UK: Panel Statement 31 (2024/12): The Takeover Panel publishes a Practice Statement on additional dispensations during a private sale process

On 30 April 2024, the Takeover Panel revised Practice Statement 31 (PS 31), which addresses formal sale processes, private sale processes, strategic reviews, and public searches for potential offerors. 

Initially introduced in 2011, PS 31 allowed company boards to undertake formal sale processes (FSP) with the benefit of certain dispensations from the Takeover Code (the Code) requirements. In particular, following an announcement of an FSP, the Panel does not normally require any participant in the FSP to be identified under Rule 2.4(a) and there would be no “put up or shut up” deadline imposed under Rule 2.6(a). There is also a limited ability to enter into inducement fee arrangements in an FSP that would otherwise be restricted under the Code. However, the FSP has in practice proven to be a relatively rigid process that requires a public announcement for these dispensations to be available and many companies have been reluctant to embark on an FSP, given that it tends to leave the relevant company vulnerable or in a position of perceived weakness.  

The Practice Statement has now been amended to reflect the commercial reality that company boards frequently use different sales processes, such as private sale processes, strategic reviews, or public searches for potential offerors as well as an FSP. It also acknowledges that in these circumstances, some of the dispensations that the Panel grants in the context of an FSP may also be appropriate.

The private sale process and strategic reviews or public searches for potential offerors will be of particular interest to companies that might otherwise have been forced to consider an FSP. Amended PS 31 now stipulates that if the Panel is satisfied that a company has “genuinely initiated a private sale process”, it will generally be willing to grant a dispensation from Rule 2.4 (a) and (b), such that:

1. Voluntary announcements by the Company in relation to what was until that point a private sale process will not require the identification of any potential offeror with whom the company is in talks or from whom an approach has been received, and
   
2. Any announcement that is made as a result of an obligation arising under Rule 2.2 will only be required to identify a potential offeror if that potential offeror has been specifically mentioned in relevant rumours or speculation.

A similar approach will apply to strategic reviews or public searches for potential offerors, although where any announcement of one of these processes is made which alludes to an offer being a possible outcome, this will result in an offer period commencing. But there would not be a requirement to identify any potential offeror participating in the strategic review (as long as there is no specific rumour as to its identity) or for a resulting “put up or shut up” obligation to arise.

In order to be willing to grant these dispensations, the Panel would need to be consulted in advance of any such process commencing. And, if an announcement of what was previously a private sale process is made, then the Panel will expect an announcement to include details of the dispensations given and confirmation as to whether or not there are any ongoing talks with a  potential offeror (even if they are not named).

The potential for dispensations to be given from obligations to identify potential bidders and the resulting “put up or shut up” requirement in the context of a private sale process is, in our view, a positive development as it is likely to provide more flexibility for companies looking to find a buyer without the potentially adverse publicity and rigidity of an FSP.