Takeovers Panel consults on shareholder intention statements
The Takeovers Panel recently released a Consultation Paper seeking public comment in relation to its proposed new draft Guidance Note on 'shareholder intention statements' (draft Guidance Note).
- shareholder intention statements are relatively common market practice.
- while bidders and shareholders can engage in dialogue in connection with a bid, care needs to be taken in terms of how and the extent to which that dialogue occurs, and the following form of any announcement that is made to the market.
The current environment
A shareholder intention statement is any statement made or authorised by a shareholder regarding whether it will accept or reject a takeover bid, or vote for or against a scheme of arrangement or shareholder approved control transaction.
It is now market practice for shareholder intention statements to be made (often through ASX announcements or in a target statement or bidder's statement). In 2014, 45% of takeovers and 86% of schemes were announced together with a statement of shareholders' intentions in response to the proposal. These statements can be persuasive for retail shareholders in their consideration as to whether to accept or reject a bid.
The existing policy in respect of shareholder intention statements is set out in ASIC Regulatory Guide 25 ("Takeovers: false and misleading statements") which dates back to 2002. Recently, the Takeovers Panel has had to consider two cases dealing with shareholder intention statements. Indeed, in one of those cases a bidder's statement said that some shareholders intended to accept an offer, and the following target statement said that some shareholders intended to reject the offer. Both statements were found to be misleading. In particular, the 'rejection' statements (in the target statement) were aggregated, unverified and made without the required consents.
Snapshot of some of the key features of the draft Guidance Note
The draft Guidance Note addresses ambiguities that can cause shareholder intention statements to be misleading or confusing. In particular, it notes:
- the Panel does not encourage, nor discourage, the making of these statements
- it may be misleading or confusing to make unclear statements (for example, an intention is expressed as a 'present' intention), to include ambiguous qualifications to the intention statement or to withhold details of the holdings involved
- the identity of the shareholder should be disclosed and, if the shareholder's holding is material, details of the holding should also be included
- an unqualified statement of intention (i.e. not subject to a superior proposal qualification) could give rise to unacceptable circumstances if given before the offer opens and those shares, when added to the bidder's existing holding, cross the 20% threshold
- where an intention statement is qualified by reference to a superior proposal:
- it is likely to be unreasonable if the shareholder accepts before allowing a reasonable period of time to pass for a superior proposal to emerge
- it will primarily be for the shareholder to determine what a competing proposal is, but it may be unacceptable for a shareholder to act contrary "to a demonstrably superior competing proposal without good reason"
- a shareholder is not obliged to accept a competing proposal just because it made a qualification regarding an earlier proposal. However, if the shareholder accepts the original bid, the Panel will be interested to consider whether that supports an inference of an understanding with the original bidder.
A few outstanding matters
The Consultation Paper also asks a number of questions in relation to further matters. For example:
- should a timeframe be included before a shareholder can accept into the bid? That is, should the shareholder be forced to wait (for example) until 14 or 21 days after the offer opens before they can accept into the bid? The Panel has previously suggested 21 days. The purpose here is to allow time for a competing proposal to emerge before the shareholder jumps into the existing bid.
- whether, in disclosing details of the holding, it is necessary for the shareholder's shareholding to be material before it is disclosed?
- whether, in disclosing aggregate holdings, it is necessary to disclose the identity and holdings of all the shareholders whose holdings are aggregated?
- whether guidance is needed on when shareholder intention statements may give rise to relevant interests or associations? Further guidance on this matter, in particular, is welcome.
Where to from here
Given the prevalence of shareholder intention statements, further guidance in this area is a positive step by the Takeovers Panel. Comments in relation to the draft Guidance Note need to be made to the Takeovers Panel by 1 September 2015. We will continue to keep you updated about material developments.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.