Takeover Panel consultation: Miscellaneous Code amendments

In brief

The Takeover Panel has published a consultation paper (PCP 2022/4) proposing various miscellaneous amendments to the Code, including in relation to flexibility regarding targets in financial difficulty, announcement requirements following a "clear public statement", an adjusted mandatory offer price, target board recommendations and directors' intentions, and the disclosure of irrevocable undertakings and letters of intent.

The deadline for responses is Friday 13 January 2023 and the Panel expects to publish a Response Statement setting out the final amendments in "Spring 2023". The amendments would then be expected to come into effect approximately one month after publication of the Response Statement. This alert summarises the more significant of the changes proposed.


Most of the Code changes proposed are essentially technical "housekeeping" points that will be unlikely to impact many offer situations in a material way. The two biggest proposed areas of change are in relation to "rescue" situations involving companies in serious financial difficulties (where the Panel seeks to give itself additional flexibility) and in relation to reversing the presumption that a potential bidder will not need to make an announcement where a target share price move, rumour or speculation follows a public announcement (most commonly of an acquisition by the potential bidder of target shares). Given the high threshold applied by the Panel for when a company is deemed to be in sufficiently serious financial difficulties to merit a "rescue" dispensation, the proposals in that area should not be controversial. Whether the reversal of the announcement presumption affects how potential bidders and their advisers consider the question of whether and when to build a stake in a target company is a more interesting question that - if the changes are effected as proposed - will be worth keeping an eye on.


In depth

The key changes being proposed can be summarised as follows.

Flexibility regarding targets in financial difficulty:


The Panel proposes to increase its flexibility to grant a waiver from Code requirements in exceptional circumstances, citing the example of facilitating a rescue of a company in serious financial difficulty. The Panel's general ability to do so is currently constrained by a proviso that "the General Principles are respected". Meanwhile, the Panel's ability to waive the Rule 9 mandatory bid requirement in the context of a "rescue" of a company in serious financial difficulty is subject to either: (a) independent shareholder approval as soon as possible after the rescue is carried out; or (b) the provision of 

  • "some other protection for independent shareholders which the Panel considers satisfactory in the circumstances". If neither proviso is met, a mandatory bid will still be required.
  • The Panel is concerned that there may be circumstances where, in the context of a "rescue" operation in respect of a company facing imminent insolvency, these provisos could not be met and, under the Code provisions as currently drafted, the Panel would feel unable to grant a dispensation and it would not be possible for the company to be rescued nor the shareholders accordingly to retain any economic value.
  • The Panel therefore proposes to increase flexibility by: 1) inserting specific wording into the introduction to give the Panel discretion, in exceptional circumstances, to grant a waiver even where in doing so one or more of the General Principles may not be respected; and 2) deleting the provisos in Rule 9.3 and instead allowing the Panel to waive the mandatory bid requirement in a rescue scenario "subject to such conditions (if any) as the Panel considers appropriate".

Announcement requirements following a "clear public statement":

  • Under Rule 2.2, the bidder must make an announcement if, after it has first actively considered a potential bid but before approaching the target board, there is rumour and speculation or an untoward movement in the target's share price and there are reasonable grounds for concluding that it is the potential bidder's actions that have led to the situation. Under Note 2 on Rule 2.2, this announcement obligation will not normally be triggered if the Panel is satisfied that the price movement, rumour or speculation results only from a "clear and unequivocal public statement" (eg a disclosure under the FCA handbook, such as of an acquisition of an interest in target securities). The Panel may potentially still require an announcement in these circumstances, for example if it is not satisfied that the bidder's active consideration of a bid remains confidential.
  • The Panel proposes to delete Note 2 and reverse the presumption as to whether, in circumstances where there is a "clear and unequivocal statement", an announcement is required, placing a potential bidder who has bought target shares in an equivalent position as one who has not. The Panel considers that doing so will remove the tactical advantage that it considers a potential bidder currently can gain through purchasing shares before approaching the target board, thereby deferring the imposition of the 28 day "put up or shut up" deadline that would otherwise apply by virtue of a possible offer announcement being made.
  • The Panel stresses that, if Note 2 is abolished, it will retain discretion as to whether or not to require an announcement depending on the specific circumstances of a particular case. This would, however, be a notable change to the rules that may make a potential bidder think twice about purchasing target shares at an early stage of its bid planning.

An adjusted mandatory offer price:

  • Under Rule 9.5, the Panel has the right to determine that the price payable on a mandatory bid (ordinarily the highest price paid in the preceding 12 months by the bidder or its concert parties) should be adjusted. Note 3 then specifies a number of circumstances that the Panel might take into account when considering a price adjustment, going on to say that the [adjusted] price "will be the price that is fair and reasonable taking into account [all relevant factors]".
  • The Panel considers that the term "fair and reasonable" is potentially confusing in this context given that this term is more commonly encountered in the context of the target board's and its financial adviser's opinion on the financial terms of the offer. The Panel therefore proposes to replace the term "fair and reasonable" in Note 3 with the term "appropriate".

Target board recommendations and directors' intentions:

  • For any offer, the target board is required to set out in the offer document, defence circular or scheme document (as applicable): a) its opinion on the offer and reasons for that opinion; and b) whether or not the target directors intend to accept the offer and, where there are alternative offers, and if so required by the Panel, which alternative (if any) the directors intend to elect for. Similar requirements apply to a proposal to option holders under Rule 15.
  • There have been several cases where the target board has sought to argue that these requirements should not extend to requiring them to provide a recommendation as to the course of action that shareholders (or, under Rule 15, option holders) should take, although in practice in most offers the target board does provide a recommendation of that nature.
  • The Panel therefore proposes to make this requirement explicit, both for offers (under Rule 25) and for proposals to option holders (under Rule 15). A further requirement will be added for an explanation to be given if there is a divergence of views amongst the target directors or if the board's opinion is not consisted with the advice of its Rule 3 independent financial adviser. Meanwhile, where there are alternative offers, the proposal is to remove the general "if so required by the Panel" proviso so that the directors must always state which alternative (if any) the directors intend to elect for and, if so required by the Panel, also the reasons for making that election.

Disclosure of irrevocable undertakings and letters of intent:

  • The Panel is proposing that if an irrevocable undertaking or letter of intent is entered into prior to the announcement of a firm intention to make an offer, it must be published on a website by the current deadline for announcing the details (rather than only following the announcement of a firm intention to make an offer).
  • In most cases, this will be unlikely to be material in practice, but the advisers to the parties should be conscious of the tighter timeframe and, in the relatively rare circumstances where irrevocables are given more than a business day before the firm intention announcement, should be in a position to publish them on a website promptly.
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