Our Legal Expert Group contributed to our response to the Takeover Panel's consultation regarding asset sales in competition with an offer and other matters.
We agreed with the proposed new restriction in each of Rules 2.8, 12.2 and 35.1 should apply in relation to the purchase of assets which are significant in relation to the offeree company (as determined in accordance with Note 5 on Rule 2.8). We noted that the the economic outcome of this type of transaction for shareholders in the target may be comparable with any competing offer.
Regarding shareholder approval during a general meeting for a proposed action under Rule 21.1, we questioned whether introducing a requirement for the board of an offeree company to obtain competent independent advice as to whether the financial terms of the proposed action are fair and reasonable was necessary, as where a Rule 3 adviser is in place, assessment of such a transaction may be required as part of their role and that, for a publicly traded target company, compliance with any applicable listing or AIM rules in relation to such a transaction will already be required.
We agreed that an offeree company should be permitted to pay one or more inducement fees to a counterparty to an agreement to which Rule 21.1 applies provided that the aggregate value of the fees payable does not exceed the 1% limit referred to in Note 8 on Rule 21.1.
Although we welcomed the Panel clarifying its approach with regards to whether an offeree company statement quantifying the cash sum expected to be paid to shareholders should be treated as a quantified financial benefits statement, we had concerns that this could result in additional costs being borne by smaller companies. We noted that the Panel has discretion to waive the requirements and encouraged it to clarify whether it would take such factors into account in such circumstances and, if so, include this concept in the text.