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Takeover Panel rules largely work well, says IR Society, although greater flexibility needed

Takeover Panel rules largely work well, says IR Society, although greater flexibility in interpretation is needed.

• Keep a simple majority of acceptances
• Do not restrict voting rights
• Allow companies more timetabling and disclosure flexibility, and
• Lower the threshold for disclosures of positions to 0.5% in takeover situations.

The Code remains intrinsically strong but its implementation in practice needs work to stay in line with the Panel's ‘Principles' based application. These are the broad themes of the IR Society response to the Takeover Panel's consultation on its Code.
Based on its members' experience of most of the recent major contested takeovers in the UK, the IR Society believes that interpretation of the Code has become too prescriptive or ‘by the book', reflecting years of refinement and precedent.

"The attractiveness of the UK market as a centre for international listings is paramount" noted Richard Davies, Chair of the IR Society "The Panel should therefore consider carefully before implementing the restrictions proposed."
On the specific questions raised by the Panel, the IR Society does not favour trading restrictions following a takeover announcement which it believes could adversely impact the pricing of equities, hindering a true valuation being established.

John Dawson, Deputy Chair of the IR Society, and formerly Head of IR at Cadbury added:
"Whilst such actions might deter selling by long-only investors in the first instance, if it hinders the free pricing of a takeover by the market then it may ultimately be destructive to shareholder value as a process unfolds. A well contested takeover is a dynamic process and strong management and investor relations teams can get their message across given a sensible timetable and some flexibility."

To achieve share register transparency, and with a significant number of smaller hedge fund managers taking arbitrage positions, a lower threshold is appropriate during offer periods. As a result, the Society supports the lowering of the threshold trigger to the proposed 0.5%.
The IR Society also believes that the existing regime is rigorous and effective in ensuring an offer is underpinned by long-term financing. More detailed disclosures by the Offeror are unlikely to influence investors in the longer term.
Further independent advisers would be superfluous, complicating the flow of information into the market, creating additional work, and adding additional fees for no material return to the investors.
The shareholders of the offeree company should remain the primary concern of the Panel. Forcing offeror shareholders to vote on a deal when they would not normally have to is only important where the consideration is significantly in equity, creating long term risk for the offeree shareholders.
The "put up or shut up" regime can best be improved by changing the timetable and disclosure requirements allowing much greater timetabling flexibility, for example by adjusting for holidays and valuable deadlines around period end reporting events.

 

ENDS

Investor Relations Society contacts:

Richard Davies, Chairman, 020 7492 0501

John Dawson, Deputy Chairman 07976 926 486

Michael Mitchell - General Manager 020 7379 1763

Notes for editors.
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 nearly 600 members drawn both from the UK and overseas, including the majority of the FTSE 100 and much of the FTSE 250.