CODEWORD

The Panel recently considered whether: (a) the Code permits a partial offer to successfully close with an offeror having acquired less than the specified percentage set out in the offer document, provided that the minimum acceptance condition is met in accordance with rule 10(1)(a); or (b) the Code requires an offeror in a partial offer to obtain not less than its specified percentage.

The words of the Code do not support the proposition that a partial offer fails simply because the offeror does not receive acceptances for at least the specified percentage. This is because:

• there is no provision in the Code which expressly restricts an offeror from acquiring less than the specified percentage (provided the minimum acceptance condition is met). If this was not the intention, it would be expected that the Code would simply provide that the minimum acceptance condition for a partial offer was the specified percentage plus the control percentage held prior to commencing the offer;
• rule 10(1)(a) and rule 23 appear to presuppose that an offeror might end up holding a control percentage of more than 50% but less than the specified percentage;
• clause 5A of Schedule 1 of the Code outlines certain disclosure requirements that relate to the particulars of the voting securities sought by an offeror when making a partial offer. Clause 5A(1) requires an offeror to disclose:
  • the number of voting securities of a class that the offeror would hold or control in the target company after the successful completion of the offer; and
  • the number of voting securities of a class that the offeror would hold or control in the target company if the offeror received acceptances in respect of the minimum number of voting securities required to satisfy the condition included in the offer under rule 23 (i.e., the minimum acceptance condition).

These disclosures suggest that it must be possible for an offeror to receive less than the specified percentage; if this was not the case, it would not be necessary for both disclosures as the latter would be irrelevant.

The Panel’s view is that an offeror making a partial offer can acquire less than the specified percentage, provided that the minimum acceptance condition is met.^[1]

The Panel expects where an offeror makes a partial offer, the offer document should be drafted carefully to explain the potential outcomes in a way that shareholders can understand. The level of disclosure should allow a retail shareholder to understand precisely what possible outcomes may arise if, for example, the offeror receives acceptances for less than the specified percentage.

The Panel has updated its guidance to clarify its position that a partial takeover offer does not fail simply because the offeror does not receive enough acceptances for at least the specified percentage (provided the offer meets the minimum acceptance condition). See the Panel’s Guidance Note on Offer Documents and Variations, as well as the Panel’s Basic Guide for Shareholders and the Basic Guide for Directors.