Bulletin 7 - UK Takeover Panel Bulletin update: Bidders 'almost always' expected to have formulated specific intentions on a takeover offer

On 15 May 2024, the Takeover Panel published Panel Bulletin 7 (Bulletin 7) in Panel Statement 2024/14. Bulletin 7 discussed Rules 2.7 and 24.2 of the Takeover Code (the Code), which require a bidder to make specific statements of intention regarding the long-term commercial justifications of an offer and statements relating to specified aspects of a target’s business in both (i) the announcement of a firm intention to make an offer, and (ii) the offer document. 

In accordance with Rule 24.2 of the Code, when a bidder intends to make an offer for a company, the bidder must explain in the offer document the long-term commercial justification for the offer and address the following:

1. Future Business: The bidders intentions for the offeree company’s future business, including research and development functions.
   
2. Employment and Management: Plans for continued employment of employees and management, any material changes in employment conditions, and the balance of skills and functions.
   
3. Strategic Plans: Strategic plans for the offeree company and its impact on employment and business locations.
   
4. Pension Scheme Contributions: Intentions regarding employer contributions to pension scheme(s), accrual of benefits, and admission of new members.
   
5. Fixed Assets: Any redeployment plans for the offeree company’s fixed assets.
   
6. Trading Facilities: Intentions related to maintaining existing trading facilities for the offeree company’s securities.

If the bidder does not propose to make changes to the target business or considers its plans will not impact employment or business location(s), the bidder must make a negative statement to that effect. These disclosures help the target board, shareholders, employee representatives, and pension scheme trustees make an informed decision about the bid. 

Bulletin 7 highlights that the Executive of the Takeover Panel “almost always” expects a bidder to have formulated specific intentions in relation to the future of the target business. It is unacceptable for a bidder to have “not formulated any intentions” or hide under the guise that it does not envisage a “material” reduction in employee headcount or that it plans to conduct a strategic review in the “12 months” following the offer. 

Over the years, the requirements around statements of intent in the Code have been strengthened significantly so as to ensure that bidders state clearly what their plans for the target are and are then properly held to account for those statements. In the preparatory phase of any offer, there is now a requirement to complete and submit to the Panel checklists that clearly demonstrate the different limbs required to be covered under Rule 24.2 are properly addressed. The most recent changes to the Code on this area (introduced in January 2015) added a requirement that a bidder should consult with the Panel in the event that it proposes to deviate from a stated intention at any time during the 12 months following the relevant offer and there is also a requirement to make a public announcement at the expiry of that 12 month period reporting on compliance with its statements of intent.

Since these changes were introduced, certain bidders have sought water down their intention statements, arguing that they cannot be definitive about their plans for the target until they have conducted a full review of the target business following acquisition. Bulletin 7 makes it clear that the Panel does not have much sympathy with this argument and expects intentions to have been formulated for these key areas in almost all cases. It will always therefore be important for bidders to formulate their intentions statements on the key elements carefully with their professional advisers at an early stage as part of their transaction planning, recognising that all elements will need to be addressed in the public documents.