Takeover Code: What has changed?

On 5 July 2021, the most significant changes to the Takeover Code (the Code) since 2011 took effect. The changes are intended to standardise the treatment of regulatory clearances and simplify the offer timetable. An overview of the main changes is set out below.

1. Regulatory clearances

   Conditions relating to competition clearances from the Competition and Markets Authority (CMA) and European Commission are no longer treated differently to other regulatory conditions. 

   As such, a bidder will no longer be able to walk away from an offer automatically simply because there is a "Phase 2" CMA or European Commission reference.  Consistent with the position in respect of other regulatory conditions, a bidder will now need to establish material significance in the context of the offer in order to invoke a relevant competition condition and lapse its bid.

   This will make it much more difficult for bidders to withdraw, delay or amend an offer based on UK and European competition conditions.  In turn, there is likely to be greater certainty for target shareholders that announced bids will proceed to completion.

2. Offer timetable

The revised Code introduces a number of key changes in relation to the timetable for contractual offers:

• There is now a "single unconditional date" by which all conditions must be satisfied (which is initially set at Day 60 but may be shortened by the bidder making an "acceleration statement"). There is no longer a distinction between the date on which a bid is unconditional as to target shareholder acceptances and the date on which the bid is wholly unconditional.  This is to avoid target shareholders being "locked in" to an offer for a long period after it has become unconditional as to acceptances but before it has become wholly unconditional.
• The acceptance condition (relating to obtaining the minimum number of acceptances by target shareholders) must now be the last condition to be satisfied. Target shareholders can withdraw their acceptances at any time right up until the end of the offer and will not be locked in pending satisfaction of other conditions (previously, withdrawal was only possible within a prescribed window).
• There is a new requirement for the bidder to include a "long-stop date" on contractual offers, which is the latest date by which all conditions must be fulfilled.
• Previously, where the acceptance condition was not reached, the bidder was able to choose whether to extend or lapse its bid without forewarning the target shareholders.  Under the revised Code, if the bidder intends to lapse its bid on the basis of insufficient acceptances, it must give target shareholders 14 days' notice of its intention to do so.  This provides much more certainty for target shareholders and replaces the current system of "closing dates".
• There are new prescribed dates on which a bidder will be required to announce target shareholder acceptance levels.
• There is a greater ability to suspend the contractual offer timetable to facilitate regulatory clearances.  This reflects that regulatory processes are on average taking much longer than in previous years and clearances are likely to be required more often, for example under the new UK national security regime (for more information on which, see "National Security and Investment Bill – when will it come into force?").  

This greater flexibility will in practice have the biggest impact on hostile bidders who may have previously struggled to satisfy all conditions within the previous 81 day deadline (which was less of an issue on a recommended offer, where the timetable could normally be extended with consent of the target board).