Are the rules for UK listed company takeovers about to get tougher?
New paper suggests bidders should say what will happen to target’s head office and R&D functions
The Takeover Panel has, in a paper issued on 19 September, made proposals requiring buyers of publicly listed UK companies to report back on certain matters one year after completing their acquisition. The Panel wants to see if acquirers have kept their word about plans announced at the time of an acquisition.
Currently a bidder must make statements of intention with regard to the business, employees and pension schemes of the offeree company. The paper is consulting on whether bidders should be required to make additional, more specific statements of intention regarding the target, namely:
Sensitivity with respect to such matters is increased when the bidder is a non-UK one; and such changes have been interpreted as being directed at foreign bidders. Though in fact the proposals apply to all bidders regardless of origin it may suit certain stakeholders to present it differently.
Changes were made only a few years ago to allow for a regime of a) binding post offer undertakings and b) statements of intention that would, in the latter case, hold for 12 months post completion notwithstanding any change in honestly held belief since the time of the relevant statement.
It should be noted that there is a difference between the two types of statements and the regime allows for intentions to change with time subject to consultation with the Panel and changing circumstances.
At present, the bid process is a highly considered and heavily advised upon one.
Bidders and their advisers examine each word of any statement made in connection to a bid to determine its appropriateness and to ensure that misleading statements are not made and a false market is not created.
It stands to reason that increasing the areas where specific statements of future intention are to be made – that the same care will be applied to such statements.
The Takeover Panel’s paper also proposes that such statements be made, earlier, i.e. at the time of the announcement by the bidder of its firm intention to make an offer.
The provision of an annual public compliance regime whereby statements are reported on will be useful for increasing transparency and accountability for statements (whether truly binding or not) in the course of a bid.
It is worth noting that the City Code on Takeovers and Mergers only applies to Code governed companies, and does not provide an answer to the same issues that arise in the context of takeovers of privately owned/non-Code governed companies. A Code governed company is predominantly a UK company listed on the London Stock Exchange.
By Mark Crofskey, solicitor, head of corporate M&A; and Jon Raggett, director, corporate finance at PwC.