Takeover Panel response statement (2020/1): conditions to offers and the offer timetable

We are keen to come and talk to you about this whenever suits, but if you have any questions in the meantime please don’t hesitate to ask.

Our view

• the changes are broadly logical and welcome, and (although there’s a lot of detail) we expect them to “bed-in” and be accepted by the market fairly easily in practice. Most of the timetable and acceptance condition changes are just procedural in nature. One point to watch is if extendable timeframes may have some unwelcome side-effects, particularly e.g. relating to costs for “certain funds”.
• the “levelling-up” of UK/EU competition conditions with other regulatory clearances has been on the horizon for a while, crystallised by Brexit, and (along with the timetable changes) is a “nod” to the current reality of offers growing ever more complex and global in nature (even for deals/targets that on first glance seem simple to execute, given “regulatory creep” both in the UK and overseas).
• although on the one hand the changes may in some ways make it harder for bidders to walk away from a bid, and introduce some unintended uncertainty into the bid process, on the other hand targets and shareholders will likely benefit from greater certainty that a bid will indeed complete after a firm intention announcement.
• the primary focus of the changes is on contractual offers (rather than schemes of arrangement). Although in theory they aim to make contractual offers more attractive, in practice we would expect bidders on larger uncontested deals to continue to prefer to use schemes, given their greater flexibility on timetable and other compelling benefits.

Key points include:

1. simplification of the contractual offer timetable, including to cater for the large number of (often lengthy) official authorisations and regulatory clearances bidders now need to obtain globally.
2. a new “single date” (Day 60 of the offer timetable) by which all offer conditions must be satisfied, so there’s no longer a distinction between the “acceptance condition” date (what was “Day 60”) and the “wholly unconditional” date for all other conditions (what was “Day 81”). If a bidder:
   • is in a hurry to bring forward the new Day 60 (i.e. unconditional date), it will make an "acceleration statement" (waiving all outstanding regulatory conditions and bringing forward the unconditional date, to a date at least 14 days after that statement).
   • wants to lapse its offer (after Day 21, but before Day 60), it will make an “acceptance invocation notice”, giving a minimum 14 days’ notice - a new safeguard putting target shareholders on notice of a bidder intending to invoke the acceptance condition to lapse its bid (as opposed to just being able to walk away on any “closing date” without notice, as is currently the case).
3. removal of the “special treatment” currently given to UK and EU competition conditions (e.g. the ability to invoke these without meeting a materiality threshold will now be removed, so all authorisation/regulatory clearances will be on the same level playing field), and a new ability for bidder or target to suspend the offer timetable at “Day 37” if material authorisation/regulatory clearance conditions have not been satisfied by then.
4. bidders must now set a "long-stop date" for a contractual offer, similar to the long-stop date used on a scheme – this will be helpful to bidders and targets concerned about major regulatory issues potentially causing an unacceptable timetable delay, and will provide investors with a finite period for resolution of the situation.
5. withdrawal rights will be available throughout the offer, so target shareholders can withdraw their acceptance at any time (rather than just from Day 42 as at present) prior to the satisfaction of the acceptance condition (i.e. up to Day 60 - so there’s no prospect of target shareholders being unfairly “locked in”).
6. clarifying the current provisions of the Code on the invocation of conditions to offers, along with a revised (and more helpful) version of Practice Statement 5 – broadly just reaffirming and adding to/improving the current guidance.

Authored by Tom Brassington, Nicola Evans, Maegen Morrison, Patrick Sarch, Daniel Simons, John Holme.