Last week, the Code Committee of the Takeover Panel (“CC”) published Public Consultation Paper 2020/1 (“PCP”) which sets out proposed amendments to the Takeover Code (“Code”) in relation to offer conditions and the offer timetable.
Many of the proposed amendments to the Code set out in the PCP will change the way the offer timetable operates. The proposed changes are set out in more detail below. The CC invites comments on the proposals by 15 January 2021. However it will not be until Q2 2021 following the consultation process that any changes will be implemented.
Many of the proposals in the PCP are designed to simplify the timetable on a contractual offer. Appendix D contains a revised offer timetable which provides a useful illustration of how the proposed changes will impact an offer timetable.
The proposals will, if implemented, remove the distinction between the date by which the acceptance condition needs to be satisfied and the date that the offer becomes “wholly unconditional” (i.e. the date by which other conditions need to satisfied). These would be replaced with a single date by which all conditions must be satisfied – this date will be known as the “unconditional date”, and will typically be Day 60. The acceptance condition will be the last to be satisfied. A bidder would also be free to make an “acceleration statement” which would condense the timeframe by bringing forward the unconditional date.
Key dates such as “Day 60” will be redefined, to reflect the changes outlined above regarding the date upon which an offer becomes unconditional as to acceptances vs wholly unconditional.
To address concerns that allowing the contractual offer timetable to be suspended pending satisfaction or waiver of conditions, the CC proposes that an offeror should be required to set a “long-stop date” (“LSD”) for a contractual offer similar to that typically included in a scheme of arrangement. The LSD would be the latest date by which (when the offer timetable has been suspended) the acceptance condition would have to be satisfied and all conditions in relation to official authorisation or regulatory clearance would need to be satisfied or waived.
The CC proposes that offeree company shareholders who have accepted an offer should not have to wait to withdraw their acceptance until “Day 42” and instead suggests that such a withdrawal should be allowed at any time. These withdrawal rights would cease once the acceptance condition has been satisfied.
The Code currently affords an exemption to the materiality threshold required to invoke a condition where the relevant condition relates to merger clearance by the European Commission and Competition and Markets Authority. The proposals include removing this exemption meaning that no distinction will be made between regulatory clearances involving the EC/CMA conditions and other merger control clearance conditions. A bidder seeking to invoke a merger control clearance will need to demonstrate that the circumstances it is relying on are of “material significance” in the context of the offer. The CC will provide updated guidance on the factors that the Panel Executive may consider when deciding whether a bidder can invoke a condition.
Also under the proposals, the Panel Executive will be able to suspend the timetable pending satisfaction of conditions relating to any official authorisation or regulatory clearances. This proposed change further aligns the treatment of both EC/CMA related conditions with other regulatory conditions.
The CC has proposed allowing the Panel to grant a dispensation from the restriction on a person triggering a mandatory offer if the making or implementation of the offer would be subject to any condition or consent where:
- the condition or consent relates to a material official authorisation or regulatory clearance;
- the triggering share purchase would itself be subject to a condition relating to a material official authorisation or regulatory clearance; and
- invocation of the condition to the share purchase is subject to consent of the Panel, applying the “material significance” test.
If you would like to discuss the proposed changes or to seek advice on the application of the Code more broadly please do get in touch with us.