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The amendments are intended primarily to clarify the application of existing provisions of the Code and to ensure greater alignment of the Code with existing practice of the Executive.
Rule 2.5(a)(i) in particular provides that where the statement relates to the price of a possible offer (a Rule 2.5(a)(i) statement), any offer made by the potential offeror for the offeree must be made on the same or better terms. This is to ensure that market participants are able to rely on the statements made regarding the value of a possible offer and make their investment decisions accordingly.
In PCP 2015/1, the Committee proposed new Notes on Rule 2.5 (possible offer announcements), Rule 2.7 (firm offer announcements) and Rule 24.3 (offer documents) which would provide that:
Respondents were generally supportive of the proposals, but concern was expressed that the proposed changes might operate harshly against a potential offeror that had inadvertently omitted to include the appropriate reservation in a Rule 2.5(a)(i) statement.
To address this concern, the Committee modified its original proposal so as to require:
Rule 32.2(b) of the Code provides that, if an offeror which has announced a firm offer makes a 'no increase statement', the offeror will not be allowed subsequently to amend the terms of its offer in any way, even if the amendment would not result in an increase in the value of the offer, except:
Rule 2.5(a)(ii) contains a similar provision where a possible offer announcement includes reference to the fact that the terms of a possible offer 'will not be increased' or are 'final', or uses a similar expression.
A new Note 4 on Rule 2.5 and a new Note 6 on Rule 32.2 have been introduced, which clarify that an offeror which has made a 'no increase' statement will normally be required to reduce the value of its offer by the amount of any dividend (or other distribution) subsequently paid or which becomes payable by the offeree, unless a specific reservation was included in the ‘no increase statement’ which provides for offeree shareholder entitlement to such dividends (or distribution) in addition to the offer consideration.
Note 5 to Rule 6 has been deleted and replaced by Note 5(a) and Note 5(b).
Note 5(a) on Rule 6 provides that where, in addition to the offer consideration, accepting shareholders are entitled to a dividend which has been announced but where the ex-dividend date has not occurred:
A revised offer will be required if the offeror purchases shares after the ex-dividend date at prices exceeding the offer value.
Note 5(b) on Rule 6 provides that where accepting shareholders are not entitled to a dividend which has been announced by the company in addition to the offer consideration:
A revised offer will be required if the offeror purchases shares after the ex-dividend date at prices exceeding the offer value less the dividend.
Note 4 on Rule 9.5 and Note 9 on Rule 11.1 have been amended to provide that Note 5 on Rule 6 also applies to acquisitions made during the period to which those Rules apply.
Respondents were supportive of the Committee’s proposals in PCP 2015/2. The Committee has adopted the substance of the amendments set out in PCP 2015/2 with some modifications in light of comments from respondents (in particular in relation to the definition of treasury shares).
Key changes to the Code include:
The Committee has also made consequential amendments to Rules 11.1 and 11.2 (and their accompanying Notes) and minor amendments to the Note on Rule 9.7 and Rule 9.7.
Presumption (2) has been amended so that the related trusts of the close relatives of a company’s director are also presumed to be acting in concert with the company (presumption (2)).
The Committee has also made consequential amendments to various Notes, including Notes on exempt fund manager and exempt principal trader, Note 5 on Rule 8, Note 1 on Rule 19.2 and also Rule 9.6.
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