On March 13, 2017 the Takeover Appeal Board (the Board) published its decision to dismiss an appeal submitted by David King against the Takeover Hearings Committee's December 2016 ruling that, as determined by the Panel Executive, he had acted in concert with three other individuals in the acquisition of shares in Rangers International Football Club Plc (Rangers) in December 2014 and January 2015. As a result, Mr King had an obligation under Rule 9.1 of the City Code on Takeovers and Mergers (the Code) to make an offer to acquire all the issued shares of Rangers not owned by him and the three individuals.
Mr King had arranged for the purchase of shares in Rangers by New Oasis Asset Limited (NOAL), the sole share in which was held on trust for Mr King and his family by Sovereign Trust (a trustee of Glencoe Investment Trust which was for the benefit of Mr King and his family). The relevant acquisitions were made on December 31, 2014 and on January 2, 2015. On December 31, 2014 Mr George Letham, Mr George Taylor and Mr Douglas Park acquired interests in shares of Rangers from Laxey Partners Limited (Laxey). As evidenced by emails passing between Mr King and Mr Letham, Mr King was aware of Mr Letham’s intention to acquire Rangers shares from Laxey and Mr Letham was aware of Mr King’s intention to acquire Rangers shares from institutional investors at the same time.
After the purchase of the shares the existing directors of Rangers were removed by a shareholders vote at an EGM in March 2015 and Mr King’s nominees were appointed as directors of Rangers. In May 2015 Mr King was appointed chairman of Rangers.
Early in 2015 the Panel Executive began to investigate allegations that Mr King had acted in concert with Messrs Letham, Taylor and Park and on June 7, 2016, following completion of its interviews and other investigations, the Panel Executive ruled that, for the purposes of Rule 9.1 of the Code, Mr King had been acting in concert with Messrs Letham, Taylor and Park in the acquisition of shares in Rangers on December 31, 2014 and January 2, 2015.
On August 2, 2016 Mr King requested a review of the Panel Executive’s ruling by the Hearings Committee and in its ruling on December 5, 2016 the Hearings Committee upheld the Panel Executive’s decision.
In December 2016, Mr King appealed to the Board. The main grounds of the appeal were that the Hearings Committee failed to examine evidence of the separation between Mr King and NOAL, and that it did not specify the nature of Mr King's interest in the Rangers shares or consider whether he had voting rights over the shares. A further ground of appeal was that the Hearings Committee had erred in relying on a separate, earlier business proposition put forward by Mr King and others in connection with attaining control of Rangers, to infer acting in concert in relation to the later acquisition of shares. Other grounds of appeal related to points concerning Mr King's motivation, the question of whether an offer to the other shareholders in Rangers would be of benefit to them, and various procedural points.
The main conclusions of the Takeover Appeal Board include the following:
- There are a number of ways in which persons may act in concert. An exhaustive definition would be difficult. As explained by the Panel in its Statement in the case of Guinness plc/The Distillers Company (Panel Statement 1989/13 at paragraph 4) and applied by the Hearings Committee in its ruling, the nature of “acting in concert” calls for a wide definition to cover, for example, tacit understandings or “nods and winks” between persons co-operating to purchase shares in a company in order to obtain control of it.
- Direct evidence of what has passed between those alleged to have acted in concert is rare. The existence and nature of an understanding between persons and whether their actions were concerted or co-incidental are often matters calling for the use of common sense and relevant experience in making reasonable inferences from all the surrounding circumstances in evidence in the case. Those circumstances include the personal and working relationships between those who deny that they were acting in concert and their conduct.
- In this case there were in evidence contemporaneous documents, mostly emails, passing between Mr King and Mr Letham. Those documents, when read in the context of their earlier co-operation in activities concerning Rangers and of the timing of the acquisitions of shares in Rangers that took their holdings in the aggregate to over 30 per cent, were material to the key issue of whether those acquisitions were (a) concerted or (b) coincidental.
- The relationship between Mr King and Mr Letham and the relevant events and communications evidenced an agreement or understanding between them to co-operate and act in concert to obtain control of Rangers and to secure Mr King’s appointment as chairman of the Rangers Board.
- In negotiating for the purchase of the shares from three institutional shareholders and instructing that the shares be put into the name of NOAL, Mr King communicated with others and acted as if NOAL, Sovereign Trust and Glencoe Investments Trust were under his control in relation to the Rangers shares and so he was acting in concert with them and they with him.
- In any event, by virtue of the operation of the presumption previously applied and now included in presumption (5) of the definition of acting in concert in the Code, NOAL, Sovereign Trust and Glencoe Investments Trust were either presumed or deemed to have acted in concert with Mr King and, via Mr King, with those other persons with whom he had an understanding and was acting in concert i.e. Messrs Letham, Taylor and Park.
- Mr King was a principal member of the group of persons acting in concert (i.e. Messrs Letham, Taylor, Park and King) within the meaning of Rule 9.2 and, for that reason, was put under an obligation to extend the offer under Rule 9.1.
- Over the last two years Mr King had had ample opportunity to disclose documents and to provide other evidence to rebut any deeming, presumption or inference from the evidence that he was acting in concert with Messrs Letham, Taylor and Park. He had not done so.
- Personal motives are not relevant when considering whether parties are acting in concert – the definition of acting in concert focuses on the existence of the objective fact of persons co-operating to gain control of a company, not their subjective reasons for seeking control or acquiring the shares.
- Mr King had argued that requiring him to make an offer under Rule 9 would be of no benefit to the other shareholders as the share price was above that at which his offer would have to be made. However, considering whether shareholders will benefit from on offer in a particular case is not a factor relevant to triggering an obligation to make a Rule 9 offer. In requiring a mandatory offer to be made, Rule 9 operates accordingly to its own terms.
The Takeover Panel has also published Statement 2017/4, setting out the Hearing Committee’s ruling of December 5, 2016, which was appealed to the Board.
(Takeover Appeal Board, Rangers International Football Club Plc & Mr David Cunningham King: Decision of the Takeover Appeal Board (2017/1), 13.03.17)