By, Jeremy Kutner, Esq., Partner at Shearman & Sterling; Laurence Levy, Esq., Partner at Shearman & Sterling; Matthew Powell, Esq., Partner at Shearman & Sterling; and Michael Scargill, Esq., Counsel at Shearman & Sterling.
This paper discusses changes made, on 8 January 2018, to the U.K. Takeover Code (the “Code”) which: (i) for the first time, expand the application of the Code to certain “asset” transactions taking place in “offer situations,” (ii) require greater disclosure by bidders of their future intentions with regard to the target and its operations, and (iii) unless the target agrees otherwise, require a bidder to delay by 14 days the posting of its offer document following the announcement of its firm intention to make an offer.
These changes do not alter the fundamental scope of the Code, which is primarily concerned with regulating the process of acquiring control of U.K. public companies.
However, the changes do stop a bidder circumventing restrictions under the Code that would prevent it making or varying an offer by instead purchasing “significant assets” of the target.
The authors next discuss this prohibition of “Significant Asset” sales and review the application of Rule 21.1 of the Code. In this respect, the Code has been amended to introduce expanded requirements where shareholder approval for a potentially “frustrating action” is being sought, as well as to set out in Rule 21.1 all the circumstances in which the Panel will generally not require shareholder approval.
The authors further discuss the applicability of the Code to situations with the sale of all or substantially all of a target’s assets in competition with a takeover offer; and amendment to the Code with regard to asset sales and Rule 21.3, which deals with the equality of information sharing with respect to multiple bidders for an entity.
Other changes to the Code relate to changes in future intentions by bidders; timing on posting of the bidder’s offer document; and a new Practice Statement (No. 32), an informal guidance in relation to Rule 21.1 (restrictions on frustrating actions by a target).
The authors conclude that these changes show the Code’s ability to continually evolve to meet developments in the market. They also show, with respect to the new 14-day delay on the bidder posting its offer document, a further shift in the balance of the Code towards supporting targets in their response to unwelcome bids.