The Takeover Code disclosure regime will be extended to a “positions-based” regime rather than a dealings-based regime with effect from 19 April 2010. The changes are intended to increase the transparency of the positions of, and dealings by, persons involved in takeover offers.
The principal changes are as follows.
Snapshot opening position disclosure at start of offer period
An “opening position disclosure” is an announcement containing details of interests or short positions in, or rights to subscribe for, any relevant securities of a party to the offer. A party to the offer in this context is the offeree and any offeror, or competing offeror, whose identity has been publicly announced (other than an offeror offering solely cash consideration).
Opening position disclosures will have to be made by:
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Offerees, offerors and exempt principal traders who are currently subject to disclosure requirements under the Code. This disclosure should also include the positions of any of their concert parties.
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Persons holding a long interest of 1% or more in offeror or offeree securities. This will apply regardless of whether they have dealt in relevant securities of the company concerned. At present the Code does not require such persons to disclose their positions unless and until they undertake any dealings during an offer period.
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Potential offerors who hold an interest of 1% or more. However, they should not be required to identify themselves as potential offerors by virtue of such disclosure if their identity has not been publicly announced.
Opening position disclosures will have to be made no later than 10 business days after the start of the offer period or, in the case of an offeror, 10 business days from the earlier of (i) the announcement that first identifies it as offeror and (ii) the time of the firm offer announcement.
The Panel acknowledges that this new regime may operate to identify the members of a consortium at a much earlier stage where one of them is interested in 1% or more of offeree securities. As such, the Code will make it clear that consortium members should not normally be required to disclose their identity as a potential offeror by a joint opening position disclosure, but should consult the Panel.
Extending the disclosure of dealings on a “composite” basis
At present the Code requires persons holding a long interest of 1% or more in a party to an offer to only disclose dealings, interests and short positions in the securities of that party. The amendments will mean that such persons will also be required to disclose any dealings they make in respect of any other party to an offer (apart from a cash offeror), even if their holding in the other party(ies) is less than 1%.
Parties to assist Panel to ascertain those interested in securities
Offerees and paper offerors (i.e. non-cash offerors) will be required to assist the Panel to determine the identity of those interested in 1% or more of any class of their relevant securities and to provide the Panel with such details promptly after the start of the offer period. This information will better aid the Panel in monitoring compliance with the Code.
Boards should be expected to provide information to the Panel only to the extent that it is readily available or easily obtainable. This information would ordinarily come from a company’s shareholder register, notifications received pursuant to the Disclosure and Transparency Rules, responses to any notices served under Section 793 of the Companies Act 2006 and any analysis previously received from, or readily available from, the company’s corporate broker or other advisers.
In addition, the offeree (and paper offeror) must send an explanation of the Code disclosure obligations to such persons who have been identified as being interested in 1% or more of any class of relevant securities at the same time as their details are provided to the Panel. However, it is not necessary for an offeree board to send an explanation of their disclosure obligations to persons who, following the start of an offer period, have been sent an announcement or circular in accordance with Rule 2.6(a) or (b) which includes a summary of the provisions of Rule 8.
Irrevocable commitments and letters of intent
New Rule 2.11 will specifically require that irrevocable commitments or letters of intent procured prior to the commencement of an offer period should be publicly disclosed by 12 noon on the first following business day and also included in any opening position disclosure.
In addition, in any case where a party to the offer has procured a letter of intent from a shareholder prior to the commencement of the offer period, the relevant party should ensure that the letter of intent continues to represent the up-to-date intentions of the shareholder.
Removal of definition of “associate” from the Code
Currently there is a significant degree of overlap between the definitions of “associate” and “persons acting in concert” in the Code. The definition of “associate” will be removed from the Code and any provisions which refer to the term “associate” will refer instead to “persons acting in concert”.
This means that persons who are currently associates of (but are not persons acting in concert with) an offeror or offeree would not be required to disclose their dealings and positions unless they are interested in 1% of more of a class of relevant securities. However, even if a person successfully rebuts the presumption of concertedness, the Panel could require a private disclosure (i.e. a disclosure to the Panel which is not made public) to be made if he deals in relevant securities.
Transitional Arrangements
Where an offer period has already commenced before 19 April 2010, or where an offeror has already been identified as such before that date, the parties to the offer, any person interested in 1% or more of any class of relevant securities of a party to an offer and exempt principal traders connected with a party to the offer, should make an opening position disclosure (on the basis of extended composite disclosure – see above) no later than 10 business days following implementation of the Code amendments, i.e. by 4 May 2010.
Click here to see the transitional arrangements set out on the Panel’s website.
Disclosure forms and Disclosure Table
New disclosure forms to be used in order to disclose dealings and opening positions on or after 19 April 2010 have been published on the Panel's website. Dealings undertaken between 16 and 18 April 2010 may also be disclosed on these forms.
From 17 December 2009, the Panel's disclosure table, which gives details of the companies in whose relevant securities dealings and positions should be disclosed and the number of securities in issue, will include details of the date and time at which the relevant offer period commenced and each offeror or potential offer was first identified.
Click here to see the new Disclosure Forms set out on the Panel’s website.
Response Statement 2009/1, including the text of the Code amendments, is available here. The original consultation is available here.
