Stakebuilding, irrevocable commitments and letters of intent
Stakebuilding, irrevocable commitments and letters of intent

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

  • Stakebuilding, irrevocable commitments and letters of intent
  • Stakebuilding
  • Irrevocable undertakings
  • Finding a precedent

Stakebuilding

This Practice Note is part of the Corporate toolkit for public company takeovers structured as contractual offers.

An offeror may seek to acquire an initial stake in the offeree before the announcement of an offer in order to increase the chances of securing ultimate control of the offeree and deter a competing bid. However, these perceived advantages will need to be weighed against the risk that stakebuilding may cause rumour or speculation in the market and/or an upward movement in the offeree's share price, which may trigger an announcement obligation. In addition, acquiring securities in the offeree may have the following consequences:

  1. acquisitions may establish a minimum offer price or lead to a requirement to offer a specific form of consideration

  2. acquisitions of 30% or more of the voting rights in an offeree may lead to an obligation to make an mandatory offer (see Practice Note: Mandatory offers)

  3. if the bid is structured as a general offer, any shares held by the offeror will not count towards the 90% threshold needed for a successful offeror to exercise its rights to compulsorily acquire minority shareholders (see Practice Note: Squeeze-outs and sell-outs: buying out minority shareholders)

  4. if the bid is structured as a scheme of arrangement, any shares held by the offeror may not be voted at the court meeting