UK Public M&A – "When Is a Final Offer Not Final?" Part 2

July 20, 2017

In our client alert "When is a Final Offer Not Final" on 9 November 2016 we described the way the UK’s Takeover Panel operates its rules in a pragmatic way and on a principles basis. We described the battle for SVG Capital Plc and the conundrum that faced the Panel when HarbourVest Partners sought to acquire 100% of the assets of SVG at a higher "see through" price per share than its earlier share offer.

The normal rule is that when a bidder has made a "final" offer it is not allowed subsequently to increase its offer later in the process. In the case of SVG the Panel did allow HarbourVest to make a higher offer for the assets demonstrating, what we then described, as a good example of how the Takeover Panel operates. That deal showed why it is so important for participants in UK public M&A to consult the Takeover Panel about their tactics in advance during any offer for UK public companies. We also observed that the Takeover Panel is not bound by precedent and has the discretion to grant waivers or derogations from its rules where appropriate.

What has happened now?

The Takeover Panel has now issued a consultation paper with a view to changing its rules in relation to asset sales in competition with an offer for a UK public company. The consultation period ends on 22 September 2017 following which, subject to the outcome of the consultation, we would expect the rules to be amended to prevent a repeat of the SVG story.

What is proposed?

There are a number of proposed amendments:

The most important changes would prevent bidders avoiding the existing rules by purchasing "significant assets". In assessing what is "significant" the Panel would have regard to the consideration, assets and profits involved, with relative values of more than 50% being normally regarded as significant.
Bidders who have made "no extension", "no increase" or similar statements would also be prevented from seeking to purchase significant assets for 12 months (which could be reduced in certain circumstances and with Panel consent to three months) after their share offer lapses.
There would be a requirement for target boards to obtain independent advice as to the financial terms of any asset sales including a formal report on the amount shareholders would ultimately receive, similar to the requirement to receive advice in connection with an offer.
Target companies would be allowed to pay an inducement fee in connection with an asset deal of up to 1% of the value of the proposed transaction.
A bidder for assets would be restricted from purchasing shares in the target company during the offer period, similar to the existing restriction for bidders who have made a takeover offer.

Conclusion

These changes make sense and reflect the market debate at the time of the SVG deal. They also both reinforce the importance of consulting the Panel on all issues that arise on public M&A in the UK and reflect the Panel’s ability to amend its rules quickly to keep up to date with market developments.

This Gibson Dunn client alert was prepared by Charlie Geffen, Nigel Stacey, Selina Sagayam and Anne MacPherson.

Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these developments. To learn more about these issues, please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Mergers and Acquisitions practice group, or the following:

United Kingdom:
Charlie Geffen – Chair, London Corporate (+44 (0)20 7071 4225, cgeffen@gibsondunn.com)
Nigel Stacey – Partner, Corporate (+44 (0)20 7071 4201, nstacey@gibsondunn.com)
Jonathan Earle – Partner, Corporate (+44 (0)20 7071 4211, earle@gibsondunn.com)
Mark Sperotto – Partner, Corporate (+44 (0)20 7071 4291, msperotto@gibsondunn.com)
Nicholas Tomlinson – Partner, Corporate (+44 (0)20 7071 4272, ntomlinson@gibsondunn.com)
James Howe – Partner, Corporate (+44 (0)20 7071 4214, jhowe@gibsondunn.com)
Selina Sagayam – Head of Practice Development, Transactional (+44 (0)20 7071 4263, ssagayam@gibsondunn.com)

United States:
Barbara L. Becker – Co-Chair, Mergers & Acquisitions Group, New York (+1 212-351-4062, bbecker@gibsondunn.com)
Jeffrey A. Chapman – Co-Chair, Mergers & Acquisitions Group, Dallas (+1 214-698-3120, jchapman@gibsondunn.com)
Stephen I. Glover – Co-Chair, Mergers & Acquisitions Group, Washington, D.C. (+1 202-955-8593, siglover@gibsondunn.com)
Dennis J. Friedman – Partner, Mergers & Acquisitions Group, New York (+1 212-351-3900, dfriedman@gibsondunn.com)
Eduardo Gallardo – Partner, Mergers & Acquisitions Group, New York (+1 212-351-3847, egallardo@gibsondunn.com)

Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

UK Public M&A – “When Is a Final Offer Not Final?” Part 2