Statements of Intention – proposals for changes to the Takeover Code

Print publication


The Code Committee of the Takeover Panel has proposed several changes to the rules relating to the content and timing of statements of intention and also the publication of hostile offer documents.

The main proposals are as follows:

Additional content in statements of intention. In addition to those statements already required under the Takeover Code, an offeror would need to make specific intention statements regarding:

  • the target company’s R&D functions;
  • any material change in the balance of the skills and functions of the target’s employees and management; and
  • the likelihood of any consequences on the target’s headquarters and headquarter functions of the offeror’s strategic plans post takeover.

New timing requirements for intention statements. An offeror would be required to make intention statements earlier than is currently the case. Under the proposals, the intention statement would have to be set out in the Rule 2.7 announcement as well as in the offer documents. It is thought that this would allow a more informed debate between stakeholders on the merits of the offer. It would also give employee representatives and pension trustees the opportunity to express an opinion in time for it to be included in the offer documentation.

New timing requirements for offer documents. The Takeover Panel proposes to prevent an offeror from publishing offer documents for 14 days from its firm offer (Rule 2.7) announcement unless it has first obtained the consent of the target company’s board. The rationale for this is that it enables the target board to have a minimum of twenty eight days to prepare its initial response circular, in turn pushing out the dates for Rule 31.1 and any Day 39 circular.

Reports on post-offer undertakings and intention statements. Both the offeror and the target company would be required to publish reports on post-offer undertakings rather than publication being at their discretion which is the current situation. Any post-offer intention statements would also have to be published rather than be given in private to the Takeover Panel.

The consultation period for the proposals ended on 31 October and it is thought that they will be adopted without any material amendments.

WM comment

The proposals are yet another development to the Takeover Code seemingly originating from the Kraft Foods take over of Cadburys in 2010. To a large part the proposals appear to be politically motivated with the Takeover Panel stating that they are responding to commentary in the public arena and suggestions made by various parties including the Government. In practice, the most significant change will be the prohibition on publishing offer documents within 14 days of a Rule 2.7 announcement. On the face of it this will make a takeover more difficult for a hostile bidder as it reduces pressure on the target’s board. We will keep you updated with any news on the adoption of the proposals.