Irish Takeover Panel Consults on Revised Rules

Overview

The consultation paper proposes a suite of amendments to amend the Irish Takeover Panel Act 1997, Takeover Rules, 2013 (the “Rules”) and the Irish Takeover Panel Act 1997, Substantial Acquisition Rules, 2007 (the “SARs”), primarily to update them to take into account developments in takeover practice since the Rules and SARs were last revised in 2013.

The principal changes will likely be seen to be those that will impose an automatic “put up or shut up” deadline of 28 days on named potential bidders following a possible offer announcement and those that overhaul the regime regulating profit forecasts.

Imperative behind the changes

The Panel notes that it has, in undertaking its review of the Rules, considered amendments to the Takeover Code made by the Panel on Takeovers and Mergers in the UK (the “Code”) over the last 10 years and the vast majority of the proposed amendments to the Irish Rules reflect changes that have been made to the Code during this period. The Panel is not proposing, however, to replicate in the Irish context those of the Code’s rules that prohibit break fees, implementation agreements and other similar arrangements except in exceptional circumstances, and those that oblige bidders to comply with statements of intention they make regarding the target for a specified period after the offer.

Many of the changes codify what has been the Panel’s practice in recent years (for example, in relation to review of takeover documentation) or bring into the Rules the substance of the Panel’s practice statements (for example, in relation to the treatment of transaction implementation agreements).

Other changes seek to modernise takeover practice (for example, to allow updates to published information to be made by announcement only through regulated information services rather than by circular to shareholders).

Put up and shut up

The Panel proposes to adopt a new “put up or shut up” (“PUSU”) regime, similar to that under the Code. 

PUSU regimes are designed to bring to an end the uncertainty and siege that may exist as a result of the announcement of a possible offer. Such a siege results from the operation of Rule 21.1 (the rule against frustrating action) which can curtail the target’s normal business operations during a takeover offer period.

The current Irish PUSU regime allows the Panel the discretion to impose a time limit of its choosing by which a bidder must clarify its intentions.  The duration of a PUSU time limit is not prescribed under the current Rules and the Panel will impose a PUSU deadline only if it is requested to do so by the target.

Under the proposed new PUSU regime an announcement by a target which commences an offer period must identify any potential bidder with which the target is in talks or from which an approach has been received. Having been so identified, any publicly named potential bidder must within 28 days of the date on which it has been publicly named either “put up” by announcing a firm intention to make an offer or “shut up” by announcing that it will not make an offer whereupon it will then be restricted from making an offer for the target for 12 months. The bidder may, alternatively, make an application jointly with the target to the Panel for an extension of the deadline.

The Panel considers that the new PUSU regime would reduce any tactical advantage which unwanted and hostile bidders would have over target companies, in that targets would, first, be subject to a shorter period of uncertainty and disruption prior to a formal offer being announced and would have a greater degree of control over the duration of that period and, second, the requirement for the board of the target to make a potentially difficult and contentious decision, as to whether to identify a potential bidder and/or to request the Panel to impose a PUSU deadline, would be removed.

Profit forecasts

The Panel proposes that Rule 28 be revised to incorporate less burdensome requirements for certain profit forecasts, most notably for profit forecasts published before the making of an approach for a possible offer. The Panel proposes to dispense with the independent reporting requirements of Rule 28 in certain circumstances, including in relation to certain “ordinary course profit forecasts” and forecasts relating to historical or future financial periods. The proposed Rule 28 is, in the main, based on the principles underpinning the Code’s Rule 28. The proposed rule will also set out the reporting requirements in respect of quantified financial benefits statements. A cash bidder will not be required to have any profit forecast or quantified financial benefits statement reported upon.

Disclosures

The Rules’ disclosure regime will move from being principally dealings based to being principally positions based. Parties to takeovers and their financial advisers should note the proposed changes and additional obligations that the Panel proposes be introduced.

The proposed new regime will require the making of opening position disclosures, containing details of long interests or short positions in, and rights to subscribe for, the relevant securities of the parties to an offer to be made by each of the bidder, the target and any person interested in one per cent. or more of any class of relevant securities of either the bidder or target. These provisions mirror those of the Code.

Euroclear

Following the migration of holding and settlement of Irish securities to the Euroclear Bank settlement system, the Panel proposes a series of amendments to Rule 10 which deals with the counting of tender offer acceptances. It also proposes to amend the rule to deal with acceptances in respect of holdings in other book entry transfer facilities (e.g. The Depository Trust Company in the US).

The Panel has invited comments on the proposed changes with the consultation due to close on 28 February 2022. We expect that the proposed changes will be welcomed by takeover participants and their advisers as bringing helpful additional clarity and flexibility to Irish takeover practice.

McCann FitzGerald LLP advises the Irish Takeover Panel on its rule-making functions.