On 8 October 2015, the Takeover Panel published Practice Statement No. 29 (Rule 21.2 - Offer-related
arrangements) and Practice Statement No. 30 (Rule 20.2 - Information required for
the purpose of obtaining regulatory consents).
Practice Statement No. 29 (Rule 21.2 - Offer-related
arrangements)
This Practice Statement provides guidance on the general
prohibition on offer-related arrangements set out in Rule 21.2 of
the Code, including that:
- The exception allowing a target to give a commitment to provide
information/assistance for the purposes of obtaining any official
authorisation or regulatory clearance includes information required
by a bidder in the preparation of an equity prospectus, circular or
similar document. It does not, however, include
information/assistance required by a bidder in connection with (i)
an application to a tax authority seeking specific tax treatment;
or (ii) the preparation of a bond prospectus in relation to the
refinancing of bank facilities. Whilst a target can choose to
provide such information voluntarily, it cannot be required to
provide such information or assistance.
- (an obvious point but…) While a bidder, other than on a
reverse takeover, may give a commitment not to invoke a condition
to its offer, the target must not agree that a condition may be
invoked by a bidder or agree not to object to a bidder seeking to
invoke a condition.
- A trigger in a reverse break fee that relates to the target
having taken or not taken certain action should not breach Rule
21.2 provided that there is no obligation on the target to take or
not take that action - note, however, that conditions which might
have the effect of deterring potential competing bidders from
making an offer would fall on the wrong side of the line e.g. that
the target does not engage in discussions with competing bidders or
does not provide information to competing bidders beyond the
information which is required to be supplied under Rule 20.2
(equality of information to competing offerors).
- In cases of doubt about the application of Rule 21.2, the Panel
must be consulted.
Above all, when advising on a transaction involving a Code company,
always consider incorporating the following clause into an
agreement that may contain "offer-related arrangements" (e.g. a
confidentiality agreement, merger agreement or framework agreement)
in case the transaction morphs from a non-Code transaction into a
Code transaction:
"The parties agree that, if the Takeover Panel determines that
any provision of this agreement that requires the [Code company] to
take or not to take action, whether as a direct obligation or as a
condition to any other person's obligation (however expressed), is
not permitted by Rule 21.2 of the Takeover Code, that provision
shall have no effect and shall be disregarded."
Section 4 of Practice Statement No.29 incorporates the relevant
contents of Practice Statement No 27 (Rule 21.2 - Directors'
irrevocable commitments and letters of intent) and Section 8 of
Practice Statement No 29 incorporates the relevant contents of
Practice Statement No.23 (Rule 21.2 - Inducement fees and other
offer-related arrangements), which have both accordingly been
withdrawn.
Practice Statement No.30 (Rule 20.2 - Information required
for the purpose of obtaining regulatory consents)
This Practice Statement provides guidance on the Panel's practice
where the target provides commercially sensitive information
(restricted information) to "outside counsel" of the bidder (the
"clean team") for the purposes of enabling the bidder to establish
whether regulatory clearances are necessary. The Panel
usually applies Rule 20.2 in such a way that where a bona fide
potential competing bidder requests access to the restricted
information, the target is only required to provide that
information to equivalent "outside counsel" of the potential
competing bidder. The target must consult the Panel and obtain
its consent to apply Rule 20.2 in this manner.
The Practice Statement also sets out various safeguards required by
the Panel to prevent the restricted information being passed to the
bidder from the clean team including:
- restrictions on the number and identity of members of the clean
team receiving the restricted information;
- arrangements to protect the confidentiality of the restricted
information, including effective information barriers;
- confirmations from the bid parties regarding: (i) the identity of
the members of the clean team; (ii) the waiver by the bidder of any
rights to access the restricted information from a member of the
clean team; and (iii) no access to the restricted information by
the bidder; and
- confirmations from each firm represented on the clean team that:
(i) it will not disclose the information to the bidder or any
person outside the clean team other than relevant regulatory
authorities; (ii) it has effective information barriers in place;
and (iii) it will notify the Panel if restricted information moves
outside the clean team.
If any restricted information is provided to, accessed by, or
deduced by the bidder or any advisers outside the clean team, the
Panel must be informed promptly. In these circumstances, Rule
20.2 would normally be applied in the usual way and such restricted
information would need to be provided, on request, directly to a
competing bidder.
