In the aftermath of the public debate surrounding the undertakings given by Pfizer to the UK government in the course of its aborted bid for AstraZeneca, Business Secretary Vince Cable tasked the Takeover Panel with ensuring that, where appropriate, commitments given by bidders in the course of takeovers were binding and that suitable enforcement measures were available to police those assurances.
The AstraZeneca bid reopened an issue which first came to the public’s attention following Kraft’s takeover of Cadbury in 2010. Kraft was later publicly criticised by the Panel for failing to adhere to statements made in relation to keeping Cadbury’s Somerdale factory open. The Kraft/Cadbury bid led to substantial changes in the Takeover Code in 2011.
The Takeover Panel has published Consultation Paper 2014/2, which seeks feedback on proposals to amend the Takeover Code to distinguish between post-offer undertakings and intention statements. The Panel notes that the Code does not currently distinguish between voluntary commitments and statements of intention, because, in effect the Code treats such statements of intention as binding.
The objectives of the proposed new framework are to:
- provide clarity for shareholders and other stakeholders as to the status of statements made by the parties to an offer in relation to action they will, or will not, take following the offer;
- increase the effectiveness of the enforcement tools available to the Panel when parties to an offer choose to make voluntary commitments; and
- enable the parties to an offer to make informative statements of intention.
The new framework would:
- distinguish between:
- “post-offer undertakings”, i.e. statements relating to any particular course of action that a party to an offer commits to take, or not take, after the end of the offer period and with which it will be required to comply for the period of time specified in the undertaking, unless a qualification or condition set out in the undertaking applies; and
- “post-offer intention statements”, i.e. statements relating to any particular course of action that a party to an offer intends to take, or not take, after the end of the offer period, which will be required to be accurate statements of the party’s intentions at the time that they are made and based on reasonable grounds;
- in view of the distinction between them, apply separate requirements to post-offer undertakings and post-offer intention statements; and
- enhance the Panel’s ability to monitor compliance with and, therefore, enforce post-offer undertakings by:
- requiring a party to an offer which makes a post-offer undertaking to provide periodic written reports to the Panel; and
- enabling the Panel to require the appointment of an independent supervisor to monitor compliance with a post-offer undertaking.
The consultation is open for comment until 24 October 2014.
Potential legislative underpinning
As we noted in this July blog post, Mr Cable has indicated that draft legislation to underpin the Panel’s proposed enforcement powers may be included in the Small Business, Enterprise and Employment Bill which is scheduled to go through the Committee stage in October this year. No details of what form those powers may take have been announced to date.