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Conditionality. In blocking Nordic Capital’s offer for 3W Power, the Bundesanstalt für Finanzdienstleistungsaufsicht
confirmed that it is unwilling to approve an offer that is subject to a “No MAC” condition unless it is drafted such
that only events that occur following the date of the offer are capable of triggering the condition.
However, Germany’s takeovers regulator is willing to approve an objective condition based on general market
performance, such as that in Advent International’s offer for Douglas Holding that the MDAX close at 8,800
points or above on the last day of the offer period. In the UK, although the bidder could make an offer subject
to such a condition because it is objective (a common implementation of the requirement in the EU Takeovers
Directive that each Member State enact rules governing permissible conditions), the UK Takeover Code goes
one step further. It prohibits (subject to limited exceptions for conditions relating to acceptance level or UK or
EC antitrust review) bidders from invoking any condition unless the circumstances giving rise to invocation are
of material significance to the bidder in the context of the offer. The Takeover Panel has adopted a very strict
interpretation of this standard when matters other than mandatory antitrust or regulatory clearances are at
issue, and because the MDAX condition relates to general market conditions, it is doubtful that a bidder could
rely on such a condition in the UK.
Impact of UK reform. The September 2011 changes to the Takeover Code were seen, at the time of reform,
as a significant potential impediment to sponsor-backed going privates, but this fear has not been borne out
in practice (both deal volume and deal value increased from 2011 to 2012). Broadly, the changes that caused
concern, and the reasons why those concerns have not materialized as feared, were as follows:
▪
Introduction of a requirement for the target to publicly name which bidders it is in discussions with
when the target is subject to rumor/speculation or unusual share-price fluctuations. A publicly named
bidder then has 28 days to make an offer or it will be prohibited from doing so for six months (“put up or
shut up”).
▪
These requirements caused concern both because sponsors generally are averse to being publicly
confirmed as interested in an acquisition before signing and because it was feared that the automatic
“put up or shut up” deadline would be used by targets to pressure bidders to complete their diligence and
present fully financed bids in a short period of time or else be unable to make an offer for six months.
Extensions to the 28-day deadline are only available with the consent of the Takeover Panel, which will
generally only give them at the request of the target’s board. However, both concerns have become an
accepted part of going private processes in the UK due to the reality that target boards generally have
agreed to extend the 28-day deadline where constructive discussions are ongoing. (Not to do so may be
in breach of their fiduciary duties.) Although most of the sponsor-backed going privates in 2012 were
announced within the initial 28-day period, Ontario Teachers’ Pension Plan Board’s period to make an offer
for Goals Soccer Centres was extended several times and ended up being in excess of 100 days in total.
In addition, these requirements have created an unequal playing field for bidders entering the process
at different times. The new requirements allow late entrants to fly under the radar and confidentially
investigate the target while the interests of others (who are also subject to the “put up or shut up”
deadline) are public. One example of this was SS&C’s trumping TPG’s offer for GlobeOp. GlobeOp had
been subject to rumor/speculation and was therefore required to announce that it was in discussions with
TPG and Advent International (the two potential bidders) at the time. Subsequently, SS&C approached
GlobeOp, but public identification of SS&C’s intent was not required because GlobeOp was not subject to
further rumor/speculation or unusual share-price fluctuations. As a result, the first that the market heard
of SS&C’s interest was after TPG had completed its diligence and announced a fully financed offer (at a
no doubt substantial cost to TPG), when SS&C announced that it was considering its position and urged
shareholders not to accept TPG’s offer until SS&C made a further announcement.
Highlights of 2012