In light of this experience, the Panel issued in Guidance Document 29 further guidance on the types of agreements and obligations and the detailed provisions contained therein that are prohibited and permitted under Rule 21.2 (black list) (white list). The most important points are highlighted below. A target company is not required to provide information to a bidder; However, if it chooses to do so, it shall normally provide the same information to each competing tenderer on request. The prospect of commercially sensitive information falling into the hands of a competing tenderer, in particular a commercial competitor, even under conditions of confidentiality, may make tenderers and target companies reluctant to request or disclose such information. The Committee`s guidelines should address these concerns and make it easier for potential bidders, through their own team, to conduct a more detailed analysis of competition before submitting a bid. This, in turn, should give both parties a more informed overview of the competition authorisations that may be required and the types of remedies that can be ordered or the commitments that can be made and the risk that the potential concentration will be totally prohibited by competition authorities. `The Parties agree that if the Takeover Committee determines that a provision of this Agreement requiring the offeree company to take action or not, whether as a direct obligation or as a condition of another person`s obligation (in whatever form), is not permitted under Rule 21.2 of the Takeover Code, this provision will have no effect and will not be taken into account. Rule 21.2(b)(vi) provides that any agreement relating to an existing incentive regime for employees is excluded from the prohibition of supply-related agreements. The Commission interprets Rule 21.2(b)(vi) as allowing only one agreement on how existing bonuses will be treated under the target company`s employee incentive agreements in connection with the placement. For example, parties to an offer would be allowed to agree on how a margin of appreciation of the management body of the target company or its remuneration committee is exercised with respect to the number of shares to be issued in relation to existing share-based incentive allocations in order to provide the parties to the offer and the employees concerned with certainty as to the number of shares; those that fall within the scope of these awards.
It seems clear that any further attempt to push the boundaries of Rule 21.2 is likely to cause the panel to take disciplinary action against each party concerned and its advisers. In case of doubt as to whether a proposed agreement or obligation falls within the scope of the Article, the parties should consult the panel as soon as possible and, in any event, before the conclusion of the agreement or undertaking. In the event that the panel objects to a provision of an agreement on the implementation of offers, it recommends including the following clause: Rule 21.2 does not prohibit a target audience from entering into an agreement, agreement or undertaking subject to the offer becoming fully unconditional or declared totally unconditional, as this does not deter a competing bidder; nor does it preclude the goal of doing any of these things voluntarily. Rule 21.2 therefore does not prohibit agreements and obligations that impose obligations only on a bidder or a person acting in concert with it, unless this is done in the context of a reverse takeover. For example, it does not prohibit a bidder from agreeing to pay a “reverse” termination fee to the target – e.g. if the transaction is not completed because regulatory approvals or approvals of bidding shareholders have not been obtained – such as. B the $3 billion reverse break fee that Anheuser-Busch InBev approved as part of its potential offer to SABMiller. The agreement of the parties not to take into account any provision contrary to Rule 21.2 Certain agreements and obligations are exempt from the prohibition in Rule 21.2b. As a result of attempts by some parties to push the boundaries of what is permissible, the Panel has issued guidance on the types of agreements and obligations, as well as the individual provisions contained therein, which are prohibited and permissible. However, it is not permissible to accept that the target company does not grant new options to employees under its established stock option programs. Similarly, a target company cannot enter into any agreement, understanding or commitment regarding other aspects of employee compensation or incentives, such as. B payment (or non-payment) of bonuses or salary increases.
Potential bidders in an acquisition often seek to reduce execution risk and protect their business interests by requiring the target company to sign a non-disclosure agreement and/or tender conduct agreement and by requiring the target`s directors to sign irrevocable commitments to accept the offer (or vote in favour of the plan of arrangement). Rule 21.2 of the Takeover Code provides for strict controls on such agreements and other obligations entered into by the person or persons concerned in conjunction with it, which could discourage competing bidders from making a bid or encourage them to offer less favourable terms. Rule 21(2)(b)(i) allows a target audience to enter into a confidentiality agreement requiring it to treat information received from a bidder or potential bidder as confidential, provided that the agreement does not contain other provisions prohibited by Rule 21.2(a). Such information could include, for example, information about a bidder that the target company needs to conduct a due diligence review of the bidder in the context of a stock exchange offer; the fact that a particular party may be interested in a tender; or the price or other conditions under which such an offer may be made. If a concentration between the target company and bidder 1 may fall within the scope of EU competition law or national competition law, Bidder 1 will often want to carry out a detailed analysis of the potential impact on competition in each of the relevant markets in order to decide whether it is necessary to obtain approval of the concentration and, if so, what information the communication should contain. Bidder 1 may therefore request the target undertaking to provide certain commercially sensitive information (restricted information) – for example, on pricing strategies, market shares and planned new activities. Sometimes the bidder wants the target company to enter into an agreement that governs the execution, execution and/or terms of a bid (a bid conduct agreement). Such an agreement will be a “supply-based agreement”. It is therefore important that the agreement contains only provisions permitted by one of the exclusions listed in Rule 21.2(b)(i) to (vii). Since the introduction of Article 21(2), a number of parties and their advisers have sought to push the boundaries of what is permissible.
Although the Panel does not generally consider in its draft agreements between the Target Company and its Parties in concert, on the one hand, and the Bidder and its Parties in concert, on the other (p.B. Tendering Conduct Agreements and Irrevocable Obligations to Accept the Bid), the Committee has regularly reviewed these agreements and obligations as soon as they were published on the Bidder`s or Target Company`s website. On occasion, the Committee has concluded that it contains provisions that it believes violate Rule 21.2, and has already warned that it will take disciplinary action against the parties and their counsel if they intentionally fail to comply with the rule. However, Rule 21.2(b)(iii) does not permit any agreement, arrangement or obligation in support of other matters, . B such as assistance in submitting a tenderer`s application to a tax authority for specific tax treatment or in the preparation of a bond prospectus, which the offeror may be required to publish in connection with the refinancing of bank facilities; who pay the compensation in cash to be paid under the offer. . . . .