UK Public M&A Monthly Activity Update: November 2024

Firm Offers breakdown this month:

Year to date breakdown:

November 2024 Updates:

Public M&A – changes to the companies to which the Takeover Code applies

The Takeover Panel has published a response statement (RS 2024/1) confirming that the scope of companies to which the Takeover Code applies will be narrowed to focus on UK companies which are, or have in the last two years been, quoted in the UK.

The changes, which are broadly in line with the Panel’s proposals in its consultation paper PCP 2024/1, take effect on 3 February 2025. The principal change to the amendments proposed in the consultation paper is that the length of each of the run-off period and the transition period will be two years, rather than the three years originally proposed.

Companies that will be subject to the Takeover Code under the new rules

Under the new rules, the Code will apply to a company if it has its registered office in the UK, the Channel Islands or the Isle of Man and either:

• its securities are admitted to trading on a UK regulated market, a UK MTF, or a stock exchange in the Channel Islands or the Isle of Man (collectively referred to as “UK-quoted”); or
• the company has been UK-quoted at any time during the two years prior to the relevant date (being the date of the announcement of an offer or possible offer, or other event which has significance under the Code).

The Code will therefore no longer apply to: companies which were UK-quoted more than two years prior to the relevant date; companies whose securities are, or were previously, traded solely on an overseas market; companies whose securities are, or were previously, traded using a “matched bargain facility”; any other unlisted public company; or a private company which has filed a prospectus at any time during the 10 years prior to the relevant date.

Other points to note

• Disclosure on delisting – When a company delists, it will have to make appropriate disclosure to its shareholders about the fact that the Code will cease to apply after two years.
• Transitional arrangements – For companies that will cease to be subject to the Code as a result of these changes, the Code will continue to apply to those companies for two years from the implementation date of the rule changes, that is until 3 February 2027. This is to allow these companies to put in place alternative arrangements such as making appropriate amendments to their articles of association or enabling shareholders to exit their investment if they do not wish to be shareholders in the company without the protections afforded by the Code.

We discussed the proposals as set out in the Takeover Panel’s consultation in this episode of our public M&A podcast series.

Disclosure of inside information – FCA Primary Market Bulletin

The FCA has published a Primary Market Bulletin (PMB 52) on inside information. One of the topics it covers is whether the receipt of an approach about a possible takeover offer is inside information.

The FCA says it has seen cases where companies have been advised that inside information crystallised only when a final offer was accepted by the company’s directors, because the likelihood of the transaction taking place before that point was not deemed certain.

It says that whether the receipt of an offer is inside information should be assessed on a case by case basis. Relevant factors to take into account could include the identity of the bidder, the nature and quantum of the offer and the likelihood that the offer will be recommended by the board of the listed or traded target company.

The clear reminder is that an approach can be inside information before it has been formally considered and recommended by the board.

The FCA also discusses:

• Considerations for issuers when there is press speculation or rumours in the market – whilst there is no obligation to correct a false rumour, DTR 2.7.1R says that an issuer should assess whether a disclosure obligation has arisen under Article 17 of UK MAR (disclosure of inside information). Where the rumour or speculation amounts to inside information and the issuer is delaying disclosure, it might have to make the information public given that it is no longer able to ensure the confidentiality of that information.
• Information ceasing to be insider information – if an issuer has delayed disclosure of inside information and the information ceases to be price sensitive (because the offer falls away), the issuer is not obliged to disclose that information. However, if it carried out market soundings under Article 11 of MAR then it will need to update any market sounding recipients to whom the issuer had disclosed the inside information.

The FCA sets out actions that issuers can consider to make sure they correctly identify and disclose inside information, including establishing a disclosure committee, training relevant employees to enable them to recognise inside information and documenting the reasons for determining that information was, or was not, inside information.

Inside information under UK MAR

Article 7.1(a) of UK MAR defines inside information as:

• information of a precise nature;
• which has not been made public;
• relating, directly or indirectly, to one or more issuers or to one or more financial instruments; and
• which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments.

Information will be ‘precise’ if it indicates a set of circumstances which exist or which may reasonably be expected to come into existence. There must be a more than fanciful chance of the future event or circumstances coming into existence or occurring, but that the threshold is lower than the event or circumstances being ‘more likely than not’.

M&A – UK Guide

We have authored the UK chapter of the International Corporate/M&A Practice Area Guide published by Global Law Experts.

We discuss matters such as:

• the legislative framework for companies in the UK
• what M&A activity we are seeing, and in what sectors, and
• new trends and upcoming developments.

You can read the chapter here.