On October 23, 2015 the Code Committee of the Takeover Panel (the Code Committee) published Response Statement 2015/1 following consultation on PCP 2015/1 published in May 2015 which contained proposed amendments to the Takeover Code (the Code) in relation to the treatment of dividends paid by an offeree company to its shareholders. The proposed amendments were intended primarily to clarify the application of existing provisions of the Code and to ensure greater alignment of the Code with the existing practice of the Panel Executive.
The Code Committee notes that respondents were generally supportive of the proposals. However, concern was expressed that a potential offeror that made a possible offer announcement which included the terms on which an offer might be made for the offeree company, but which (possibly as the result of an inadvertent mistake) did not reserve the right to reduce the offer consideration by the amount of all or part of a dividend subsequently paid by the offeree company, would not be permitted to introduce such a reservation in a subsequent firm offer announcement or offer document, and that this could result in potentially significant consequences for the offeror.
Having considered the responses to the consultation, the Code Committee has adopted the substance of the amendments to the Code which were proposed in PCP 2015/1. However, the Code Committee has decided that the new Note 4 on Rule 2.5, the new Note 4 on Rule 2.7 and the new Note 5 on Rule 24.3 should not be adopted in the forms proposed in the PCP. The Code Committee has instead concluded that, in summary, the Code should require an offeror, in a statement made under Rule 2.5(a)(i), a firm offer announcement and an offer document, to state that the offeror will have the right to reduce the offer consideration by the amount of any dividend (or other distribution) which is paid or becomes payable by the offeree company to offeree company shareholders, unless, and to the extent that, the offeror expressly states that offeree company shareholders will be entitled to receive all or part of a specified dividend in addition to the offer consideration.
A draft of an Executive Practice Statement in relation to the application of certain provisions of the Code to the payment of dividends by an offeree company was set out in Appendix C to PCP 2015/1. The Code Committee understands from the Panel Executive that, in view of the final form of the amendments to the Code adopted in this Response Statement, it considers that it is not currently necessary to publish a Practice Statement in this area.
The amendments to the Code will take effect from November 23, 2015.
(Takeover Panel, Response Statement 2015/1: Dividends, 23.10.15)