CODEWORD

The Panel is aware of recent acquisitions of public companies in Australia where the target company agreed to exclusivity arrangements which included deal protection devices that the Australian Takeovers Panel found to create unacceptable circumstances.[1]

While deal protection devices can have a role in eliciting offers (and offers at higher prices) the Panel may have concerns where deal protection devices have the effect of inappropriately reducing the potential for competing transactions.

The Panel intends to provide further guidance in due course regarding deal protection devices.

In the interim, the Panel notes that the most recent consideration of deal protection devices in New Zealand arose in relation to the 2021 scheme of arrangement by which Tilt Renewables Limited (Tilt) was acquired.[2] In that case, after a scheme implementation agreement had been signed and announced, the agreement was varied so that the board was required to put the scheme to shareholders and was unable to consider any competing proposals.

Critically, however, Tilt had conducted an extensive auction process prior to signing the initial scheme implementation agreement, the initial scheme implementation agreement had allowed the board to consider superior competing proposals, and the tightening of the exclusivity restrictions occurred in response to a further approach after the scheme implementation agreement had been signed. Accordingly, this was an example of a deal protection device eliciting an offer at a higher price at a late stage in a very competitive sale process.

The Panel encourages boards think carefully before adopting overly restrictive or coercive deal protection devices early in a transaction.