Takeover Panel consultation—communication and distribution of information

Darius Lewington, solicitor in the Lexis®PSL Corporate team, considers the latest public consultation by the Code Committee of the Takeover Panel (the Panel) regarding the communication and distribution of information and opinions during an offer.

Original news

Proposed Takeover Code amendments on communication and distribution of information during an offer, LNB News 15/02/2016 132
 
The Code Committee of the Panel has issued a public consultation paper setting out proposed amendments to the Takeover Code (the Code) with regard to the communication and distribution of information and opinions during an offer by, or on behalf of, an offeror or offeree.

Equality of information to shareholders

Rule 20.1 of the Code provides that information must be made equally available to all offeree shareholders as nearly as possible at the same time and in the same manner. This reflects General Principle 1 of the Code, which provides that all holders of the securities of an offeree of the same class must be afforded equivalent treatment.
Information and opinions relating to an offer or party to an offer
The Code Committee is proposing to amend Rule 20.1 so as to make clear that it applies not only to information about a party to an offer (as currently stated), but also to 'information and opinions relating to an offer or a party to an offer'.This amendment is intended to reflect how Rule 20.1 is currently interpreted in practice and would become a new Rule 20.1(a).
Requirement for an announcement
The Code Committee considers that the Code should provide greater clarity as to how the requirement for information to be made equally available to all offeree shareholders should be satisfied.The Code Committee is therefore proposing that, where any material new information or significant new opinions relating to an offer or a party to an offer are:

  • published by or on behalf of an offeror or the offeree (other than in a document sent to offeree shareholders)
  • provided to any shareholder or other relevant person
  • provided to the media

the requirement in Rule 20.1 for the information or opinions to be made equally available to all offeree shareholders as nearly as possible at the same time and in the same manner should be satisfied by the offeror or offeree (as appropriate) at the same time publishing the information or opinion in an announcement published via a RIS.

The Code Committee proposes to introduce a new Rule 20.1(b) to reflect this position.

Shareholder presentations and media communications

In addition, the Code Committee proposes to extend the requirements of Rule 20.1 to certain relevant materials, even if they do not contain any material new information or significant new opinion relating to the offer or a party to the offer, so that:

  • any presentation or other document relating to an offer or a party to an offer provided to, or used in any meeting with, any shareholder or other relevant person must be published on a website promptly after it is so provided or used
  • any article, letter or other written communication relating to an offer or a party to an offer provided to the media must be published on a website promptly following its publication by the media

Communications by an offeror or offeree with its employees would be exempt from these requirements, even if certain employees are also shareholders in the offeree, provided that the communication does not include any material new information or significant new opinion relating to the offer or a party to an offer.

The Code Committee proposes to introduce a new Rule 20.1(c) to reflect this position.

Insiders

The Code Committee recognises that there are certain circumstances in which it will be appropriate for information or opinions to be provided in confidence to one or more shareholders and other relevant persons. For example, an offeror may wish to meet with selected major offeree shareholders in order to ascertain their views on a possible offer or revised offer or to seek an irrevocable commitment to accept it.

The Code Committee is proposing that these circumstances would be included in a new note 6 on Rule 20.1. This would provide that:

  • prior to the commencement of an offer period, material new information or significant new opinions relating to an offer or a party to an offer may be provided in confidence by or on behalf of an offeror or the offeree to one or more shareholders or other person interested in securities (including debt securities) or to any investment manager, investment adviser or investment analyst (Relevant Person), subject to the announcement requirements of Rule 2.2(e)
  • during the offer period but prior to the announcement of a firm offer or a revised offer, the Panel may consent to the provision of such information or opinions in confidence to one or more Relevant Persons
  • any such information or opinion which is so provided must be so published in, or by not later than the date of, either:
    • the announcement of the firm or revised offer, or
    • where the information or opinion is provided by the offeree and where the offeree board is not recommending the offer, the first substantive announcement made by the board in response to the announcement of the offer
  • any presentation or other document provided to a Relevant Person in such circumstances must be so published promptly following:
    • the announcement of the firm or revised offer
    • where the presentation or other document is provided by the offeree and where the offeree board is not recommending the offer, the first substantive announcement made by the board in response to the announcement of the offer

Meetings and telephone calls with shareholders and others

Note 3 on Rule 20.1 places restrictions on the conduct of meetings of representatives of the offeror or offeree and their advisers with their shareholders or other persons interested in their securities or with analysts, brokers or others engaged in investment management or advice prior to and during the offer period, in relation to material new information that may arise from those meetings.
 
The principal safeguard provided in note 3 on Rule 20.1 for ensuring that no material new information or significant new opinions are provided to relevant parties is the requirement for the meeting to be supervised by a financial adviser or corporate broker.
 
The Code Committee recognises that in certain circumstances it may be appropriate to relax this requirement and is therefore proposing to introduce a new Rule 20.2 to replace the current note 3 on Rule 20.1. The new Rule 20.2 will apply to both meetings and telephone calls and will provide as follows:

  • a financial adviser or corporate broker to the offeror or offeree (as appropriate) should be required to supervise a meeting or telephone call to which the proposed new Rule 20.2 applies and subsequently to provide a written confirmation to the Panel that no material new information or significant new opinion was provided if the meeting or telephone call takes place during one of the following periods:
    • prior to the offer period (but only if the meeting or telephone call relates to a possible offer or would not be taking place but for the possible offer)
    • during the offer period but prior to the announcement of a firm offer
    • following the announcement of a firm offer, but normally only if the offer is not recommended by the offeree board or if there is a competitive situation
  • subject to prior consultation with the Panel, there should normally be no requirement for 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 offeree board and where there is no competitive situation. In such cases, a senior representative of the offeror or offeree who attended the meeting or telephone call should normally 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
  • the requirement for a financial adviser or corporate broker to supervise a meeting or telephone call should not apply to meetings or telephone calls attended only by one or more advisers to the offeror or offeree (other than a financial adviser or corporate broker)—for example, a public relations adviser—and one or more 'sell-side' investment analyst. In such cases, a senior adviser who attended the meeting or telephone call should 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
  • in any case where a representative of or adviser to an offeror or the offeree (other than a financial adviser or corporate broker) is to provide a written confirmation to the Panel, the financial adviser to that party should be required to provide an appropriate briefing to the representative(s) or adviser(s) who will attend the meeting or telephone call as to the requirements of the proposed new Rule 20.2 and as to the information and opinions which may and may not be provided during the meeting or telephone call
  • the requirement for a written confirmation to be provided to the Panel should not apply if the only persons who attended the meeting or telephone call on behalf of the offeror or offeree were one or more financial advisers or corporate brokers

The current note 3 on Rule 20.1 states that its provisions apply to all meetings held prior to or during an offer period 'unless the meetings take place by chance'. The Code Committee considers that unscheduled meetings should not be excluded from the scope of the proposed new Rule 20.2 and does not therefore propose to carry this provision over into the proposed new Rule.

Videos and social media

Videos
The Code Committee has noted that videos may be used by an offeror or the offeree as a means of communicating information or opinions relating to an offer or to the party itself. However, the Code does not currently contain any specific provisions in relation to the use of videos.
 
The Code Committee considers that, if an offeror or the offeree publishes such a video, it should comprise only a director or senior executive reading from a script or participating in a scripted interview.
 
An offeror or offeree which wishes to publish such a video should obtain the Panel’s prior consent. In addition, the video should be published on a website at the time of publication and the offeror or offeree should publish an announcement via a RIS noting that the video has been published and including a link to the relevant webpage.
 
The Code Committee is proposing to introduce a new Rule 20.3 to reflect the above.
Social media
The Code Committee has also noted that an offeror or offeree may wish to communicate information or opinions relating to an offer or to the party itself via social media, such as Twitter or Facebook. As with any other information published, or statement made, during the course of an offer, information or opinions published via social media will need to comply with the standards of care and presentation set out in Rule 19.1.
 
The Code Committee considers that the Code should provide that social media should not be used by or on behalf of an offeror or offeree to publish information relating to an offer or a party to an offer, other than for the publication of:

  • the full text of an announcement which has been published via a RIS
  • the full text of a document which has been published on a website in accordance with the relevant provisions of the Code
  • a notification of a link to the webpage on which such an announcement or document has been published, which notification must comply with the requirements of (what will become) para (b) of the note on the definition of 'website notification' in the definitions section of the Code, ie that:
    • the information in the notification must be confined to non-controversial information about the offer or a party to the offer and should not include any argument or opinion
    • the notification should not include a recommendation to take or not to take any action in relation to, or contain any view on the merits of, the offer except for a factual statement as to whether or not the offer is proceeding with the recommendation of the offeree board

The Code Committee is proposing to introduce a new Rule 20.4 to reflect the above proposals.

Advertisements

Publication of advertisements connected with an offer

Under Rule 19.4 of the Code, the publication of advertisements connected with an offer or potential offer is prohibited unless the advertisement falls within certain exempt categories of advertisement. The Code Committee is proposing to amend Rule 19.4 to:

  • broaden the scope of the prohibition from advertisements 'connected with an offer' to advertisements 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 for advertisements 'not bearing on an offer'
  • delete certain categories of exception to the prohibition, which the Code Committee considers are now unnecessary

The Code Committee does not intend that the proposed amendments should alter the current operation of Rule 19.4 in any material way.

In addition, the Code Committee considers that Rule 19.4, as proposed to be amended, should be included within Rule 20, as a new Rule 20.5, on the basis that it should logically follow the provisions relating to the methods of communication of information and opinions relating to an offer or a party to an offer in Rules 20.1–20.4 (as proposed to be amended and introduced). For further details, see Resource Note: Takeover Code—Rule 20—Equality of information.

Requirement to include responsibility statement

The Code Committee considers that it is unnecessary for Rule 19.2 to require a responsibility statement to be included in any advertisement published in connection with an offer, particularly given that the requirements of Rule 19.1 will in any event apply to the advertisement, and considers that it would be sufficient for the requirements of Rule 19.2 to apply only to documents published in connection with an offer. The Code Committee is therefore proposing to amend Rule 19.2 to remove references to advertisements.

Comment

The majority of the changes proposed clarify how the Code is currently interpreted in practice and are unlikely to result in a significant change in how offers are conducted.
 
Arguably the most significant change is the pragmatic approach that the Code Committee is proposing regarding the 'policing' of meetings and telephone calls with shareholders and other Relevant Persons where an offer is recommended and there is no competitive situation. The removal of the requirement for a financial adviser to be present in these circumstances seems proportionate and is likely to be welcomed by the market.
 
The new restrictions on the use of social media to publish information relating to an offer or a party to an offer suggest a concern about the increased risk of new material being disclosed through such media. This is underlined by the Code Committee's comment that, as with any other information published, or statement made, during the course of an offer, information or opinions published via social media will need to comply with the standards of care and presentation set out in Rule 19.1.
 
The Code Committee is inviting comments on the Public Consultation Paper, which should reach the Code Committee by Friday 15 April 2016. Comments may be sent by email (supportgroup@thetakeoverpanel.org.uk) or by post (The Secretary to the Code Committee, The Takeover Panel, 10 Paternoster Square, London EC4M 7DY). 

Relevant Articles
Area of Interest