UK Public M&A Monthly Activity Update: February 2023

From the latest public offers and updates to the Takeover Code, we break down recent developments in the listed UK deal market

In February 2023, there were four Rule 2.7 announcements made across the UK public M&A market and a further four possible offers announced.

Firm Offers announced this month:

• Recommended cash offer by Songtradr, Inc. for 7digital Group plc - £19.4 million – public to private
• Recommended cash offer by Macquarie Group Limited for AdEPT Technology Group plc - £50.3 million – public to private
• Cash offer by Teddy Sagi for Kape Technologies plc - £1.25 billion – public to private
• Recommended share offer by Jounce Therapeutics, Inc. for Redx Pharma plc - £84.4 million

Possible Offers announced this month:

• Possible offer by Bluestar Group Limited for Home REIT plc
• Strategic review including formal sale process announced by Purplebricks Group plc
• Possible offer by Providence Equity LLP for Hyve Group plc - £306.2 million – cash consideration
• Possible offer by Apollo Global Management, Inc. for John Wood Group PLC - £1.59 billion – cash consideration

Firm Offers breakdown this month:

Year to date breakdown:

February 2023 Updates:

Changes to the Takeover Code

Changes to the definition of acting in concert, and who is presumed to be acting in concert, under the UK Takeover Code came into force on 20 February 2023. The changes (set out in RS 2022/2) centre on the Panel’s approach to groups of companies and investment entities. Whilst many of the changes codify the Panel’s existing practice, there are some areas where its approach has changed. The key changes include:

• Groups of companies – The threshold at which entities within a group are presumed to be acting in concert has been raised from 20% to 30%.
• Interests that are taken into account – The Panel will look at both voting rights and equity interests/economic rights, and there is new guidance on how indirect interests should be calculated and when interests need to be aggregated. Long derivative/option positions will also be taken into account in determining whether the thresholds have been met.
• Types of entity that the rules apply to – As well as companies, the presumptions will apply to interests held by other undertakings (including partnerships or trusts) or any legal or natural person. An interest in a limited partnership will be treated as analogous to equity share capital.
• How the rules apply to different entities – The Panel’s treatment of private equity portfolio companies has changed, and the previous practice of accepting comfort letters about wider portfolio companies has been discontinued. There are also specific provisions and guidance on how the rules apply in the context of a consortium offer, to joint ventures and to sovereign wealth funds.

It is important to understand how the new definition applies to a group of companies or investment entity, regardless of whether they intend to be a party to a public M&A transaction, because:

• the Panel treats persons who are acting in concert as a single person and so, if one of them deals in shares without properly aggregating the interests of the wider group, it could trigger a requirement to make a mandatory offer under Rule 9 of the Code or set a floor level price for any future bid; and
• it may impact the disclosures that an investor is required to make if a bid is announced for a company in which it holds shares.

The changes are discussed in more detail in our briefing here.

February 2023 Insights:

After a quieter February in 2022, public M&A deal activity has returned to the levels seen prior to the pandemic this February, with four firm offers and four possible offers announced. This slight boost in deal volume could indicate that the appetite for public M&A is increasing, following a lull in deal activity in Q4 2022 and January 2023.

It is interesting to note that Teddy Sagi's offer for Kape Technologies is not recommended by the target's board at this stage. The bidder already holds 54.8% of the target's shares, through Unikmind Holdings Ltd, and it says that, regardless of the outcome of the offer, it intends to requisition a general meeting to seek to pass a resolution to delist Kape from AIM as soon as reasonably practicable following the offer.

There have been no hostile offers throughout January and February 2023. This follows the trend seen across the last eight quarters, where there has generally been a decline in the number of hostile offers. The decrease could be because more companies are pursuing collaborative M&A, seeking a recommendation from the target's board regarding the transaction. Despite this, there have been some notable hostile offers recently, for example, AdvancedAdvT's offer for M&C Saatchi in May 2022.