Updated Practice Statement No. 20 and consultation on removing restriction on anonymous order book dealings

The Takeover Panel has published an updated version of Panel Practice Statement No. 20, on when it should be consulted about a possible offer, and a consultation paper (PCP 2022/1) on removing the restriction on a bidder purchasing shares in the target through an anonymous order book.

Panel Practice Statement No. 20

Practice Statement No. 20 gives guidance on Rule 2 of the Code and when an announcement about a possible offer will be required. It says that the Panel Executive should be consulted if the share price of the potential target moves 10% or more over the relevant period.

The revisions to the Practice Statement make it clear that a 10% share price movement is relevant for determining the latest time by which the Panel Executive should first be notified of a possible offer. Therefore, if the relevant party has already notified the Executive of the possible offer prior to a 10% share price movement, the Executive will not expect to be consulted again solely because of the 10% share price movement.

It is still the case though that the Executive should be consulted if the target is the subject of rumour and speculation or there is a 5% share price movement in a single day.

A blackline showing the changes to the Statement is available on the Takeover Panel’s website.

Consultation paper PCP 2022/1

Rule 4.2(b) currently provides that, during an offer period, a bidder must not acquire an interest in any target securities through any anonymous order book system (such as the Stock Exchange Electronic Trading Service) or by any other means, unless it can be established that the seller is not an exempt principal trader connected with the bidder.

An exempt principal trader is the principal trading entity within a multi-service financial organisation which has been given exempt status by the Panel, and consequently is exempt from a number of Code provisions. In particular it is not treated as acting in concert with the bidder or target, even if another part of the principal trader’s group is advising the bidder/target. It will however be regarded as connected with the relevant party.

The Panel is proposing to delete the restriction in Rule 4.2(b) on the basis that in practice it makes it difficult for a bidder to purchase target shares in the market at the prevailing market price. This is because, in order to comply with the Rule, a bidder must ensure that during the purchasing operation each exempt principal trader which is connected with the bidder ceases any activities that may result in sell orders being entered into the anonymous order book and this will often not be practicable.

The general prohibitions in Rule 38 on an exempt principal trader assisting a bidder or target, and on a bidder-connected exempt principal trader knowingly dealing with the bidder in target shares, remain.

The consultation closes on 18 March 2022. The final rule changes will be published in spring 2022, and the amendments will come into force one month later, at the same time as the changes made following PCP 2021/1 (discussed in our blog post here).