Changes to the UK Takeover Code to come into effect on 22 May 2023

Extensive changes were made to the offer timetable in 2020/2021. In the months following the implementation of these changes, a number of competing offers were announced which resulted in three Panel auction procedures - with Ashurst advising two of the relevant target companies, Morrisons and Augean. PCP 2022/3 was intended to clarify the Panel's approach to the offer timetable following these deals. RS 2022/3 confirms these amendments with one important clarification.

1. The Panel will not normally introduce an auction procedure under Rule 32.5 until after the last condition relating to a relevant official authorisation or regulatory clearance has been satisfied or waived by each of the bidders.
2. Where both bidders are proceeding by way of contractual offers:
   • Both bidders will be subject to the same offer timetable, set by reference to the later offer document.
   • If either timetable is suspended, bidders will move to the slower timetable.
   • The faster bidder can bring the unconditional date forward by making an acceleration statement.
3. Where one or more bidders is proceeding by way of a scheme, the Panel will agree a timetable and process with the parties:
   • No bidder will be required to announce any final revisions or participate in an auction whilst a material authorisation or regulatory clearance is outstanding, unless all parties want to bring the date forward.
   • A bidder proceeding by way of a contractual offer may still bring the unconditional date forward by making an acceleration statement.
   • The Panel intends to consult further on whether the target may accelerate the timetable of a bidder by proceeding to sanction a scheme whilst a competing offer remains outstanding. PCP 2022/3 noted that such an approach could constitute frustrating action under Rule 21.1. However, the Panel has helpfully indicated that this will form part of a general and welcome review of Rule 21 later this year. The expectation is that the Panel will either determine that the approach should not constitute frustrating action or continue its practice of generally agreeing to disapply the restrictions in Rule 21.1 in these circumstances.
4. Following an auction, where a contractual offer is competing against a scheme, the Panel will introduce an orderly framework which will typically proceed in the following sequence: (i) shareholder meetings to approve the scheme; then, assuming approval is forthcoming and sufficient time has been given to allow shareholders to accept into the offer knowing the outcome of the shareholder meetings, (ii) Day 60 of the contractual offer timetable; and then, if applicable (iii) the court sanction hearing for the scheme, assuming the contractual offer has not gone unconditional before then.

PCP 2022/4 covered a number of miscellaneous and unrelated changes. RS 2022/4 confirms these amendments and also highlights certain formatting amendments which are required to assist with the preparation of a digital version of the Code. These latter changes do not alter the effect of any of the provisions.

1. The Panel will have greater flexibility to grant a derogation or waiver from the Code in exceptional circumstances - for example, where a company is in financial distress.
2. Note 2 on Rule 2, which provided bidders an exemption from announcing where they could satisfy the Panel that the rumour or speculation and/or untoward share price movement had resulted from a clear public statement rather than a leak, will be deleted.
3. Where the mandatory offer price is adjusted, with the consent of the Panel, the price should be "appropriate" rather than "fair and reasonable" given that the price offered does not, in fact, have to be fair and reasonable to shareholders.
4. Target boards will be explicitly required to give a recommendation to shareholders and holders of convertible securities, options and subscription rights, on all offer proposals and the action that shareholders should take in respect of the offer. This includes any alternative offers and all Rule 15 offers. Where there are alternative offers and (a) more than one of the offers can, in the board's opinion, be recommended to shareholders; but (b) the appropriate action for individual shareholders to take will depend on various factors and their particular circumstances, target boards may state this and explain the key factors which they consider shareholders should take into account in making their decision. Directors will also be required to state which alternative (if any) they intend to elect for and may be required to give reasons for doing so. Appendix C in RS 2022/4 includes some example language which could be used to address a number of different scenarios.
5. Irrevocable undertakings and letters of intent will now need to be published on the website at the time of announcement.