Comment

The Code changes proposed are designed to address certain issues to have emerged on recent competitive bid situations (arising since the rules on the offer timetable were changed, as from 5 July 2021) where either: 1) one or both of the bids was subject to regulatory conditions that could not be satisfied within the standard 60 day timetable; and/or 2) one of the bids was proceeding by way of a contractual offer whilst the other was proceeding by way of a scheme of arrangement. The proposals provide greater clarity on how the Panel will apply the rules in those two scenarios and it will be important for advisers to digest them fully as they will - if implemented as proposed - feed into tactical considerations around bids and potential bids.

In depth

The key changes being proposed can be summarised as follows

Timing of auction procedure:

• The Panel will not normally conduct an auction process under Rule 32.5 until after the last regulatory condition has been satisfied or waived by each of the bidders, regardless of whether (if one or more of the offers is proceeding by way of a scheme of arrangement) the shareholder meetings have or have not already taken place.
• If, however, all the parties agree that an auction procedure should take place on an earlier date, the Panel will normally consent to this.  

Where a scheme of arrangement is published in competition with a contractual offer (which is therefore unlikely to be recommended at that point) and the Panel introduces an auction procedure, Day 39 will normally be the seventh day before the last day for final offers to be announced prior to the auction procedure (unlikely then to be the 21st day before Day 60).

• By contrast, where a scheme of arrangement is published in competition with a contractual offer and the Panel does not introduce an auction procedure, Day 39 will normally continue to be the 21st day before Day 60.

Where one bidder wants to try to complete its offer before any auction procedure

• If the "faster" bidder (i.e. the first to satisfy/waive its regulatory conditions) is proceeding by way of a contractual offer and wants to try and complete before any auction procedure, it can make an acceleration statement. If it is competing with a "slower" bidder that is proceeding by way of a scheme, then without an acceleration statement Day 60 would be pushed back.
• If the "faster" bidder is proceeding by way of a scheme and, with target consent, wants to complete the scheme before any auction procedure, the target board must consult the Panel as to whether the sanction of the scheme would, without an additional shareholder vote, constitute frustrating action under Rule 21. The Panel will make its determination in the circumstances of the case, taking into account all relevant factors

Framework for target shareholders to decide between competing bids:

• The Panel is focused on ensuring that target shareholders have sufficient time to consider each of the offers (in line with General Principle 2) and is keen to ensure an orderly framework for the resolution of competing offers.
• Accordingly, once each of the bidders has made its final offer (whether as a result of an auction procedure or otherwise), where a contractual offer and a scheme of arrangement are both submitted to shareholders, the sequencing should usually be such that:
  • the date of the shareholder meetings to approve the scheme should precede Day 60 of the contractual offer;
  • there should be sufficient time between the date of the shareholder meetings and Day 60 for target shareholders to make their acceptance decision on the contractual offer in the knowledge of the outcome of the shareholder meetings; and
  • Day 60 of the contractual offer should precede the date of the court sanction hearing.

Guidance on Code rules relating to timetable

The Panel has set out as Appendix B to the Consultation Paper a summary of the Code rules that govern the timetable for contractual offers and for schemes, with context to help market participants. Advisers should read through Appendix B to confirm that their understanding of the operation of these rules is consistent with the Panel's guidance.