On January 15, 2016 the Takeover Appeal Board (the Board) published a statement setting out the reasons for its dismissal of an appeal from a December 2015 ruling of the Hearings Committee on the interpretation of Rule 2.6(d) of the Takeover Code. Rule 2.6(d) sets out the deadline by which a publicly identified potential offeror which is in competition with an announced firm offer must clarify its position (i.e. announce a firm intention to make an offer or make a “no bid” statement).
In October 2015, Xchanging announced that it had received approaches from Capita plc (Capita) and Apollo Global Management (Apollo). Capita subsequently announced a firm intention to make an offer for Xchanging following which Apollo made a “no bid” statement.
Capita published its offer document on October 17, 2015. On November 12, 2015 Xchanging announced that it had received an approach from Computer Sciences Corporation (CSC) and on November 16, 2015 it announced it had received an approach from Ebix Inc (Ebix).
In accordance with Rule 2.6(d), a deadline of 5pm on December 9, 2015 (the 53rd day following the publication of Capita’s offer document) was set by which each of CSC and Ebix were required to clarify their position. On December 9, CSC announced its firm intention to make an offer for Xchanging and the Panel ruled that the deadline for Ebix to clarify its position would be 5pm on the 53rd day following the publication of CSC’s offer document.
CSC requested that this ruling be reviewed by the Hearings Committee as it felt that it unfairly prejudiced CSC and uncertainty was created. CSC argued that Ebix, as a potential competing offeror, should be required to clarify its intentions in relation to Xchanging by reference to the offer timetable established by Capita as the first offeror, rather than that established by CSC as the second offeror. The Hearings Committee rejected CSC’s appeal and upheld the Panel’s ruling and so CSC appealed to the Board.
The Board accepted that the rationale for requiring a potential competing offeror to clarify its position is to remove uncertainty in the later stages of the offer timetable, at a time when shareholders in the offeree company are making their investment decision. The point of the rules is that shareholders in the offeree company should not be deprived of the opportunity to receive an improved offer and should be able to reach a properly informed decision on an offer. The Board accepted the Panel’s submission that, where there are two or more offerors, the phrases “first offer” and the “first offeror’s initial offer document” in Rule 2.6(d) should be construed as applying to the offeror whose offer document has established the offer timetable, and not the offeror which first published an offer document. As a result, Ebix, as a potential competing offeror, should be required to clarify its intentions by reference to the current offer timetable established by the publication of CSC’s offer document and not by reference to the previous offer timetable established by the publication of Capita’s offer document. As a result, the Hearings Committee was right to dismiss CSC’s appeal.
(Takeover Appeal Board, 2016/1: Ruling of the Takeover Appeal Board - Xchanging plc, 15.01.16)