Takeovers Panel pushes for punchier guidance – and hints at tougher funding requirements

A new Takeovers Panel Consultation Paper¹ signals a push by the Panel for punchier guidance.

The Panel has issued draft replacement guidance notes on lock up devices (Guidance note 7), frustrating action (Guidance note 12), funding arrangements (Guidance note 14) and rights issues (Guidance note 17).

This is generally a rewrite rather than new policy. The main purpose is to make the notes clearer and more concise without sacrificing the level of guidance given.

However, the Panel seeks comment on some possible changes relating to bid funding:

• Should the bidder under an off-market takeover bid only be able to take a transfer of accepting shares once it has paid the holder for those shares? Unlike the structuring of most schemes of arrangement, under a typical takeover bid a target shareholder takes insolvency risk on the bidder for a period of up to a few weeks between transfer of their shares and payment.
• Should all off-market bids that are conditional on finance be required to include a condition that precisely matches the financing conditions of the financier? This would mitigate the risk of the bid becoming unconditional when the financing has fallen away.

The Panel invites comments on the new draft guidance notes generally, as well as those questions on funding. The Panel is particularly interested in any new insights on market practice since the previous guidance notes were written, together with any implications they may have as to what guidance is appropriate.

Submissions on the proposal

Submissions on the proposals are due by 30 June 2009.

This article was written by Rebecca Maslen-Stannage, Partner, Sydney.

Endnotes

1. The consultation paper can be accessed via the Takeovers Panel website.

More information

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