Takeover Expert Group Consultation – Code “Plumbing” Technical Changes Confirmed

In short

The Takeover Panel issued a statement in response (RS2021/1) confirming the various changes to the Code that will be made following the consultation launched in December (see PCP 2021/1). The changes, which are technical “plumbing” in nature, are broadly as set out in the consultation document, with some enhancements, and will come into effect from Monday, June 13, 2022. This alert summarizes the most significant changes.


The Code changes are sensible mechanical changes, some of which are designed to address certain issues that have recently arisen in transactions, while others provide useful clarifications of existing practice. The key points that bidders’ advisers should be aware of are probably (1) the need to verify as soon as possible whether the bidder or its performers have triggered an obligation to offer a minimum price and/or a particular form of consideration and (2 ) the need to ensure that appropriate reservations are made in any announcement of a lapsed bid or a “no intention to bid” announcement under Rule 2.8.

In depth

The main changes made can be summarized as follows.

Announcements regarding floor price or counterparty species

  • A potential bidder who is publicly identified is, at the start of a bidding period, required to disclose any floor price or requirement to offer any particular form of consideration, under rules 6 and 11.
  • The Panel acknowledged the point raised by respondents that: (1) a potential bidder may not know at the start of the bidding period whether a concert actor has acted in a manner that would trigger this requirement; and (2) it is undesirable to increase the risk of leakage or delay an announcement by requiring a bidder to inquire before the announcement. Accordingly, the original proposal has been amended so that if a bidder is unaware at the time of the initial announcement that an obligation under Rules 6 or 11 has arisen as a result of the actions of a concert, the tenderer is required to announce this information as soon as possible and in any case no later than the deadline of its DPO (generally 10 working days after the start of the tender period).
  • Similarly, if during a bidding period a potential bidder or concert participant acquires an interest that triggers the imposition of a price floor or the obligation to offer a particular form of consideration, this fact must be announced immediately.
  • Substantially, if a bidder has no obligation to offer a minimum price or any particular form of consideration, no negative statement is required.

Restrictions on acquisitions by an obligated bidder at the end of the offer calendar:

  • The mandatory offeror and its performers may not acquire additional interests in the securities concerned within 14 days preceding the date of the unconditional offer. The objective is to enable shareholders to make their decision whether or not to accept the offer by knowing the maximum percentage of participation that would be held by the mandatory offeror (and its concert participants) if the offer were to expire.

“Looking back period” for determining the mandatory auction price

  • The 12-month “look-back period” for determining the price at which a binding bid should be made will begin to run from the date the bidder was required to announce its bid, rather than the date it announces actually the offer (which could be later, notwithstanding that this would violate rule 2.2(b)). This avoids the risk of an obligated bidder deliberately delaying the announcement of their bid in order to have a more favorable “look-back” period.

Application of the “chain principle”

The test to determine whether a “chain principle” submission would be required under Note 8 to Rule 9.1 will be amended by (a) removing the “significant purpose” part of the test and (b) lowering the threshold at which an interest in a company code would be considered “significant” to the immediate holder, from 50% to 30% of assets, profits and market values. This is intended to make the test more transparent and with less discretion over its application.

Restrictions following an expired auction or a declaration of “no intention to bid”

  • Where a bid has expired and the bidder has made a “declaration of no increase” or a “declaration of acceleration” without reserving the right to rescind it with the consent of the target board, and a bid competition is in progress, the restriction on the bidder to make another bid will generally be extended beyond three months, until the end of the bidding period. This takes into account the fact that the deadline for submitting offers can often be longer than three months when there are regulatory conditions to be met.

  • Equivalent changes are made to the restrictions imposed on a potential bidder who has 1) made a “no intention to bid” statement under Rule 2.8 and/or 2) made a statement as to the terms of its possible bid under Rule 2.8. Rule 2.5, in each case without reserving the right to waive it with the consent of the target board.

Definition of “securities rights”

  • This definition will be amended to clarify and state explicitly (in a new note on the definition) that a custodian or depositary (which may not be a bank) acting in the ordinary course of its business will not be treated as having a ” interest in “the securities it holds as a result of this activity.

Renaming “whitewashes”

  • “Whitewashes” are renamed “Rule 9 Waivers” and some minor clarifying changes are made to the content requirements of the circular.

Removal of the requirement to submit documents to the Panel on paper

  • The requirement that documents be distributed to it, and to counsel for other parties to the offer, in paper form has been removed, as documents can only be distributed in electronic form. Unlike the other changes, the requirement to submit paper documents to the Panel disappeared with immediate effect as of the date of the PCP (December 2021).

Modification of the default bidding procedure

The default auction procedure defined in appendix 8 of the code is modified in accordance with the proposal made in the PCP. If a declaration of no increase (whether or not accompanied by a price increase) is made by one of the bidders shortly before the cut-off time of 5 p.m. on day 46, the second bidder will have the opportunity to announce a revised bid. on what would have been “Auction Day 1”.

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