On 7 July 2015 the Takeovers Panel (Panel) released a
consultation paper and draft guidance note relating to intention
statements given by shareholders in the context of a control
transaction. An "intention statement" is a statement made
by a shareholder of a target regarding its intentions to either
accept or reject a takeover bid, or vote in favour or against a
scheme of arrangement. Currently, the use of intention statements
is governed by the "truth in takeovers" policy set out in
ASIC Regulatory Guide 25, "Takeovers: false and misleading
The need for guidance has been highlighted by two recent
decisions of the Panel involving intention statements, the most
recent being the application brought by Magnum Hunter in Ambassador
Oil and Gas Limited 01  ATP14.
Magnum Hunter successfully obtained a declaration of
unacceptable circumstances in relation to the intention statements
given by shareholders of Ambassador which gave the bidder,
Drillsearch Energy Limited, a relevant interest in more than 20% of
the issued shares of Ambassador. Norton Rose Fulbright acted for
Magnum Hunter in those proceedings.
Consultation paper and draft guidance note
The current draft guidance note is thin on detail regarding when
an intention statement will give rise to unacceptable
circumstances. It also does not adequately explain when an
intention statement may give rise to the acquisition of a relevant
interest by a bidder in shares owned by the maker of the intention
statement. The consultation paper asks a number of questions
regarding the position that the Panel should take in relation to
intention statements. The key issues on which the Panel is seeking
Whether the guidance note should specify a time period during
which a shareholder who has made an intention statement may not act
on that statement.
Whether details of all shareholders who have made intention
statements need to be disclosed. This includes the size of their
holding, regardless of how material or otherwise their holding may
Whether consents of each holder giving an intention statement
are required before disclosure in either a bidder's or
target's statement, or other communication with the
Whether guidance is needed on when shareholder intention
statements may give rise to a relevant interest or associate
relationship between the maker of the intention statement and the
We agree that the Panel should provide guidance on intention
statements given the regularity with which such statements are used
in control transactions. The guidance, however, needs much greater
clarity than is proposed in the current draft, particularly in
circumstances where a bidder already holds, or is concurrently
acquiring, a pre-bid stake. Clarity on the timing for acceptance by
shareholders who have given intention statements would also be
particularly useful to market participants so that they can manage
their affairs accordingly, and rival bidders can have greater
certainty about the circumstances where shares may become available
for either acceptance into an alternative offer to vote for an
Norton Rose Fulbright views
Our view is that:
An inference of association should be drawn between the bidder
and the maker of an unqualified intention statement.
The Panel should discourage the use of unqualified intention
statements where the bidder already holds or concurrently acquires
a pre-bid stake if the shares the subject of the intention
statement would, if acquired by the bidder, take its relevant
interest over 20%.
Unqualified intention statements should be considered
unacceptable where the shares the subject of the intention
statement would, if acquired by the bidder, take the bidder's
relevant interest in the target over 20%.
Shareholders who make intention statements prior to the opening
of an offer which are qualified by the language "in the
absence of a superior proposal" should not be permitted to
accept the offer until the offer has been open for a minimum of 21
days to allow a reasonable time for a superior proposal to
Clear guidance should be given on when an intention statement
will give rise to a relevant interest, using specific
Norton Rose Fulbright will be providing detailed comments to the
Panel as part of the consultation process.
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