UK: Takeover Code Consultation - Distribution Of Information During An Offer

The Code Committee of the Takeover Panel has published a consultation paper containing some proposed changes to the City Code on Takeovers and Mergers (the "Code") relating to the manner in which information and opinions are communicated and distributed by, or on behalf of, a bidder or target company during the course of an offer. These changes are mainly being introduced in order to clarify how the Code is currently interpreted in practice and are unlikely to result in a significant change in how offers are conducted.

The proposed changes are designed to reinforce the existing key requirements under the Takeover Code for the shareholders of the target company to be treated equally and for them to be given sufficient time and information to enable them to reach a properly informed decision on a bid. They also reflect the way in which communications are now made through social media, the internet or other electronic means. 

Key proposed changes:

• Rule 20.1(b) (Information and opinions) - the existing provisions in Rule 20.1 relating to information about parties to an offer are to be enhanced so that any material new information or significant new opinion relating to an offer, or a party to an offer, which is (a) published by, or on behalf of, a bidder or target (other than in a document sent to target shareholders) (b) provided by, or on behalf of, a bidder or target to the media; or (c) provided by, or on behalf of, a bidder or target to any shareholder in, or other person interested in any securities (including debt securities), of a bidder or target, or to any investment manager, investment adviser or investment analyst ("Relevant Person") must, at the same time, be published in an announcement via a regulatory information service ("RIS").
• Rule 20.1(c) (Shareholder presentations and media communications) – copies of any presentation or other document relating to an offer which is provided to a shareholder or Relevant Person, or which is used in any meeting with such persons or any written communication relating to an offer or party to an offer provided by or on behalf of the bidder or target must be published on a website promptly after it is provided, used or published by the media. Where there are multiple versions of a presentation or other document then only the latest version needs to be published, provided it does not omit any relevant information included in a previous version. The proposals will allow information to be supplied to a shareholder or Relevant Person prior to the commencement of an offer period or, with the consent of the Panel, during the offer period but prior to the announcement of a firm or revised offer, provided the information is then published by no later than the date of the announcement of the firm or revised offer or, where the information is provided by a target board which is not recommending the offer, the first substantive announcement made by the board following the offer.
• Rule 20.2 (Meetings and calls with shareholders and others) - a new rule will be introduced in order to require financial advisers or corporate brokers to the bidder or target company to supervise any meetings or telephone calls that take place (a) prior to the offer period where the meeting or call relates to a possible offer; (b) during the offer period but prior to the announcement of a firm offer; or (c) after the announcement of a firm offer, but normally only where the offer is not recommended by the board of the target or if there is a competitive situation. The relevant financial adviser or corporate broker who supervises the call would be required to provide a written confirmation to the Panel that no material new information or significant new opinion was provided at the meeting or on the call. The Code Committee recognises that in certain circumstances it may be appropriate to relax this requirement and is proposing to replace the current note 3 to Rule 20.1. The new Rule 20.2 would, with prior consultation with the Panel, not require a financial adviser or corporate broker to supervise a meeting or telephone call following the announcement of a firm offer which is recommended by the target board and where there is no competitive situation. In such cases, a senior representative of the bidder or target itself who attended the meeting or telephone call would be permitted to confirm in writing to the Panel that no material new information or significant new opinion was provided during the meeting or telephone call.
• Rule 20.3 (Videos) - a new rule will be introduced in order to restrict the use of social media and videos. Videos published by a bidder or target company which include any information or opinions relating to an offer, or a party to an offer, must have the prior consent of the Panel and broadly comprise only a director or senior executive reading from a script or participating in a scripted interview. The video should, at the same time, be published on a website and an announcement made via a RIS that the video has been published and which RIS also contains a link to the website.
• Rule 20.4 (Social media) - a new rule will be incorporated into the Code in order specifically to prevent the publication of any bid information through social media (e.g. Twitter or Facebook), unless it includes the full text of the information and opinions that are published by a party by means of a RIS announcement or website in accordance with the provisions of the Code (or a basic notification of a link to the website on which such an announcement or document has been published). The Code Committee emphasises that any information or opinions published by social media need to comply with the standards of care and presentations in Rule 19.1.
• Rule 19.4 (Advertisements) – the Code Committee is proposing to amend Rule 19.4 in order to  broaden the scope of the current prohibition on advertisements that are connected with an offer or potential offer to include all advertisements that are published during the course of an offer. This is intended to avoid potential confusion arising from the Rule prohibiting advertisements which are "connected with an offer" and then providing exceptions from advertisements that have no bearing on an offer.

Comments on the amendments to the Code proposed in the consultation paper should be provided to the Code Committee by no later than 15 April 2016.

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