Statement of public censure for failure to make a Rule 9 offer

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The Takeover Code (the Code) contains provisions which prohibit acquisitions of interests in 30 per cent or more in aggregate of the target shares (subject to certain exceptions) (Rule 5) and, where the bidder (together with persons acting in concert with him) is able to and does acquire interests in 30 per cent or more (because it falls within one of these exceptions) these provisions require the bidder to make a mandatory offer for the remainder of the shares (Rule 9).

Mr Bob Morton and persons acting in concert with him acquired interests in shares carrying approximately 39.1 per cent of the voting rights in Armour Group plc, an AIM company. Mr Morton later declined an offer to purchase further shares in the company, but arranged for his sons to purchase those shares. Mr Morton considered, wrongly, that his sons would be seen as independent of him by the Takeover Panel.

The definition of “acting in concert” in the Code sets out a list of persons who are presumed to be acting in concert unless the contrary is established, which includes the company and its directors (together with their close relatives and related trusts).

The Panel ruled that the sons were acting in concert with Mr Morton and, as no exemption applied, those purchases were made in breach of Rule 5.1.

WM comment
Advisers and companies subject to the Code should consult the Takeover Panel whenever they are in any doubt as to the operation of the Code in relation to any transaction.

The Panel found these breaches particularly bad in the context of earlier private censures of Mr Morton for breaches of the Code, as well as his experience as an investor and significant experience with Code-governed transactions. The Panel also noted that Mr Morton had the opportunity to consult the Panel and/or his advisers, but had failed to do so.