All change at the ToP: taking stock of the changing nature of the UK - PDF document

ALL CHANGE AT THE ToP: TAKING STOCK OF THE CHANGING NATURE OF THE UK TAKEOVER REGIME KEY POINTS Feature – Tie Takeover Code is now far more complex than it has ever been. – – Circumstantial evidence suggests the so-called Cadbury law and the 2011 amendments – have not dampened takeover activity. – Tie role of lawyers in advising on and ensuring compliance by clients with the Takeover – Code has arguably eclipsed that of the bankers in many respects. Authors Leon Ferera, Florian Albert and Natasha Sellayah All change at the ToP: taking stock of the changing nature of the UK takeover regime In 2011, following Kraft Food’s takeover of Cadbury the Takeover Panel introduced subject to exceptions, be locked out from a number of amendments to the Takeover Code with the aims of redressing the announcing an ofger for the target for up balance of power in favour of target boards, of ensuring that greater account to six months. Tie Panel generally grants is taken of the views of persons affected by takeovers in addition to target an extension to the PUSU deadline only shareholders (such as employees) and of increasing transparency. The Kraft/ if requested by the target company. Tie Cadbury offer, and a number of subsequent large offers, also prompted a debate purpose of these amendments was to avoid about government intervention in takeovers, including whether governments protracted and destabilising virtual bids for should be able to apply national interest tests to foreign takeovers of companies target companies. involved in certain sectors of importance to the UK economy. Concern was When the Panel consulted on these expressed that the 2011 amendments to the Takeover Code and political proposed amendments, two thirds of interference, which many felt played a larger part in prompting the Takeover respondents opposed the identifjcation Panel to make the amendments, would impede takeover activity. This article rule arguing that it would deter potential considers the impact of some of those amendments and how the Takeover Code ofgerors who would not wish to be and the role of the Takeover Panel have evolved in recent years as a result of named prematurely and, if the ofger did various factors, such as the increasing global nature, size and sophistication not proceed, be associated with a failed of takeovers, political intervention, and increased scrutiny and regulation of transaction. Tie majority of respondents financial markets in the aftermath of the financial crisis. were concerned that 28 days was too short a period to allow for adequate preparation for an announcement of a fjrm intention INTRODUCTION favour of ofgeree companies; to make an ofger. In both cases, the – ensuring that greater account was taken – n Tie takeover of Cadbury plc by Kraft respondents who objected were concerned Foods Inc (Kraft), which commenced of the position of persons afgected that legitimate potential ofgerors might in early 2010 prompted widespread public by takeovers in addition to ofgeree be deterred and that shareholders might discussion about the regulation of UK company shareholders, most notably consequently be denied the opportunity to takeovers. Cadbury was subject to a long employees; and consider valid potential ofgers. – increasing transparency and improving – virtual bid process. Many commentators Prohibition of “offer-related argued that it was too easy for an unsolicited the quality of disclosure. arrangements” ofgeror to subject an ofgeree company KEY 2011 AMENDMENTS to a protracted seige which could be “Ofger-related arrangements” such as destabilising for the ofgeree and its business inducement/break fees, non-solicitation Naming of potential offerors and and employees, and that the outcomes of undertakings and matching rights granted compulsory PUSU takeovers, particularly hostile ofgers, were by an ofgeree in favour of an ofgeror were unduly infmuenced by the actions of “short One of the most hotly debated amendments outlawed, except in certain very limited term” investors. On 1 June 2010, the Code at the time was the introduction of a circumstances. Tiese sorts of deal protection Committee (Code Committee) of the requirement for any announcement by an measures had become commonplace and the Takeover Panel (Panel) commenced a public ofgeree of an approach or possible ofger to Code Committee wished to reduce the tactical consultation on suggested amendments to the name the potential ofgeror(s) with which it advantages obtained by the ofgeror imposing Takeover Code to address these concerns. Tie was in talks or from whom it had received an complex arrangements that tied target boards in Code Committee’s response statement 1 noted approach. Another was a requirement that knots but which they felt compelled to accept. “signifjcant confmicts of views” on some of the any named potential ofgeror must, except Tiis proposal received either support or proposed amendments. with Panel consent, within 28 days following a neutral response from roughly two thirds Tie Code Committee ultimately decided the announcement in which it was named of the respondents to the consultation. Tie to implement several of the proposed (PUSU deadline), announce either a fjrm concern of the remaining third was, similarly, amendments, with the key aims of: intention to make an ofger or that it would that this rule would deter potential ofgerors, – redressing the balance of power in – not make an ofger, in which case it would, in particular private equity bidders, from April 2016 Butterworths Journal of International Banking and Financial Law 234