Changes to Takeover Code to ensure consistency of information flows during offers coming into force

Written on 7 Sep 2016

In July 2016, the Takeover Panel published Instrument 2016/5 setting out amendments to the Takeover Code relating to the communication and distribution of information and opinions during an offer.  These amendments come into effect on 12 September 2016, including in relation to ongoing offers.

The main purpose of the changes is to provide greater clarity and consistency of approach in relation to the requirement for information to be made equally available to all offeree company shareholders as nearly as possible at the same time.  The updated rules also take into account developments in the use of electronic communications (including video and social media) during offers.

The principal changes are to Rules 19 and 20 of the Code, which we look at below.

Extension of scope of materials to be published on a website (Rule
20.1)

Where any material new information or significant new opinion is published by, or on behalf of, an offeror or offeree company or provided to a shareholder, bondholder, fund manager, analyst or the media, that new information must be published through an announcement through an RIS in accordance with new Rule 20.1.

Importantly, the Panel has also extended the requirements of Rule 20.1 to capture other relevant materials (but not containing material new information), such as presentations or other documents used in meetings (physical, by telephone or electronic means) and any articles provided to the
media relating to an offer.  This information must be published on a website promptly after its use (subject to the notes to Rule 20.1).

Safeguards during meetings with shareholders and others (Rule 20.2)

New Rule 20.2 replaces the current Note 3 on Rule 20.1 relating to the policing of meetings between representatives of, or advisers to, an offeree or the offeree company and shareholders of an offeror or the offeree company or any analysts, brokers or fund managers during or prior to the offer period.

The amendments make it clear that the requirements for a financial adviser/corporate broker to supervise such meetings extend also to
telephone calls and electronic meetings. As before, the financial adviser/corporate broker must confirm to the Panel that no new material information or opinion was provided by no later than 12 noon the following business day.

The Panel will normally grant a dispensation from the requirement to supervise meetings following the announcement of a recommended offer and where there is no competitive situation, in which case, a senior representative of the relevant party must provide the confirmation to the Panel.

New requirements for video and social media communications (Rules 20.3
and 20.4)

The Panel has introduced a new Rule 20.3 relating to videos published by an offeror or the offeree company. Any video containing any information or opinions relating to an offer or the financial performance of one of the parties must comprise only a senior officer reading from a script or participating in a scripted interview.  It may only be published with Panel consent and made available on a website.

New Rule 20.4 provides that social media must not be used to publish information relating to an offer other than the full text of an announcement or document (or a webpage link) already published under the Code.

Companies’ investor relations teams should therefore be made aware of these new restrictions during an offer period to avoid any unintended
infringement.