The Takeover Panel has published a new practice statement which describes the way in which the Takeover Panel normally interprets and applies certain aspects of the profit forecast and quantified financial benefits statement regime, as well as the vetting of investment research published by a firm connected to a bidder or target.
The issues covered include:
- Target profit forecast after rejection of approach: the Takeover Panel may grant a dispensation from the usual reporting requirements for a target if it publishes a profit forecast after it has unequivocally rejected a takeover approach. In this case, the target will be required to repeat the forecast and publish director confirmations if an offer period subsequently starts. For example, the Takeover Panel may be willing to grant such a dispensation if a profit forecast was published by a target more than seven days after the date on which its board unequivocally rejected an approach and prior to the receipt of any subsequent approach.
- Publication of quantified financial benefits statement without contemporaneous publication of reports: in a possible offer, the Takeover Panel may consent to the publication of a quantified financial benefits statement without the contemporaneous publication of the reports from reporting accountants and financial adviser(s) which is usually required. The Takeover Panel is unlikely to consent to a delay in the publication of these reports beyond 21 days following the publication of the quantified financial benefits statement or, if earlier, the date of the firm offer announcement.
- Long-term forecast regime amended to relax the bridging requirement: the Takeover Panel may be willing to grant a dispensation from the usual requirement to produce a full sequence of profit forecasts if it considers that the profit forecast for the future financial period is not intended as a means to enable shareholders, analysts, and other market participants to infer profit forecasts for the intervening years without the usual regime applying.
- Dispensation when target provides profit forecast privately to bidder: where a profit forecast is provided privately by a target to a bidder in due diligence and then is subsequently required to be published as a matter of law or regulation (e.g. in a proxy statement by a US bidder), the Takeover Panel will normally grant a dispensation from the usual reporting requirements, provided the forecast is not used in arguments as to the merits of the offer and the document explains the limited purpose for which the forecast was prepared.
- On a strict application of the Takeover Code, these profit forecasts would have to be treated as endorsed by the target and require directors’ confirmations or reports. This dispensation is therefore welcome, especially in cross-border offers, involving US securities exchange bidders.
- Dispensation for profit estimate publication: the Takeover Panel may dispense with the requirement for reports on the publication of a profit estimate where (i) the relevant directors confirm to it that a profit estimate of the type referred to in Takeover Code Rule 28.5 (e.g. preliminary results) will be published shortly afterwards and an appropriate date for that publication is agreed, (ii) the profit estimate relates to a normal reporting period, and (iii) the document containing it includes the requisite directors' confirmations.
- Disapplying the continuing validity confirmation requirements in recommended and non-competing offers: the Takeover Panel may grant a dispensation from the requirement to confirm the continuing validity of profit forecasts/quantified financial benefit statements in the context of a recommended firm offer which is not competitive.
- Relaxation of pre-vetting of investment research: in the context of a recommended firm offer which is not competitive, the Takeover Panel may dispense with the requirement for investment research published by a firm connected to bidder/target to be pre-vetted by the Takeover Panel. This is subject to the connected firm confirming that it has complied with the investment research content requirements under the Takeover Code e.g. that the research contains no statements of fact or opinion from information that is not generally available.
Comment
Significant amendments were made to the profit forecast and quantified financial benefits statement regime in 2013. These have worked well since and these changes in this new practice statement build on those.
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