The Secretary to the Code Committee
The Takeover Panel
10 Paternoster Square
London EC4M 7DY
27th September 2012
Dear Mr/Madam Secretary
Investor Relations Society response to The Takeover Panel Consultation Paper issued by The Code Committee of the Panel: profit forecasts, quantified financial benefits statements, material changes in information and other amendments to The Takeover Code
I have pleasure in enclosing The Investor Relations Society’s response to the above consultation. The Investor Relations Society’s mission is to promote best practice in investor relations; to support the professional development of its members; to represent their views to regulatory bodies, the investment community and government; and to act as a forum for issuers and the investment community.
The Investor Relations Society represents members working for public companies and consultancies to assist them in the development of effective two way communication with the markets and to create a level playing field for all investors. It has over 600 members drawn both from the UK and overseas, including the majority of the FTSE 100 and much of the FTSE 250.
Thank you for giving us the opportunity to respond to this Public Consultation Paper. Overall, we are in agreement with the broad thrust of this paper and we consider that the proposed amendments to the provisions of the code relating to profit forecasts, merger benefits statements and material changes in information previously published during an offer period will - in general - serve to strengthen the existing Code. The role of Rule 28 in conferring credibility to profit forecasts is clear and we support it, as this is a key issue for investor relations professionals. We are strong advocates of companies using an independent consensus to help analysts and investors accurately establish a true and fair understanding of the company’s current trading and future prospects; we also understand that the exact form that guidance may take and the combination of narrative and data points provided will depend on the nature of an individual company’s business model and its established practice.
However, we do have concerns with aspects of this consultation that, whilst few in number, we feel are of significance and if left uncorrected could have an adverse impact on issuers. We discuss these in our response but they can be surmised as such:
1) We are concerned in general that the accuracy of some third party consensus compiling does not always meet the expressed requirements of Rule 19.1 and that this is not obviously recognised in the consultation paper;
2) The proposed Note 1 on Rule 28.7 for a party to an offer, upon commencement of an offer period, to be required to remove an independent consensus forecast from their website would also remove a vital opportunity for investors to be able to rely on a stable and verifiable number. It would leave only unverifiable and often inaccurate third party figures available for investors, which seems an unsatisfactory outcome.
3) We feel the advantages of companies publishing independently (through an accredited provider) or self-collated (verifiable) consensus on their websites should be considered by the Code Committee and Panel.
Our response is below and we hope it will be of assistance.
Chair of The Investor Relations Society’s Policy Committee
020 7379 5151
Published: 2 October, 2012