Takeovers—cash confirmation requirements

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

  • Takeovers—cash confirmation requirements
  • 'Certain funds' requirement
  • Cash confirmation requirement
  • Responsibilities of the offeror’s financial adviser
  • Financing conditions and pre-conditions
  • Pre-conditions in possible offer announcements
  • Pre-conditions in firm offer announcements
  • Financing conditions and cash underpinning conditions
  • Cash underpinnings—cash confirmation
  • Other financing pre-conditions
  • More...

Takeovers—cash confirmation requirements

It is a fundamental concept of the City Code on Takeovers and Mergers (Code) that an offeror should announce a firm intention to make an offer only after the most careful and responsible consideration and when it has every reason to believe that it can and will continue to be able to implement the offer, including ensuring that it can fulfil in full any cash consideration (‘certain funds’ or ‘certainty of funds’). Under Rules 2.7(d) and 24.8, when an offer is made in cash or includes a cash element, both the announcement and the offer document must include confirmation by an appropriate third party (usually the offeror’s financial adviser) that resources are available to the offeror sufficient to satisfy full acceptance of the offer (a 'cash confirmation').

This Practice Note considers the certain funds principle and the related cash confirmation requirements under the Code, and looks at various issues for the offeror and its financial adviser to consider when dealing with these requirements and other matters relevant to bid financing arrangements, including financing conditions and pre-conditions, cash underpinnings and the treatment of new loan facilities, as well as the documentation customarily produced.

'Certain funds' requirement

The ‘certain funds’ or ‘certainty of funds’ requirement is principally established under General Principle 5 of the Code:

'An offeror must announce a takeover bid only after ensuring that the

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