Break fees, deal protection measures and other offer-related arrangements
Break fees, deal protection measures and other offer-related arrangements

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Break fees, deal protection measures and other offer-related arrangements
  • Background—Takeover Panel consultations
  • Rule 21.2—general prohibition on offer-related arrangements
  • What are break fees?
  • Implementation agreements
  • Deal protection measures—examples
  • Other agreements and arrangements in connection with an offer
  • Schemes of arrangement and implementation agreements
  • Exclusions from the Rule 21.2 prohibition
  • Confidentiality agreements
  • More...

Break fees, deal protection measures and other offer-related arrangements

This Practice Note considers the prohibition on break fees and other deal protection measures (or ‘offer-related arrangements’) under Rule 21.2 of the City Code on Takeovers and Mergers (Code) and the application of Rule 21.2 to schemes of arrangement as established by Appendix 7. Exemptions from the general prohibition are considered, as are circumstances in which dispensations may be granted by the Takeover Panel (Panel), such as those in relation to competing offers or a formal sale process.

Background—Takeover Panel consultations

Since 11 September 2011 the Code has generally prohibited break fees and other deal protection measures in public takeovers, subject to some specific exceptions. The prohibition was introduced in response to the Panel’s concerns that the increasing use of inducement fee arrangements and other deal protection measures was discouraging potential competing offerors and leaving offeree boards with limited room to facilitate or recommend a competing offer.

Rule 21.2—general prohibition on offer-related arrangements

Rule 21.2 states that, except with the consent of the Panel, neither the offeree nor any person acting in concert with it may enter into any ‘offer-related arrangement’ with either the offeror or any person acting in concert with it during an offer period or when an offer is reasonably in contemplation.

An ‘offer-related arrangement’ is any agreement, arrangement or commitment in connection with an offer, including any

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