• To give the target company and other stakeholders more time to consider the bidder's statements of intent, a bidder must now make these statements at the time it publicly announces its firm intention to proceed with the bid, as well as include them within its formal offer document.
• Unless the target board consents to earlier publication, the rules will prevent a bidder from publishing its formal offer document until at least 14 days after it announces its firm intention to proceed with the bid. As a result, where a bid is hostile, the target board will have 28 days, rather than the current 14, to publish its views on the bid (and the bidder's intentions for the target) in its formal response document.
• Bidders will have to publish annual reports on their compliance with any commitments they have made during the course of the bid (so-called 'post-offer undertakings'). They must also publicly confirm whether or not they have carried out their intentions as stated during the bid ('post-offer intention statements') 12 months after end of the offer period (or within the time period specified in the original statement).

The Panel continues to emphasise the importance of meaningful disclosures on a bidder's intentions in relation to the target business. RS 2017/2 states that intention statements should be specific and bespoke and appropriately reflect the bidder's unique business rationale and intentions. It will not be enough for a bidder to state that it will undertake a review of the target's business following completion of the deal. The bidder would also need to disclose what the review is likely to cover and its expectations for the review.

Asset sales and other matters

The Panel consulted on these amendments to the detail of the Takeover Code in PCP 2017/1 in July 2017 and the new rules are contained in RS 2017/1. As with the consultation on intention statements, the Panel has largely adopted the changes as originally proposed, but with some alterations to the specifics. The key points are as follows:

• Currently, where a potential bidder announces under Rule 2.8 of the Code that it has decided not to go ahead with its proposed bid (i.e. it makes a 'shut up' statement), the rules impose a six-month ban on it re-approaching the target and re-bidding for it. This ban automatically ceases to apply in certain circumstances (for example, if a competing bid is announced). Under the new rules, a bidder who wish to reserve the right, in the circumstances permitted by the rules, to set aside a Rule 2.8 statement and re-bid for the target must specifically state this and identify those circumstances when it makes the statement.
• Where an unsuccessful bidder would be prevented from making a further bid for the company for a set period of time under the rules (e.g. under Rule 2.8 or 35.1), or during a competition reference period under Rule 12.2, it will also be prevented, in certain circumstances, from seeking to buy significant assets from the target company for a limited period of time. For these purposes, relative values of 75 per cent, excluding cash, will usually be regarded as significant. However, in practice, given that an asset sale will always require target board approval (and, frequently, shareholder approval too, under listing rules), the circumstances in which the Panel will impose this ban are relatively limited. The Panel has included a detailed explanation of how these rules will work in Appendix C of RS 2017/1.
• There are a number of changes to the rules preventing target boards from taking 'frustrating action' in relation to a bid without shareholder approval, such as selling the company's assets (Rule 21.1). In essence, target boards will not usually need to obtain shareholder approval under the Code if the proposed action is conditional on the bid being withdrawn or lapsing. However, where shareholder approval is needed for the proposed action, the target board must obtain an independent fairness opinion on its financial terms, consult the Panel about the proposed shareholder meeting date and send a circular to shareholders containing specified information about the proposed action. If shareholder approval is not required, the board can instead publish an announcement containing the required information (but the Panel retains the discretion to require the board to circularise shareholders with the information). The new rules will also permit a target company to enter into a break fee agreement (subject to the usual 1 per cent cap in aggregate) with a counterparty to a Rule 21.1 transaction.
• Where a target board proposes to sell all or substantially all of the target company's assets in competition with a bid and return all or substantially all of the company's cash balances to shareholders, a statement quantifying the amount to be returned will be treated as a 'quantified financial benefits statement' under the rules and must be accompanied by the disclosures required for this kind of statement (subject to certain derogations). The proposed purchaser of the assets would also be restricted from buying shares in the target company, unless the price it pays does not exceed the amount per share that is expected to be returned to shareholders following the asset sale. The rules on ensuring equality of provision of information as between competing bidders will also be extended so as to require that any information the target company gives to the proposed purchaser of the target's assets is also given to any competing bidder that requests it.
• Miscellaneous further changes will:
  • Limit the current, overly-wide restrictions in the Code on the use of social media during a bid so that they only apply to information published about the proposed bid, and so as to permit Panel-approved videos to be published via social media. The rules will also clarify that financial advisers are responsible for guiding bid parties on the content of social media (as with any other publication media), during the course of the bid.
  • Codify the Panel Executive's existing practice of not requiring a formal shareholder resolution to waive a mandatory bid requirement under Rule 9 on the issue of new shares (the so-called 'whitewash' procedure) if instead independent shareholders with over 50 per cent of the voting rights give their consent in writing to the waiver.

These changes come into effect on 8 January.

Client Alert 2018-004