UK Law and Practice Contributed by: Federico Fruhbeck, Alice Brogi, Alex Bluett and Gisele Zouein, Gibson, Dunn & Crutcher LLP
4.2 Mandatory Offer Under the Takeover Code, there is a mandatory requirement to launch an offer if a bidder (and its con- cert parties) is interested in shares carrying 30% or more of the voting rights of a company subject to the Takeover Code. A mandatory offer must be in cash (or include a cash alternative) at no less than the highest price paid by the bidder (and its concert parties) during the prior 12 months. 4.3 Transaction Structures The typical transaction structures for an acquisition of a public company in the UK are: • a contractual takeover offer; or • a court-approved scheme of arrangement. The acquisition may be recommended or hostile, with most being recommended by the public company’s board of directors. On a contractual takeover offer, most bidders will set an acceptance level of 90% in order to facilitate a squeeze-out, but bidders can set an acceptance level as low as 50% plus one. A scheme must be approved by the court and by the public company’s shareholders by a majority in num- ber, who also represent at least 75% in value (ie, it is a dual test), of those voting. Once approved, a scheme binds all shareholders, so that there is no need to squeeze out minority shareholders (see 4.8 Squeeze- Out Mechanisms ). Schemes of arrangement are the customary method of implementing recommended transactions. 4.4 Consideration and Minimum Price Public company acquisitions of UK companies can be structured as cash or securities exchange transac- tions. Bidders may also offer cash and/or securities in a “mix and match offer”. If securities are offered as part of the consideration for the acquisition then a prospectus may be required (see 8.2 Prospectus Requirements ).
See 4.1 Stakebuilding (“Setting the floor price”) for the circumstances in which a minimum price or cash consideration requirement will apply. Contingent value rights, which provide target share- holders with the right to an additional cash payment on the occurrence of a specific event (eg, the suc- cessful outcome of material litigation or a subsequent disposal for more than a specified hurdle price), are a feature of a small number of transactions and can assist in bridging value gaps between the parties where the valuation will be significantly impacted by the outcome of specific events. 4.5 Common Conditions for a Takeover Offer/ Tender Offer An offer will customarily be subject to conditions in respect of: • acceptance levels in the case of a contractual takeover offer (see 4.7 Minimum Acceptance Con- ditions ) or the scheme becoming effective in the case of a scheme; • applicable legal or regulatory requirements or approvals; • long-stop dates; and • general protective conditions in respect of the con- tinuing nature and condition of the target. An offer cannot be subject to conditions or pre-con- ditions (being conditions to the offer formally being made) that depend solely on subjective judgements by the bidder or the target, or the fulfilment of which is in their control. See 4.9 Requirement to Have Cer- tain Funds/Financing to Launch a Takeover Offer and 4.14 Timing of the Takeover Offer in relation to finance conditions and regulatory pre-conditions, respectively. Before a bidder can invoke a regulatory condition or a general protective condition (such as a material adverse change condition), the Takeover Panel must be satisfied that the relevant circumstances upon which the bidder is seeking to rely are of material sig- nificance to it in the context of the offer. This is an extremely high bar in practice.
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