Takeover Code amendments: dividends, voting rights and acting in concert
The Code Committee of the Takeover Panel has recently finalised amendments to the Takeover Code in respect of dividends, restrictions and suspensions of voting rights, and the definition of "acting in concert". The changes are summarised below and will take effect on 23 November 2015.
New Notes have been introduced on Rules 2.5, 2.7, and 24.3 relating to the treatment of dividends and other distributions paid by a target company to its shareholders. The amendments require a bidder, in an offer announcement, a firm offer announcement and offer documents, to state that it will have the right to reduce the bid price by the amount of any dividend payable or which becomes payable by the target company to its shareholders unless, and to the extent that, it states that target shareholders will be entitled to receive all of part of a specified dividend in addition to the bid price.
If a bidder states that target shareholders are entitled to receive a specified dividend previously announced by the target, but that dividend is subsequently not approved by the shareholders or is cancelled, the bidder would have the option to increase its offer by the amount of the dividend, even if an increase would otherwise be prohibited. If the bidder had purchased target company shares for a price being the aggregate of the bid price and the proposed dividend, before the dividend was not approved or was cancelled, it would be required to increase the bid price by the amount of the dividend.
In addition, new Notes have been introduced on Rules 2.5 and 32.2 to the effect that a bidder which makes a "no increase statement" will normally be required to reduce the value of its offer by any dividend paid by the target company unless it makes a specific reservation in the "no increase statement".
Lastly, revisions have been made to Notes on Rules 6, 9.5, and 11.1 clarifying how dividends will be treated in the calculations of the minimum bid value established by the acquisition of interests in target company shares.
Restrictions and suspensions of voting rights
The definition of "voting rights" has been amended to clarify that shares subject to restrictions or suspensions on voting rights should nonetheless be regarded, for the purposes of the Code, as having voting rights which are currently exercisable at a general meeting.
Minor amendments have also been made to clarify the Note on Rule 9.7 relating to the calculation of the number of shares to which voting restrictions will be applied and the number of interests to be disposed of where the Panel has agreed to the disposal of interests in shares as an alternative to making a mandatory offer.
Any companies which have issued suspended voting shares remaining in issue should contact the Panel Executive to obtain a ruling regarding the application of the Code in those circumstances.
Acting in concert
Three new presumptions have been added to the definition of "acting in concert". The move is in order to codify the existing practice of the Panel Executive.
The following will now be presumed to be acting in concert:
- a person, the person's close relatives, and the related trusts of any of them, all with each other;
- the close relatives of a founder of a company to which the Code applies, their close relatives, and the related trusts of any of them, all with each other; and
- shareholders in a private company who sell their shares in that company in consideration for the issue of new shares in a company to which the Code applies, or who, following the re-registration of that company as a public company in connection with an initial public offering or otherwise, become shareholders in a company to which the Code applies.
In relation to the third presumption, the Panel may be prepared to agree that this has been rebutted where, for example, the private company shareholders are independent institutional shareholders.
All three Response Statements containing the amendments to the Code are available here.