Disclosure of securities in issue: new
Rule
In PCP 14 the Panel consulted on whether a
new Rule 2.10 should be introduced to require target companies
during an offer period to disclose to the market details of all
their securities in issue. The same obligation
would apply to bidders unless the offer is wholly in
cash. The change was proposed in order to avoid the type of
situation, which has occurred on a number of takeover offers, where
it is uncertain exactly how many securities a target company has in
issue and under option during an offer
period.
As responses to
the consultation proved overwhelmingly positive, in Response
Statement 14 the Panel introduced the proposed Rule, which obliges
the target, when an offer period begins, to announce to the market
as soon as possible and in any case by 9.00am the following
day "details of all classes of relevant securities issued by
[the target], together with the numbers of such securities in
issue", and
to make further announcements of any changes to this
information. "Relevant securities"
is defined in Note 2 on Rule 8
and broadly comprises securities and equity share capital in the
target and any share options, warrants, other subscription rights
and derivatives referenced to any of these (but is likely to
exclude any shares held in treasury). Unless the
bidder (or any named potential bidder) has stated that its offer is
wholly in cash, the bidder (or potential bidder) will also have to
announce such information about its own
'relevant
securities'. Although this change will mean that
more information about the target's share capital will be available to the
bidder from the target's RIS announcements, it will still be advisable
for the bidder to send the target a letter under Note 3 on Rule 10
requesting information about (for example) option exercise dates
and prices and the terms of any option schemes.
At the same time the Panel amended note 1 to
Rule 9 and paragraph 6 to Appendix 1 so that disclosure of details
of any Rule 9 waiver in respect of convertible securities, options
or rights to subscribe for shares, or the issue of such rights,
should now be made in the company's accounts rather than included
in its Extel card. Disclosures in the accounts
should continue to be made until such time as the relevant
securities to which the rights relate have either been issued or it
is confirmed that no issue will be made.
Copies of Response Statement 14 (RS 14) may
be obtained from the consultation documents section of the Panel's
website at http://www.thetakeoverpanel.org.uk/.
The Statement includes the wording of the Rule changes.
Subjective conditions for the benefit of
the target: consultation on Rule change
On 21 July the Panel published PCP 15
relating to proposed amendments to Rule 13 (Subjective
Conditions). This Rule provides that offers must
not normally be subject to conditions which depend solely on
subjective judgements made by the bidder's directors, or conditions
the fulfilment of which is in hands of the bidder's
directors. Note 2 to the Rule also limits the
circumstances in which a bidder can invoke non-fulfilment of such a
condition as grounds for lapsing its offer: this will only be
permitted by the Panel where the non-fulfilment is of very material
significance in the context of the
offer.
Conditions that are included in offers for
the benefit of the target company are not currently subject to Rule
13, and it is therefore unclear whether they can be framed in
subjective terms and the circumstances in which they may be invoked
by the target. Such conditions are commonly
included in recommended offers where the bidder is offering its own
shares as consideration, and the board of the target wishes to make
sure that the value of the consideration shares remains
substantially the same as it was when the board agreed to recommend
the offer. The conditions are considered by the
Panel to be a legitimate means for the board of the target to
protect the best interests of its shareholders particularly
because, in the absence of such conditions, the only options
available to the target's board - such as withdrawing the
recommendation or any acceptances which have been given - will not
help where the bidder has managed to secure enough target shares to
declare the offer unconditional as to
acceptances.
The Panel therefore proposes that Rule 13 be
extended so that it would apply in the same way to conditions which
are in favour of the target. In practice this
will mean that the Panel is unlikely to permit the target to invoke
non-fulfilment of such a condition as a means of rejecting a
previously recommended offer unless the non-fulfilment is of very
material significance in the context of the bid.
Where the condition relates to the value of the consideration
shares, the Panel may have to determine what degree of fall in
value should be considered material for this
purpose.
The deadline for responses to the
consultation exercise is 1 September 2003.
Copies of the Panel's consultation document (PCP 15) may be
obtained from the consultation documents section of the Panel's
website at http://www.thetakeoverpanel.org.uk/
For further information please contact either
Bill Carr at [email protected] or on +44 (0) 20 7367
2002 or Peter Bateman at [email protected] or on +44 (0) 20 7367
3145.