or shut up” regime has changed and a potential bidder is now required to clarify its position within a fixed period of 28 days following the date of the announcement in which it is first publicly named, unless an extension of that period is obtained from the Takeover Panel at the request of the target company. This deadline will fall away if any bidder subsequently announces a firm intention to make an offer.
3. Deal protection prohibition
The new Code prohibits a target company from entering into any “offer-related arrangement” (that is, any agreement,arrangement or commitment in connection with an offer) with a bidder which is outside the ordinary course of business. The prohibition covers inducement and break fee and also prevents exclusivity arrangements and implementation agreements from being implemented. This is a significant change as such arrangements were previously a common feature of public company takeovers.
4. Disclosure of advisers’ fees
Both the bidder and target company must disclose offer related fees and expenses, including the fees of financial advisers and lawyers, and for the bidder to disclose fees and expenses in relation to its bid financing arrangements. Any material changes to the publicly disclosed fee arrangements must be disclosed privately to the Panel who will determine whether further public disclosure might be required.
5. Disclosure of financial information and financing arrangements for the offer
Disclosure will be required in respect of financial information about a bidder, details of debt facilities (including interest rates, key covenants and security arrangements) and financing documentation will have to be put on display.
6. Statements about the target business
A number of changes have also been made to the Code which are aimed at improving the quality of disclosure about a bidder’s intentions for the target company and its employees following the bid, and improving the ability for employee representatives to give their views.
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