Changes to the Takeover Code took effect on 8 January 2018 following public consultations by the Takeover Panel in the second half of 2017. The first of these related to asset sales and other matters, and the second to statements of intention and related matters.

Asset sales and other matters

The changes principally address transactions under which, in competition with an offer, the board of a target agrees to sell all or some assets of the target to a third party. In particular:

• New rules prevent a bidder from avoiding the Code by buying significant assets of an offeree company. A person who has made a "no intention to bid" statement cannot generally buy, agree to buy or make any statement that it is interested in buying a target's significant assets within six months of the date of the statement. Similarly, a bidder or its concert parties cannot generally buy, agree to buy or make any statement that it is interested in buying a target's significant assets during a competition reference period or within 12 months of the withdrawal or lapse of an announced offer.
  
  The test for whether assets are significant is by reference to the value of the consideration for those assets, their value and the operating profit attributable to them, in each case relative to the company as a whole. The Panel will normally regard relative values of more than 75 per cent as significant.


• There are changes to Rule 21.1. This restricts the board of a target from selling assets or entering other transactions which may result in an offer being frustrated or in shareholders being denied the opportunity to decide on the offer's merits, unless shareholders give their approval. New requirements include that, where the target's board seeks shareholder approval, it must get competent independent advice about whether the financial terms of the proposed action are fair and reasonable and must send a circular to shareholders containing prescribed information.
• New rules provide that where, in competition with an existing offer or possible offer, the board of a target states that it proposes to sell all or substantially all of the company's assets and to return to shareholders all or substantially all of the company's cash balances:
  • any statement made by the target's board about the amount per share that shareholders can expect to receive from the sale and return of value counts as a "quantified financial benefits statement"; and
  • a buyer of some or all of the target's assets is restricted from acquiring interests in shares in the target during the offer period unless the board of the target has made a statement quantifying the cash sum expected to be paid to shareholders, and then only to the extent that the price paid does not exceed the amount stated.

Statements of intention and related matters

The key changes are as follows:

• When making statements of intention with regard to the business, employees and pension schemes of the target company, the bidder must now include specific statements of intention regarding:
  • any research and development functions of the target company;
  • the balance of the skills and functions of the target company's employees and management; and
  • the location of the target company's headquarters and headquarters functions.
  
  The Panel believes that these changes will further help target company boards, employee representatives and pension scheme trustees to give their opinions on the offer as required by the Code, as well as increasing the quantity of information available to shareholders.


• A bidder must now state in its firm offer announcement its intentions regarding the business, employees and pension schemes of the target company. Previously, the firm offer announcement did not need to include this information, only the offer document itself. Bringing forward the time at which this information must be provided gives the target company board, employee representatives, pension scheme trustees, shareholders and other stakeholders more time to consider the effects of the offer.
• A bidder now cannot publish an offer document for at least 14 days from the announcement of its firm intention to make an offer without the consent of the board of the target company. Previously there was no minimum period. This means that in a hostile offer the target's board will now normally have at least 28 days from the date of the firm offer announcement to put together its opinion on the offer and to prepare its response document.
• The Code now requires a party making a post-offer undertaking (i.e. a statement about a course of action that it commits to take, or not take, after the end of the offer period) to publish via a Regulatory Information Service its periodic written reports to the Panel detailing progress made in complying with the undertaking. The interval between reports now must not exceed 12 months.
  
  Where a party makes a post-offer intention statement (i.e. a statement about a course of action that it intends to take, or not take, after the end of the offer period) it must now confirm to the Panel whether it has taken the intended course of action or not and publish that confirmation via a Regulatory Information Service. It must do this at the end of 12 months from the end of the offer period (or the period referenced in the statement).

Takeover Panel RS2017/1: Asset sales and other matters and Takeover Panel RS2017/2: Statements of intention and related matters