4)2) The Takeover Code

Question 1

2.1 What is the purpose of the Takeover Code?

Answer 1

To ensure shareholders are treated fairly and are not denied an opportunity to decide on the merits of a takeover, and that shareholders of the same class are afforded equivalent treatment by an offeror
Also provides an orderly framework within which takeovers are conducted.
Designed to promote, in conjunction with other regulatory regimes, the integrity of the financial markets

Question 2

2.1 What are the key features of a txn governed by the takeover code?

Answer 2

The form, structure and timetable associated are all shaped by the Code

In certain circumstances, the Panel may derogate, or grant a waiver to a person from the application of a rule

Question 3

2.1 How does the Companies Act 2006 apply to the parties involved in a takeover?

Answer 3

No unlawful financial assistance
A company’s right to investigate who has an interest in its shares

Question 4

2.1 How does the Criminal Justice Act apply to the parties involved in a takeover?

Answer 4

Insider dealing

Question 5

2.1 How do various aspects of FSMA apply to the parties involved in a takeover? (3)

Answer 5

The responsibilities associated with published info
Financial promotion
Other financial regulation

Question 6

2.1 How does the MAR and the FSA 2012 apply to the parties involved in a takeover?

Answer 6

Aspects relating to misleading statements and market manipulation

Question 7

2.1 Also note the Listing Rules, and Disclosure Guidance and Transparency Rules (DTRs), together with the Prospectus Regulation Rules apply to parties involved in a takeover

Question 8

2.1 What careful planning is required for a takeover governed by the Code?

Answer 8

Information required to make a bid
Timing factors
Who the existing shareholders are and the likely price they would accept if an offer was made
The need and use of irrevocable undertakings from the target shareholders
The response to competing bidders
How the bid will be structured and financed (cash, shares, other)
Whether clearance is required from relevant bodies
What shareholder approval is required (including if the bidder is also quoted)

Question 9

2.1 What power does Section 945 of the Companies Act 2006 give to the Panel?

Answer 9

To give rulings on the interpretation, application or effect of rules and, subject to any review or appeal, a ruling has a binding effect

Question 10

2.1 When may the Executive give a conditional ruling or an unconditional ruling?

Answer 10

Conditional ruling when it cannot hear the views of other parties involved (on an ex parte basis)
Unconditional ruling when it hears the views of other parties involved

Question 11

2.2.1 Who does the Takeover Code apply to?

Answer 11

• Companies registered in the UK, the Channel Islands or the Isle of Man that are traded on a regulated market or MTF (including AIM and Aquis Growth Market) in the UK, or any stock exchange in the Channel Islands or Isle of Man

-plc’s not traded on a regulated market, which are registered in the UK, the Channel Islands or the Isle of Man, but only if they have their place of central management and control within those jurisdictions

• Private companies registered in the UK, Channel Islands or Isle of Man, but only if they have their place for central management and control within those jurisdictions, and if at any time during the previous ten years their securities have been admitted to trading on a regulated market or MTF in the UK or any stock exchange in the Channel Islands or Isle of Man, or if dealings and/or prices for their regular securities have been published on a regular basis for a continuous period of at least six months in the ten years prior to the relevant date

The Code does not apply to open-ended investment companies (OEICs)

Question 12

2.2.2 What types of transactions is the Takeover Code concerned with regulating?

Answer 12

takeover bids and merger transactions of relevant companies, including by means of statutory merger or scheme of arrangement

other txns which have as their obj or potential effect obtaining or consolidating control of the relevant companies, inc:
- offers by a parent company for shares in a subsidiary
- dual-holding company txns
- new share issues
- share capital reorganisations
- offers to minority shareholders

Also regulates partial offers to shareholders for securities in the relevant companies

does not apply to the acquisition of non-voting, non-equity capital unless these txns are made alongside offers for control and required by Rule 15 (appropriate offer for convertibles)

Question 13

2.2.3 Which persons do the Code apply to?

Answer 13

A range of persons who participate in, are connected with, or in any way seek to influence, intervene in, or benefit from takeovers or other matters to which the Code applies

Also applies to all advisers to such persons, and all advisers insofar as they advise on takeovers and other matters to which the Code applies. This includes:
- parties to an offer and their shareholders
- financial, legal and all other advisers
- directors, officers or partners
- employees
- concert parties
- any other reps of the above

Question 14

2.2.3 What does the PTM say the responsibility of Financial Advisers is in the Code?

Answer 14

‘Financial advisers to whom the Code applies have a particular responsibility to comply with the Code and to ensure, so far as they are responsibly able, that their client and its directors are aware of their responsibilities under the Code and will comply with them’

Question 15

2.2.4 In May 2023, what proposals did the Code Committee publish to amend Rule 21 (Restrictions on frustrating action)?

Answer 15

In May 2023, the Code Committee proposed several changes to Rule 21 of the UK Takeover Code. The primary focus was on enhancing transparency and fairness in the context of the purchase of shares during a takeover bid. Here are the key amendments they proposed:

Disclosure Requirements: The proposed changes aimed to improve disclosure regarding the purchase of shares by offerors. The intention was to make it clearer when and how an offeror’s dealings in shares should be disclosed to the market.

Timing of Disclosures: The amendments included more specific requirements about the timing of disclosures. This was intended to ensure that all market participants have access to relevant information in a timely manner, reducing the potential for market manipulation or unfair advantage.

Consideration and Conditions: There were adjustments related to the conditions under which shares can be purchased, particularly focusing on the type of consideration offered and any conditions attached to such purchases.

These changes were designed to enhance market integrity and ensure that all stakeholders have access to the same information, thereby promoting a fairer and more transparent takeover process.

Question 16

2.3 What are the Takeover Code’s 6 General Principles?

False markets not created in the securities of offeree, offeror or any other company to artificially influence prices

Offeror can only announce bid when it ensures it can fulfil in full any cash consideration

Offeree company must not be hindered in the conduct of its affairs for longer than is reasonable by a bid for its securities

Answer 16

General Principle 1:Equality of Treatment
All shareholders of the same class should be treated equally, and no shareholder should be disadvantaged or favored over others.

General Principle 2:Disclosure of Information
Adequate information must be provided to shareholders so that they can make an informed decision about a takeover or merger.

General Principle 3:Independent Advice
Shareholders should be provided with sufficient information and be given advice from an independent source so that they can make informed decisions.

General Principle 4:Timely Information
Shareholders should be given timely information about a takeover or merger, allowing them to make decisions based on the most current and relevant information.

General Principle 5:No Coercion
The process of a takeover or merger should not be coercive, ensuring that all shareholders have the freedom to decide whether or not to accept an offer.

General Principle 6:Management of Conflicts
The board of a company should act in the best interests of the company and all its shareholders, avoiding conflicts of interest and ensuring fair treatment of all parties involved.

These principles are designed to promote fairness and transparency throughout the takeover and merger process.

Question 17

2.4.1 What is ‘acting in concert’?

Answer 17

Includes ‘persons who, pursuant to an agreement or understanding (formal or informal), cooperate to obtain or consolidate control of a company or to frustrate the successful outcome of an offer for a company’

A person and affiliated persons will be deemed to be acting in concert all with each other

Question 18

2.4.1 Which persons will be presumed acting in concert with other persons in the same category, unless the contrary is established?

Answer 18

1. Company X and any company which controls, is controlled by or is under the same control as X, all with each other
2. Company Y and any other company Z where one of the companies is interested, directly or indirectly, in 30% or more of the equity share capital in the other, together with any company which would be presumed to be acting in concert with either Y or Z under presumption (1), all with each other
3. A company’s pension schemes, and the pension schemes of any company with which the company is presumed to be acting in concert under presumption (1) or (2) , with the company
4. The directors of a company (together with their close relatives and the related trusts of any of them) with the company
5. an investment manager of or investment adviser to: (a) an offeror; (b) an investor in a new company (or other vehicle) formed for the purpose of making an offer; or (c) the offeree company with the offeror or offeree company (as appropriate), together with any person controlling, controlled by or under the same control a that investment manager or adviser
6. a connected adviser with its client and, if its client is acting in concert with an offeror or the offeree company, with that offeror or offeree company respectively, in each case in respect of the interests in shares of that adviser and persons controlling, controlled by or under the same control as that adviser (except in the capacity of an exempt fund manager or an exempt principal trader)
7. the directors of a company which is subject to an offer from the beginning of the relevant period as defined in rule 21.1(b) or from the beginning of the offer period
8. a person, their close relatives, and the related trusts of any of them
9. the close relatives of a founder of a company to which the Code applies, their close relatives and the related trusts of any of them
10. shareholders in a private company or members of a partnership who sell their shares in consideration for the issue of new shares in a company to which the Code applies, or who, following the re-registration of that company as a public company in connection with an initial public offering or otherwise, become shareholders in a company to which the Code applies

Market makers are also classed as acting in concert with either company in a takeover situation. Market makers that are part of an investment bank that undertakes other activities will have information barriers sufficient to distance it from knowing the other activities of the firm and company

Question 19

2.4.1 What is the definition of ‘control’?

Answer 19

‘A company (or, where appropriate, a fund manager, a principal trader or an adviser) will be regarded as ‘controlling’ another company if it is interested in: (a) shares carrying 30% or more of the voting rights of that other company; or (b) a majority of the equity share capital in that other company, and references to a company being ‘controlled by’ or ‘under the same control as’ another company are to be construed accordingly. In this Note, a reference to a company includes any other undertaking (including a partnership or trust) or any legal or natural person’

Dealings and interests in securities held by members of concert parties are aggregated for the purposes of the Code
If the PTM is satisfied that effective info barriers (Chinese walls) are in place then it may grant an exempt status

Question 20

2.4.2 What are ‘dealings’?

Answer 20

Includes:
- acquisition or disposal of securities, or the right to exercise or direct the exercise of the voting rights attaching to securities, or of general control of securities
- the taking, granting, acquisition, disposal, entering into, closing out, termination, exercise (by either party) or variation of an option (including a traded option) in respect of any securities
- subscribing, or agreeing to, for securities
- the exercise or conversion, whether in respect of new or existing securities, of any securities carrying conversion or subscription rights
- the acquisition of, disposal of, entering into, closing out, exercise (by either party) of any rights under, or variation of, a derivative referenced, directly or indirectly, to securities
- entering into, terminating or varying the terms of any agreement to purchase or sell securities
- the redemption, purchase of, taking or exercising an option over, any of its own relevant securities by the offeree company or an offeror
- any other action resulting, or which may result, in an increase or decrease in the number of securities in which a person is interested, or in respect of which they have a short position

Question 21

2.4.3 What are ‘interests in securities’?

Answer 21

A person with long economic exposure to changes in the prices of securities is treated as having an interest in them. A short position will not be treated as having an interest

Examples include:
- owning securities
- the right to exercise, or direct the exercise, of the voting rights attaching to them or have general control of them
- by virtue of any agreement to purchase, option or derivative they a) have the right or option to acquire or call for the delivery, or b) are under an obligation to take delivery of them, whether the right, option or obligation is conditional or absolute and whether it is in-the-money or otherwise
- they are party to any derivative a) whose value is determined by reference to their price and b) which results, or may result, in their having a long position in the security
- in the case of Rule 5 only they have received an irrevocable commitment in respect of them

Question 22

2.4.4 What are ‘relevant securities’?

Answer 22

Include:
- securities of the offeree company for which an offer has been received, or which carry voting rights
- equity share capital of the offeree company and an offeror
- securities of an offeror which carry substantially the same rights as any to be issued as consideration for the offer
- securities of the offeree company and an offeror carrying conversion or subscription rights into any of the foregoing

Question 23

2.5.2 Under Rule 2.2 of the Code, when is an announcement required?

If an announcement is required under the Code, it must be made through a regulated information service (RIS) as well as to the other bid party(ies) and to the PTM

Answer 23

• When a firm’s intention to make an offer is notified to the board of the offeree company by or on behalf of an offeror, irrespective of the attitude of the board to the offer
• immediately upon acquisition of any interest in any shares which gives rise to an obligation to make an offer under Rule 9.1. The announcement that an obligation has been incurred should not be delayed while full information is being obtained; additional information can be the subject of a later supplementary announcement
• when, following an approach by or on behalf of a potential offeror to the board of the offeree company, the offeree company is the subject of rumour and speculation, or there is an untoward movement in its share price
• when, after a potential offeror first actively considers an offer, but before an approach has been made to the board of the offeree company, the offeree company is the subject of rumour and speculation, or there is an untoward movement in its share price and there are reasonable grounds for concluding that it is the potential offeror’s actions (whether through inadequate security or otherwise) which have led to the situation
• when negotiations or discussions relating to a possible offer are about to be extended to include more than a very restricted number of people (outside those who need to know in the parties concerned and their immediate advisers)
• when a purchaser is being sought for an interest, or interests, in shares carrying in aggregate 30% or more of the voting rights of a company, or when the board of a company is seeking one or more potential offerors, and:
  
  • the company is subject of rumour and speculation, or there is an untoward movement in its share price,
  • the number of potential purchasers or offerors approached is about to be increased to include more than a very restricted number of people

Offeror’s job to monitor offeree’s share price and make announcements until the offeree board is approached, at which point it passes to them

Question 24

2.5.2 What types of offer announcement are there?

Answer 24

• A firm announcement (of a firm intention to make an offer)
  
  • offeror should only make this after careful and reasonable consideration, when they believe they can and will continue to be able to implement the offer. This commits the offeror to make its offer
• A talks announcement (stating that the offeree is in talks in relation to a possible offer)
  
  • include identity of the offeror, unless unequivocally rejected. Doesn’t commit the potential offeror to make a formal offer
    Triggers the start of the offer period. List of companies in the offer period can be found on the PTMs website
• A no intention to bid announcement
  
  • ‘put-up or shut up’, no later than 17:00 on the 28th calendar day following the start of the offer period. If this announcement is made, the offeror is generally prohibited from announcing a bid for that offeree for another 6 months

Question 25

2.5.2 What details should be included in a firm announcement?

Answer 25

• the terms of the bid
• the identity of the offeror
• all conditions or pre-conditions to which the offer or the making of an offer is subject
• language which appropriately reflects that the offeror may only invoke any condition or pre-condition which is subject to Rule 13.5(a) with the consent of the Panel, a statement as to which conditions and pre-conditions are not subject to Rule 13.5(a) and a statement that any condition or pre-condition that is subject to Rule 13.5(a) may be waived by the offeror
• details of any relevant agreements entered into by the offeror, relating to circumstances in which it might seek to invoke a condition or pre-condition of the offer
• details of any concert party arrangements
• details of any deal-related agreements which have been permitted by the PTM
• details of any relevant securities of the offeree company which the offeror or any person acting in concert with it has borrowed or lent, saved for any borrowed relevant securities, which have been either on-lent or sold and details of any financial collateral arrangements which the offeror or any person acting in concert with it has entered into
• A summary of the provisions of Rule 8 (which requires holders of 1% or more of the offeree’s, or a cash offeror’s, securities to announce their positions and dealings in these securities during the offer period)
• Confirmation from a financial adviser that any cash element of the ash offer can be fulfilled
• a list of required documents published on a website with the address of that website
• the intentions of the offeror with regard to the business, employees and pension scheme(s) of the offeree company
• details of any relevant securities of the offeree company in which the offeror or any person acting in concert with it has an interest or in respect of which it has a right to subscribe, in each case specifying the nature of the interests or rights concerned, together with any short positions (inc under a derivative), or any agreement to sell
• details of any irrevocable commitment or letter of intent procured by the offeror or any person acting in concert with it
• a statement relating to the right to reduce the offer in relation to any dividend paid or that becomes payable by the offeree company (unless the offeree company shareholders will be entitled to a specified dividend in addition to the offer consideration)

Question 26

2.5.3 What other announcement must an offeree make once it has announced the approach from a potential offeror?

Answer 26

Details and number of all classes of its relevant securities in issue
- ASAP and in any event by 07:15 on the next business day
- the same info must be disclosed by a named offeror by 07:15 the day following it being named a potential offeror, unless it has stated the offer is likely to be solely in cash

When certain dealings give rise to an obligation to amend or increase an existing offer:
- the offeror to announce an increased or amended offer without delay

Offeror to announce the level of acceptance received for the offer
- no later than 08:00 the business day following

Question 27

2.6 When must firms obtain independent advice?

Any person who is in the same group as the financial or other professional adviser to an offeror, or who has significant interest in or financial connection with either offeror or offeree will not be regarded as competent independent advice

Answer 27

Offeree company regarding the financial terms of the offer (are they fair and reasonable)
- the substance of such advice must be made known to all its shareholders
- of particular importance where the offer is a management buy-out (MBO) or is being made by the existing controller or group of controllers

Board of offeror when offer being made is a reverse takeover, or when the directors are faced with a conflict of interest

Question 28

2.6 What is a reverse takeover?

Answer 28

Private Company Acquires Public Company: The private company effectively takes control of the public company by acquiring a majority of its shares or the entire company. This public company is often referred to as a “shell company” if it has minimal operations or assets.

Public Listing: Through this acquisition, the private company gains access to public markets and becomes publicly traded itself. This is often a quicker and less costly way for a private company to go public compared to a traditional IPO.

Regulatory and Compliance Considerations: Even though the private company takes over the public company, it must comply with regulatory requirements applicable to listed companies. This includes adhering to the UK Takeover Code, as well as ongoing obligations for public companies such as disclosure and reporting.

Advantages: Reverse takeovers can be attractive because they can be faster and less expensive than a traditional IPO. They also allow the private company to avoid some of the market risks associated with the timing of an IPO.

Risks and Challenges: There are risks involved, such as inheriting any liabilities or issues associated with the public company. Additionally, the private company must navigate the complexities of becoming a publicly traded entity and meet ongoing compliance requirements.

Question 29

2.7. Per the Takeover Code, when is an offer period?

Answer 29

Commences when first announcement of an offer or potential offer is made, or certain other announcements are made
Offer period will end when announcement made offer is unconditional, a scheme of arrangement has become effective, all announced offers have been withdrawn or lapsed or following other certain announcements

For schemes of arrangements, provisions of the Code that apply during the course of the offer, or before the offer closes for acceptance, will apply until it is announced that the scheme has become effective or it has lapsed or been withdrawn

For unconditional offers, the offer period lasts at least until day 21

Question 30

2.7 What are prohibitions on an offer period?

Answer 30

• Dealings on the basis of insider info
• offeror and any persons acting in concert with it are not allowed to sell any securities in the offeree company unless permitted y the PTM, with 24 hours public notice that such sales might be made
• offeror and concert parties may not acquire shares in offeree through an anonymous book order system, or otherwise, unless it can be shown the purchase is not from an exempt principal trader connected with the offeror
• no financial adviser or corporate broker to the offeree may deal in offeree securities
• offeror and offeree and concert parties must not enter into, or unwind, any stock lending agreements in relation to offeree shares without the Panel’s approval

Question 31

2.8 What does Rule 5 focus on?

Answer 31

Preventing a person obtaining control, or consolidating control, over a company, except in acceptable circumstances

5.1(a) prevents person obtaining share taking holding from below 30% to above 30% level of interests
5.1(b) if a person is interested in shares carrying 30% or more voting rights but does not already hold 50% or more, they may not increase their holding without making an offer under Rule 9

Question 32

2.8 What are the exceptions to Rule 5?

Answer 32

When:
- control arises as the results of an issue of new shares, and a vote of independent shareholders approves the acquisition of control (referred to as a ‘Rule 9 waiver’)
- the acquisition of interests in shares is from a single shareholder and it is the only acquisition in a 7-day period, when;
- acquisition immediately before firm announcement to make an offer, and offer will be recommended or acquisition is made with the agreement of the offeree board
- acquisition is after a firm announcement to make another offer, and offer is made with offeree board approval or the offer or a competing offer has been recommended by the offeree board, or day 21 has passed, or the offer is unconditional
- the acquisition of shares has arisen through the acceptance of an offer

Question 33

2.9 When will an offeror face restrictions which impose a minimum level of consideration?

Answer 33

Under rule 6, where the offeror has acquired any interests in the shares of the offeree company during the three months prior to the start of the offer period, or between the start of the offer period and a firm announcement, the minimum price to be offered by the offeror is the highest price that they have paid to acquire offeree shares during that period

If the offeror purchases shares in the offeree company at a higher price than the offer price during the offer period, they must increase their offer to the highest price paid and offer a fill cash alternative, if not already provided

Under Rule 11, if the offeror or concert parties have purchased 10% or more of the voting shares in the offeree for cash during the offer period or in the 12 months prior, then the offer must be at least the highest price paid by the offeror for offeree shares during that period, and must be in cash or with a full cash alternative available to all shareholders

Question 34

2.10 When must public disclosure through an RIS be made?

All disclosures must be made without delay, by 12:00 next business day at the latest following the dealing (15:30 for disclosures by 1% shareholders not connected to the bid parties)

Answer 34

In respect of:
- any dealing by any party on their own account or on behalf of discretionary clients
- any dealings by persons with interests in securities representing 1% or more of the voting rights
- any dealings by an exempt principal trader connected to either of the bid parties
- a summary of total acquisitions and disposals by exempt principal traders (such as market makers), with the highest and lowest prices

Question 35

2.10 When must private disclosure to the PTM be made?

All disclosures must be made without delay, by 12:00 next business day at the latest following the dealing (15:30 for disclosures by 1% shareholders not connected to the bid parties)

Answer 35

• any dealings in relevant securities on behalf of discretionary investment clients by an exempt fund manager connected with the offeror and/or offeree
• any dealings by the bid parties (or concert parties) on behalf of non-discretionary clients

Question 36

2.10.2 Who must opening disclosures be made by?

Answer 36

The offeree company
The offeror company (after its ID is publicly disclosed)
Any person interested in 1% or more of any class of relevant securities of any party to the offer

Question 37

2.10.2 When must opening position disclosures be made?

Answer 37

Within 10 business days after the commencement of the offer period or the announcement that first identifies an offeror

Question 38

2.11 When must a person make a mandatory offer to all other shareholders?

Answer 38

When they (alone or in concert with others) increase aggregate holdings to above 30%, including where the party already owns between 30%-50% and wishes to increase

Question 39

2.11 What are the rules that apply to the offeror under mandatory order?

Answer 39

• Min price is the highest price at which the offeror purchased shares in the offeree company within the last 12 months
• offer must be for cash or have a full cash alternative
• offer must remain open for not less that 14 days after the offer has become unconditional
• except with Panel consent, mandatory offer only subject to acceptance condition that the offeror has received acceptances in respect of shares which, together with shares acquired or agreed to be acquired before or during the offer, will result in the offeror and its concert parties holding shares carrying more than 50% of the voting rights in the offeree company

Question 40

2.11 When might a mandatory offer not be required?

Answer 40

a shareholder’s interest in the securities of a company are increased not through their own actions, but by a share buy-back or other reduction in capital
shareholder can file a Rule 9 waiver and the independent shareholders will have to agree to no mandatory offer being made
The PTM will generally not grant a waiver if the shareholder acquired interests in share in the knowledge of a potential buy-back

Question 41

2.12 What are common conditions for a voluntary offer to be made, subject to?

Answer 41

• the reaching of an acceptance threshold (such as 90%, whereupon a squeeze-out is permitted, or 75%, which allows a scheme of arrangement to be approved)
• offeror shareholder approval
• regulatory clearance or official auth
• other bid-specific conditions

Must not depend solely on subjective judgements by the directors of the offeror or offeree

Question 42

2.12 What is the general voting rights an offeror must acquire for an acceptance condition to be satisfied?

Answer 42

Over 50% unless the offeror chooses another threshold, reserving the right to reduce to the Code minimum in due course

Question 43

2.13 What is the latest an offeror or offeree may publish a copy of information of an offer to its website, after sending the same to shareholders and sending it to an RIS?

Answer 43

By no later than midday on the following business day

Question 44

2.13 What are the requirements of a post-offer intention statement?

Answer 44

• must be an accurate statement of that party’s intention at the time that it is made
• must be made on reasonable grounds.

Any deviation or no action taken (when it had stated action would occur) must be disclosed to the Panel

Question 45

2.13 All information and opinion relating to an offer must be made equally available to all offeree shareholders and nominated persons and at the same time (as is practicable). No new information passed this may be shared in analyst briefings or statements, with a rep of the broker ensuring. When must the broker or financial adviser report to the PTM that this is the case?

Answer 45

It must confirm in writing to the PTM no later than 12:00 the following business day

Any info given to one offeror or potential offeror must, on request, be given equally and promptly to any other bona fide offeror or potential offeror, even if that other offeror is less welcome

Question 46

2.14 When is the ‘relevant period’ of Frustrating action?

Answer 46

The earlier of:
- an approach by a potential offeror to the board of the offeree company
- the beginning of the offer period, until the end of the offer period or, where no offer period has begun, at 17:00 on the seventh day following the date on which the latest approach is unequivocally rejected

Question 47

2.14 What are considered ‘restricted actions’?

Answer 47

Any of the following, to the extent that it is not in the ordinary course of the offeree company’s business:
- issuing, or transferring out of treasury, shares, or securities carrying rights of conversion into or subscription for shares, in the offeree company
- redeeming or purchasing shares, or securities carrying rights of conversion into or subscription for share, in the offeree company
- granting options over or awards in respect of shares in the offeree company
- disposing of or acquiring (in one or more transactions) assets of a material amount
- entering into, amending or terminating a material contract

Question 48

2.14.1 What defences are available to the Offeree company?

Answer 48

• Publish a defence document, including profit forecasts and/or arguments as to why the bid itself, or the terms of it, are not in the best interest of the shareholders
• Lobby for referral to the CMA
• Seek an alt purchaser on more favourable terms (a ‘white knight’)

Question 49

2.15 What should be included with a profit forecast in a Code document?

Answer 49

Reported on both by the auditors of the company making the statement and their financial advisers
Full disclosure of assumptions made in the forecast
Statement that those making them have given consent to publication of the document

Different reqs apply for forecasts depending on if they are:
- published during the offer period
- published before the offer period but after the approach
- published before the approach
- published in the ordinary course
- for management buy-outs (MBOs)

Question 50

2.16 How long must an offer be open for after a firm announcement?

Answer 50

Min 21 days

Question 51

2.16 When must all conditions of a bid be satisfied?

Answer 51

By day 60

Question 52

2.16 How long must an offer be open for after becoming unconditional?

Answer 52

Min 14 days

Question 53

2.16 How long must a bidder give offeree shareholders for notice of any intention to invoke the acceptance condition to lapse its offer if insufficient acceptances have been received? (Acceptance Condition Invocation Notice / ACIN)

Answer 53

Min 14 days

Question 54

2.16 What is a long-stop date?

Answer 54

A term included by the offeror that the offer will not proceed, will lapse or will be withdrawn on a specific date (‘long-stop’ date):
1. if sufficient acceptances have not been received so as to enable the acceptance condition to be satisfied
2. with the consent of the Panel, if a condition or pre-condition relating to an official authorisation or regulatory clearance has not been satisfied or waived

Question 55

2.16 How long does an offeror have to publish its offer after the firm offer has been announced?

Answer 55

28 days
make available to offeree employees and pension scheme trustees
It can only post within 14 days with the consent of the offeree board
This is known as publication day, and counts as day 0 for the timetable

Question 56

2.16 What is the difference between documents that have to be published by day 14 for recommended offers and hostile takeovers?

Answer 56

Recommended offer -
the offer doc includes a letter by the company chairman to the company shareholders, setting out a recommendation that shareholders accept the offer, and including the Rule 3 adviser’s opinion

Hostile Offer -
The offeree board must send a defence document to all shareholders by the 14th day after publication. This contains the directors’ response to the offer document, recommending that the shareholders reject the offer and explaining why

Question 57

2.16 Brief timetable

Answer 57

Day 21 -
Offer must be open for acceptance either 21 days or the date which offer is declared unconditional or lapses (the later of the two)

Business Day following day 21:
Announce level of acceptances by 08:00 on the day after day 21 and every 7 days thereafter

Day 37 - the date by which the Panel may suspend the offer timetable at the request of the bidder or bidder and offeree, if an official auth or regulatory clearance remains outstanding

Day 39 -
Offeree board not permitted (unless PTM approve) to announce new info or material after day 39. Day 60 is reset if this happens

Day 46 -
Offeror may amend offer up to day 46. After this date, offeror must not buy shares in the market at above the offer price

Day 53 -
When a rival offeror has publicly announced it wishes to challenge a bid, the rival must, by 05:00 on day 53, either:
- announce a firm intention to make an offer
- announce it does not wish to make an offer

Day 60 -
All conditions must be satisfied or waived by this point, unless consented by the Panel

Day 74 -
Assuming offer is unconditional on day 60, day 74 is the earliest day the offer may close

Question 58

2.16 In which situations may day 60 be extended?

Answer 58

Panel normally only extends following publication of the initial offer document:
- if a competing bidder has been announced
- if the board of the offeree company consents to an extension
- if suspension of the offer timetable has been requested in relation to clearance/official auth
- if the target board makes an announcement after day 39
- if the bidder’s receiving agent requests an extension with regard to the certificate stating the number of acceptances

Consideration must be sent to shareholders within 14 days after the later of:
- day 21
- the date the offer becomes or is declared unconditional
- after the date of receipt of the shareholder acceptance

Question 59

2.17 What is a scheme of arrangement?

Answer 59

Alt method of launching a takeover bid that is used for an agreed bid
Existing shareholders of the offeree company agree to have their shares replaced with some other securities, such as shares in the bidding company, or redeemed for cash

Main difference with a normal contractual offer is that shareholders are not asked to accept an offer, but to vote on proposals for a reconstruction of the company, transferring it into new ownership

Question 60

2.17 What additional rules does a scheme of arrangement have over a contractual bid?

Answer 60

• a scheme of arrangement cannot be used for a mandatory bid without the Panel’s consent
• 21 days’ notice is required for shareholder meetings to consider the scheme, and notice must be given of any revisions to the scheme at least 14 days before a meeting
• the results of the meeting(s) must be announced by 08:00 by the next business day, including full details of the votes for and against the scheme
• as soon as a scheme of arrangement is sanctioned, the Panel requires the bidder to confirm that all the conditions have been satisfied (or waived) and that the bidder must undertake all steps for the scheme to become effective