Arrangements for access to information for antitrust analysis
The Takeover Panel has published new guidance explaining its approach to offer-related arrangements (Practice Statement 29), and when a target may provide commercially sensitive information to a bidder's advisers on an 'outside counsel only' basis to assist the bidder in determining whether regulatory consents are required without having to provide such information to a competing bidder in accordance with the principle of equality of treatment of competing bidders (Practice Statement 30).
Under the Takeover Code, except with the consent of the Takeover Panel, a bidder may not enter into an offer-related arrangement with the offeror during an offer period or when an offer is in contemplation (Rule 21.2).
An 'offer-related arrangement' is defined broadly under the Takeover Code as "any agreement or arrangement or commitment in connection with an offer, including any inducement fee arrangement or other arrangement having a similar or comparable financial or economic effect".
However, this definition excludes certain arrangements set out in the Takeover Code.
Practice Statement 29 provides helpful guidance on the Takeover Panel's interpretation and application of Rule 21.2 in practice.
Commitments to maintain confidentiality The existing rules on offer-related arrangements permit a target to enter into a confidentiality agreement with a bidder. The Takeover Panel's position is that the terms of such agreement must not restrict the target's board from making an announcement relating to a possible offer or from publicly identifying the bidder.
Commitments to provide information or assistance for obtaining official authorisation or regulatory clearance The existing rules permit a target to enter into a commitment with a bidder to provide information or assistance for obtaining any official authorisation or regulatory clearance. The Takeover Panel has clarified that this applies only to authorisations or clearances on which the offer is conditional. In particular, these rules do not permit:
- agreements to assist with other matters (eg, assistance with a bidder's application to a tax authority to obtain a specific tax treatment); or
- the target to enter into a commitment to pay the bidder's costs incurred in obtaining such authorisations or clearances.
Reverse break fee Other than in the context of a reverse takeover, the existing rules permit a bidder to pay a reverse break fee to the target. This can be conditional on the bidder taking or not taking certain actions. The Takeover Panel considers that such conditions are not allowed if they deter potential competing bidders from making an offer or would result in such bidders making an offer on less favourable terms. The Takeover Panel notes that it is normally permissible for a bidder's obligation to pay a reverse break fee to be conditional on the target's board continuing to recommend the bidder's offer.
Agreements relating to existing employee incentive arrangement The existing rules provide that agreements relating to how existing awards under the target's employee incentive arrangements will be treated in connection with an offer do not constitute offer-related arrangements. The Takeover Panel has clarified that an agreement that the target will not grant any new options to employees under its established share option schemes and arrangements relating to other aspects of employee remuneration or incentives are both prohibited.
Bid conduct agreements The Takeover Panel notes that bid conduct agreements between the target and the bidder must not contain offer-related arrangements. The Takeover Panel states that it is not its practice to review such agreements before they are signed; however, if the Takeover Panel subsequently identifies any offer-related arrangements in such agreements, it will initiate remedial and/or disciplinary action.
Arrangements for access to information for antitrust analysis
Under the Takeover Code, any information given by a target to one bidder must, on request, be given equally to a competing bidder, even if the competing bidder is less welcome (Rule 20.2).
Practice Statement 30 highlights that in certain circumstances, a target may wish to provide a limited amount of commercially sensitive information to a bidder's advisers on an outside counsel only basis (rather than to the bidder or a competing bidder itself), particularly where the target wishes to assist the bidder in determining whether there is a need to obtain regulatory consents.
The Takeover Panel notes that in such circumstances, its practice is normally to agree that Rule 20.2 will be satisfied if, upon the sensitive information being requested by a competing bidder, it is provided to the competing bidder's advisers on the same outside counsel only basis. Specifically, the Takeover Panel will not require the sensitive information to be provided directly to the competing bidder. The Takeover Panel notes that in order for it to agree to apply Rule 20.2 in this manner, it must be satisfied that appropriate measures have been implemented to ensure that the sensitive information will not be obtained by the first bidder or its other advisers. In addition, the Takeover Panel notes that its consent is required before any sensitive information is provided to advisers.
The Takeover Panel states that if any sensitive information is provided to a bidder in such circumstances, the panel must be informed promptly and such sensitive information must be provided, on request, directly to competing bidders.
For further information on this topic please contact Will Pearce or William Tong at Davis Polk & Wardwell London LLP by telephone (+44 20 7418 1300) or email ([email protected] or [email protected]). The Davis Polk & Wardwell website can be accessed at www.davispolk.com.
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