Posted by John North, Partner
On 1 September 2016 Withy King LLP merged with Royds LLP. The trading name for the merged firm is Royds Withy King. All content produced prior to this date will remain in the name of the firms pre-merger.
UK Takeover Code to distinguish between offer “commitments” and “intentions”
The Takeover panel has outlined new rules that clarify the blurred lines between “commitments” and “intentions” after a number of ‘controversial’ deals raised concerns about offers being made.
The new guidelines, issued by the panel who act as a referee during public mergers and acquisitions in the UK, come after the controversy generated by US drug Giant Pfizer’s failed bid for UK rival, AstraZeneca.
In the agreement the US pharmaceutical firm made supposedly “binding” commitments to keep various activities in the UK, which critics claimed were virtually worthless due to the fact that it would only need to cite “material change of circumstances” to get out of them.
Following this and similar cases the panel has said it will draw a greater distinction between an “intention” and a “commitment”.
Under the rules firms will be allowed to make “intentions” so long as they do so with “due care” and on the basis that it is an “accurate statement” of the party’s intention “at the time that it is made”.
But to make commitments, such as those given by Pfizer, will require firms to seek permission, agree a time period and “prominently state any qualifications”.
They will have to secure the agreement of the panel to use qualifications if they later want to get out of commitments, and also explain themselves in statements to the market.
Failure to stick to the rules could see the panel seeking legal enforcement of its rulings under the 2006 Companies Act for the first time.
They could even go as far as to seek an injunction if a bidder committed, for example, to keep a factory open after completing a deal and then reneged on it.
The proposed rule changes come after concerns in relation to a number of foreign takeovers of UK firms and, that the current guidelines make it too easy for bidders to drop commitments after the acquisition has gone ahead.
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