The Panel has today (19 September 2017) published its consultation paper PCP 2017/2 on statements of intention. The Panel has been concerned for some time that the disclosures by a bidder in relation to its intentions for the target business (required to be made in the offer document) have been bland and generic, and therefore do not really provide the target board and other stakeholders (particularly employees and pension scheme trustees) with sufficient specific information to make a meaningful assessment of the bid. This is an area of the Code that has now been consulted on a number of times, firstly following Kraft’s takeover of Cadbury, and subsequently following Pfizer’s possible bid for AstraZeneca (which did not proceed).  The consultation paper sets out certain proposals to address this issue and other related matters.

In summary, the proposals would, if implemented: 

widen the scope of “social/employment disclosures” by bidders from the current regime (impact on employees and places of business)

In particular, the Panel is requiring specific disclosures to cover:

o   the impact on the target’s R&D function

o   the “balance of skills and functions of [the target’s] employees and management”

o   location of the target’s HQ and HQ functions

The changes are presumably intended to make generic disclosures harder. Notably, the Panel has expressed the view that statements of intention should not be qualified by reference to a bidder’s “current” or “present” intentions.

require that the same “social disclosures” regarding the target business, employees and location be made at an earlier point in the offer timetable

This would be at the time of the Rule 2.7 firm offer announcement rather than just in the offer document. This front-loads the disclosures so that a bidder must disclose intentions for the target business by the time it makes the announcement of its actual offer (i.e. up to a 28 days’ acceleration of the information).

prohibit the bidder from publishing the offer document within 14 days of the Rule 2.7 announcement except with the consent of the target

The main impact of this proposal is on hostile offers since the bidder cannot launch a hostile offer and immediately publish the offer document. Currently a target has 14 days after publication of the offer document to publish its defence document. Further, in a situation where the target may need accountants and other advisers to produce profit forecasts and other reports to mount a proper defence, it was thought that the current 14 day period puts too much pressure on the target. This new requirement gives the target at least 28 days to respond to a hostile offer.

In a recommended offer, the target is normally involved in the production of the (combined) offer document and can, of course, consent to earlier publication.

impose additional requirements on the party which has made any post-offer undertakings or post-offer intention statements

This would require that party:

o   in relation to any post-offer undertakings, to publish the reports that it is currently required to submit to the Panel in relation to its compliance with those undertakings. Currently publication is only required at the Panel’s discretion. The reports must be produced and published at least on an annual basis (where the undertaking is for a period longer than a year)

o   in relation to post-offer intention statements, to confirm in writing to the Panel whether it has taken, or not taken the course of action described in the statement at the end of the 12 months following the end of the offer period (or such other period specified in the statement) and the confirmation must be published/announced via an RIS. Current practice only requires a private confirmation to be made to the Panel at the end of the period.