The Executive of the Takeover Panel published Panel Bulletin 7 on 15 May 2024, dealing with the Takeover Code’s requirements for a bidder to make specific intention statements with regard to a target's business both in its firm intention announcement (the Rule 2.7 Announcement) and the offer document.

The Takeover Code (see Rules 2.7 and 24.2) requires a bidder to explain the long-term commercial justification for the offer and to state its intentions regarding certain specific aspects of the target's business, including:

• continued employment of employees and management;
• any changes to material changes in terms and conditions of employment; 
• strategic plans for the target; and
• redeployment of fixed assets.

If the bidder does not intend to make any changes in relation to these aspects of the target’s business, or if it considers that its strategic plans will have no repercussions on employment or the location of the target’s places of business, it must make a negative statement to that effect. 

These disclosures allow the target board and shareholders to take that information into account in order to reach an informed decision on the bid.

The post-offer intention statements regime was expanded following Kraft's takeover of Cadbury back in 2010.   During the offer Kraft said it would keep the Somerdale factory open just to subsequently announce that it would in fact close the factory.  Kraft / Cadbury intensified the Panel's desire for meaningful disclosure around intentions and there has been a number of reforms to support such disclosure.

Bulletin 7 notes that the Executive on occasion hears arguments to the effect that a bidder has “not formulated any intentions” in relation to the target which are required to be disclosed.  Examples include:

• the bidder is unsure about expected synergies;
• the bidder does not envisage a material reduction in employee headcount; or
• the bidder's only intention is to conduct a strategic review in 12 months following the offer.

Bulletin 7 makes it clear that the Panel Executive does not consider any of these arguments to be an acceptable basis for formulating the required intention statements.  A bidder will have (i) a business rationale for seeking to acquire the target and will have (ii) intentions for the 12 months following completion. Any statement made by a bidder under Rules 2.7 or 24.2 should:

• be specific and bespoke; and
• appropriately reflect the bidder’s unique business rationale and intentions.

Only by exception, where a bidder has no intention to make any changes in relation to the relevant aspects of the target’s business, will it be required to make a negative statement to that effect.

The Panel is proactive in its review and challenge of bidder’s intention statements proposed to be included in the Rule 2.7 Announcement and the offer document.  Bidders should carefully consider their statements of intent with their financial advisers – as an unsubstantiated default “no intention” statement will not be good enough.