8) Takeover Process Flashcards
If an announcement says that it is pleased to announce that one company has reached an agreement on the terms of a recommended share and cash merger to create a bigger business, what is it?
- Announcement of the firm intention to make an offer: Rule 2.7
Whos responsibility is it to make an announcement when there has been a firm intention to make an offer under 2.2?
- Rule 2.3(c)
- The offeree company because they had been approached, so legally responsible for making the announcement
- Recommended offer - offeror will often make a joint announcement
Under Rule 2.7(a), what practical things can a company do to make sure that they will actually be able to implement the offer?
- Make sure they have sufficient cash resources to finance the scheme
- Before announcing their offer for the company
- Responsibility lies with financial advisor and the offeror themselves.
How do you calculate the percentage change of the share price?
- Work out the difference
- Then divide the difference by the original share price, and multiply by 100 obviously.
- Then look at Rule 2.2 Note 1(b)
What is a mandatory offer?
- Aka a Rule 9 offer
- If you acquire 30% or more of the voting rights in the company, have to make an offer for the rest of the shares
- This is usually an intentional trigger
• This is conditional on 50% acceptances being received - Rule 9.3
What is the most common exception to a mandatory offer?
- The whitewash dispensation
- Waive obligation to make mandatory bid as long as shareholders who are independent of the transaction pass a resolution to approve the waiver
What are the downsides of a mandatory offer?
- Offeror may not have wanted to acquire the whole company
- Takeover code also restricts how this offer can be made
What are the rules surrounding the price of shares?
- Rule 9.5 - Offer must be in cash or cash alternative
Explain the rule of an offer being unconditional as to acceptances?
- Rule 9.3
- Offer must be declared unconditional as to acceptances once it has more than 50% acceptances
- If it already has percentage higher than this before purchase
- Offer will be unconditional from the outset
- Would have no option OTHER than to just proceed with the offer! As cannot look for more conditions that have to be fulfilled before you go ahead with it
Explain the disclosures a company would have -to make if they acquire extra shares?
- Opening position disclosure - Rule 8.1(a) in relation to existing shareholding
- Public dealing disclosure - Rule 8.1(b) in relation to additional acquisition
What are the disadvantages of a mandatory bid?
- Triggering Rule 9 bid
- Restrictions
- Lack of control
What are the requirements of a rule 9 offer?
- Basically cannot contain any conditions except a condition requiring that there are acceptances of 50% of the voting rights obtained
What is the correct wording for describing the DTRs required when there has been a percentage change in the shareholding?
- DTR 5.1.2 applies because company voting rights started at x in total and would have changed by at least 1% as a result of the acquisition
- Therefore obliged to disclose acquisition to the shareholder.. And say by when
- (all tabbed in white book)
- Then the offeree company would be required to make a notification based on the info they were given
What does unconditional as to acceptances mean?
- Bidder requires certain levels of acceptances
- ‘i will buy this company if i can get acceptances related to over 50% of the voting rights’ - this is the min but they can ask for more
- Once this has been reached, then offer is declared unconditional as to acceptances and then will usually require some form of announcement
Explain the scrutiny over stakebuilding?
- Share purchases in an offeree - stake-building
- These purchases are monitored closely
- PDMRS - have to notify connected persons in any dealings.
