Takeovers Flashcards
What is the purpose of the Takeover Code? (5)
- To ensure shareholders are treated fairly
- To promote an orderly framework in which takeovers are conducted
- To ensure the integrity of financial markets
- Based on six general principles
- Enforcement
What are the six general principles of the Takeover Code?
- Shareholders treated equally
- Sufficient time and information
- Act in the interests of the company
- False markets must not be created
- Predator must announce a bid only after ensuring it can fulfil obligations
- Target company must not be hindered in the conduct of its affairs
What is the function of the Panel of Takeovers and Mergers (PTM)? (2)
To ensure the shareholders of an offeree company are:
1) Treated fairly and are not denied an opportunity to decide on the merits of a takeover
2) Offeree shareholders of the same class are afforded equivalent treatment by a bidder
What is the role of PTM in takeovers? (3)
1) Advise and provide guidance on the application of rules in takeovers
2) Monitor the progress of an actual or contemplated takeover bid for breaches of compliance
3) Enforce the code
What are the powers of the PTM?
Impose sanctions through private warnings, public censure and reference to other regulators
What is the role of Competition and Markets Authority? (3)
1) Investigate and block takeovers or mergers if in the interest of competition and consumers
2) Enforce consumer protection legislation
3) Prosecute unlawful cartel
What requirements constitute a takeover to be a concentration with a community dimension (CCD)?
Test 1:
a) >5bn EUR combined turnover global
b) >250m EUR combined EU turnover
Test 2:
a) >2.5bn EUR combined turnover global
b) >100m EUR combined EU turnover in at least 3 EU states (>25m EUR in each EU state)
What is the role of the Pensions Regulator (TPR) during a takeover? (5)
1) Protect benefits of members of the occupational pension schemes
2) Reduce risk of situations that lead to claims for compensation
3) Promote and improve understanding of work-based pension schemes
4) Maximise employer compliance
5) Minimise adverse impact on sustainable growth
Who does the Takeover Code apply to? (3)
1) Companies registered in the UK, Channel Islands, or Isle of Mann that are traded on regulated market or MTF in UK
2) Plcs not traded on regulated market, which are registered in the UK, Channel Islands, Isle of Man only if place of central management and control within these jurisdictions
3) Private companies registered in Uk, Channel Islands or Isle of Man in which have traded within past 10 years
Define acting in concert
Persons who pursuant to an agreement or understanding (whether formal or informal) co-operate to obtain or consolidate control of a company or to frustrate the successful outcome of an offer for a company
Define dealings (4)
1) Buying or selling any securities that hold voting rights
2) Effecting any contact to buy or sell securities
3) Exercising or converting instruments into securities
4) Any other action that may increase or decrease a holding in securities
Define interests in securities (3)
1) Own shares or have influence over the rights attached to them
2) Own derivative that is exercisable or deliverable into securities
3) Own derivative the price of which is determined by securities
Define relevant securities (4)
1) Securities in the offeree under offer or carry votes
2) Equity share capital in offeree or offeror
3) Securities in the offeror with the same rights as those used in the offer
4) Securities in the offeror or offeree that are convertible into any of the above
What is Rule 2 of the Takeover Code?
Announcements
When does an announcement need to be made upon acquisition of any interest in shares >30%?
Immediately, without delay
Describe a no intention to bid announcement.
Must ‘put up or shut up’ by 17:00 on 28th calendar day following the start of the offer period.
How much time would a firm be prohibited from announcing a bid following a no intention to bid announcement?
6 months
What is Rule 2.9? (Announcements)
A firm that enters the offer period must announce as soon as possible and in any event by 7:15 on next business day details and classes of relevant securities in issue.
What is Rule 7.1? (Announcements)
Rule 7.1 requires offeror to announce an increased or amended offer without delay
What is Rule 17.1? (Announcements)
Requires offeror to announce level of acceptances received for the offer no later than 8:00 on the next business day following day which offer is about to expire, or day on which offer becomes unconditional or when revised or extended
What is Rule 3?
Board of offeree company must obtain competent independent advice to whether the financial terms of the offer are fair and reasonable
What is Rule 4?
Rule 4 lays out dealing restrictions during an offer period
What are the exemptions to Rule 4?
Prior consent form the Panel and 24 hours public notice that such sales might be made
What is Rule 5?
A person is interested in shares carrying >30% of voting rights and <50% may not increase their holding without making a mandatory bid under Rule 9
What is Rule 6?
Any offer made 3 months prior to the offer period or between start of offer period and a firm announcement, min price to be offered is the highest price they have paid
What is Rule 11?
If the offeror has purchased 10% or more of voting shares in offeree for cash during offer period or in 12 months beforehand, offer must be highest price paid and must be in cash
What is Rule 8?
Disclosure is required for offeror, offeree and 1% voting right shareholders:
1) Voting shares of target
2) Securities of the predator, if a securities offer
3) Any instruments convertible into 1) and 2)
When is disclosure of dealings required for offeror, offerees and 1% shareholders?
For offeror / offeree by 12:00 next business day
For 1% shareholders by 15:30 the next business day
When does the opening position need to be disclosed?
Within 10 business days of commencement of offer period
What is Rule 9?
Person who takes >30% voting rights must make a mandatory offer to acquire shares of remaining shareholders (also includes parties that already own between 30% - 50%)
What are the conditions under a mandatory bid?
1) Min price is highest price purchased within 12 months
2) Offer must be for cash
3) Must remain open after offer has been declared for 14+ days
4) Must be subject to regulatory clearances and acceptance threshold
What is Rule 37?
Considers situation of shareholder whose interest in securities is not increased through own purchases but by share buyback or reduction in capital
What is Rule 13?
Offer is subject to conditions
1) Reach an acceptance threshold
2) Offeror shareholder approval
3) Regulatory approval
4) Bid-specific conditions
5) Not being referred to CMA or DG Comp Phase 2 investigation
What is Rule 19?
Each document, announcement made during course of offer must be prepared with highest standards of care and accuracy and must be adequately and fairly presented as soon as possible (no later than 12:00 next business day on website)
What is Rule 20?
Information must be made equally available to all offeree shareholders with information rights at the same time and in same manner
What is Rule 21?
An offeree may not enter into frustrating actions that may damage the company or be unfair to the shareholders
What are the defences available to an offeree company?
1) Defence document
2) Referral to CMA
3) White knight
What is Rule 28?
When a profit forecast is included in a Code document, it must be reported by both auditors to company and financial advisors
What are the important milestones during the offer period for a friendly bid?
Offer must be open for minimum of 21 days and maximum of 60 days
Offer must be open a min of 14 days of becoming unconditional
Day 39 is the last day company may make announcements
Day 46 is the last offer amendment day (must not buy shares in the market above offer price)
What are the important milestones during the offer period for a hostile bid?
Day 14, offeree’s deadline for a defence document
Day 46, last date for predator to revise offer
Describe post-bid environment
Any offer declared unconditional to acceptances must remain open for 14 days for remaining shareholders
max. 21 days to fulfil any outstanding obligations
What are the three steps for schemes of arrangement?
1) Explanatory statement
2) Members and creditors meetings (21 days notice)
3) Court approval
