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LPC Law Notes Equity Finance Notes

Takeovers Notes

Updated Takeovers Notes

Equity Finance Notes

Equity Finance

Approximately 50 pages

A collection of the best LPC Equity Finance notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor". In short these are what we believe to be the strongest set of Equity Finance notes available in the UK this year. This collection of notes is fully updated ...

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The following is a more accessible plain text extract of the PDF sample above, taken from our Equity Finance Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

TAKEOVERS

Announcements

Trigger Announcement Responsibility Consequences
TALKS ANNOUNCEMENTS

Rule 2.2(c)

Following an approach to the board of the offeree company, the offeree company is the subject of rumour and speculation or there is an untoward movement in its share price.

Note 1b to Rule 2.2 [which only applies to this trigger!] clarifies that untoward movement = price movement of 10% or more above lowest price since time of approach. [Be sure to calculate how much share price has risen!]

Rule 2.4(a) [talks announcement] and eventually either Rule 2.7 [firm intention] or 2.8 [no intention to make an offer]

See below under ‘Rule 2.4’ trigger.

 Offeree (Rule 2.3(c)) – unless offer unequivocally rejected by the offeree, in which case responsibility reverts to offeror.

Rule 2.4 announcement starts the offer period, triggers announcement under Rule 2.10 (se below).

Rule 2.6 requires a ‘put up or shut up’ announcement [hence, either one under Rule 2.7 or 2.8] on the 28th day following the announcement in which the offeror is first identified, unless an extension is agreed with the Panel.

Rule 2.2(d)

Before an approach has been made to the board of the offeree company, offeree company is subject of rumour and speculation or there is an untoward movement in its share price and there are reasonable grounds for concluding that it is the potential offeror’s actions which have led to the situation.

The Panel should be consulted if there is any rumour or speculation regarding a possible offer (as opposed to the note to 2.2(c)!)

 Rule 2.4(a) [talks announcement] and eventually either Rule 2.7 [firm intention] or 2.8 [no intention to make an offer] Offeror (Rule 2.3(a)) See above consequences for Rule 2.2(c) trigger.

Rule 2.2(e)

Negotiations or discussions are about to be extended to include more than a very restricted number of people [more than six people].

 Rule 2.4(a) [talks announcement] and eventually either Rule 2.7 [firm intention] or 2.8 [no intention to make an offer] Offeree (Rule 2.3(c)) See above.

Rule 2.4

Talks announcement has been made

 Rule 2.6(a) requires offeror to put up or shut up – i.e. must make an announcement under Rule 2.7 or Rule 2.8 within 28 days of the date after the announcement Offeror (only offeror knows if it is going to proceed with offer or not)

If Rule 2.8 announcement made, cannot make bid for offeree for 6 months and cannot stakebuild over 30%.

Rule 2.4 starts offer period, so see also offeree’s obligations under Rule 2.10 below.
FIRM INTENTION ANNOUNCEMENT

Rule 2.2(a)

Firm intention to make an offer is notified by an offeror to the board of the offeree company [irrespective of attitude of offeree board to the offer!]

 Rule 2.7 – Firm intention

Before approach to board – offeror (Rule 2.3(a))

Following approach to board – offeree (Rule 2.3(c))

Usually made jointly when bid is recommended.

Rule 2.7(b) [also see GP 7] - Offer must be made unless pre-condition invoked under Rule 13 (which cannot include ‘subjective judgments’ or conditions related to financing!) or competing offeror subsequently announces a firm intention to make a higher offer.

Offer must be made [i.e. offer document sent to shareholders] within 28 days of this announcement (Rule 24.1(a)).
MANDATORY OFER ANNOUNCEMENT

Rule 2.2(b)

Rule 9.1(b) mandatory offer triggered by an acquisition of shares

 Rule 2.7 [no choice here!] Offeror (Rule 2.3(b))
START OF OFFER PERIOD ANNOUNCEMENT

Rule 2.10

Offer period has begun [triggered by a Rule 2.4 or Rule 2.7 announcement]

 Announcement of numbers of relevant securities in issue

Offeree

Offeror if offering offeror shares as part of the consideration

May trigger the need for shareholder’s disclosures under DTR 5.1.2R

See also DTR 5.6.1AR (disclosure by issuers)

Note: There may be circumstances where a matter is not required to be disclosed under the rules of the Code but triggers an obligation under the DTRs!

Traditional takeover timetable

*Yellow highlights indicate additional stages required for hostile bids.

STAGE CONSIDERATIONS RULES
1. Due diligence

  • What are you buying?

  • What price is appropriate to offer?

  • What pre-conditions/conditions will be appropriate?

    • Levels of acceptance

  • Will benefit from DTRs because offeree company already have publicly available information

  • If recommended offer, will have access to books of the company (but will have to offer a better price)

Equality of information means board may have to be careful about what they choose to give (preferred) bidders, because under Rule 20.2 they will have to do the same for competing offerors.

 Rule 20.2 – see also GP 3 (in shareholders’ interests for there to be competing bids!)
2. Negotiations with target board

A potential offeror who wants to make a recommended offer will first approach the board of the offeree on an informal basis to negotiate the terms of the offer.

However, it is essential during this period that the existence and details of the takeover are kept secret to avoid any obligation to announce the offer prematurely.

Note Rule 2.1 supplements control/disclosure of insider information provisions under the DTRs.

GP4 and Rule 2.1 (secrecy – preventing false markets!)

See also permitted offer-related arrangements under Rule 21.2(b)
3. Talks announcement

If you are concerned with leaks of information, (i.e. trigger event?), you might make a talks announcement.

Remember that any announcement will trigger the beginning of the offer period (designed to control share dealings…)

Rule 2.2(c), (d) and (e) and Rule 2.4

Rule 8 (disclosures at the start of an offer period)
During the pre-firm intention announcement period, offeror may undertake stakebuilding and due diligence. The offeree will be planning a defence strategy [if hostile bid].
4. Firm intention announcement

Once you are sure you’re going ahead with the offer, then make a firm intention announcement. (Again, consider trigger...

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