UK Law and Practice Contributed by: Carly Gulliver, Giles Distin, David Anderson, James Dawson, George Danczak and Elvan Hussein, Addleshaw Goddard
grant break fees in extremely limited circumstances, and subject to significant limitations; in practice, break fees are very rare. 6.11 Additional Governance Rights If a bidder obtains 90% ownership of the target’s vot- ing shares, it can utilise the statutory squeeze-out mechanism to compulsorily acquire the shares held by remaining shareholders. There is no equivalent to the German domination or profit-sharing arrangement in the UK. UK companies are normally directed by a company’s board of directors in their material day-to-day decision making, operating by majority board decision. Share- holders holding significant stakes – in particular, over 50% of a company’s shares – may be able to force the appointment or removal of directors at a general meeting of the company. Not obtaining 100% of the ownership of a target is often a risk in hostile/unsolicited offers that are exe- cuted by way of contractual takeover offer (and not It is common for irrevocable commitments or “under- takings” to be obtained by a bidder from target direc- tor shareholders or other target shareholders (usually major shareholders) shortly before the announcement of a firm intention to make an offer has been pub- lished in respect of a recommended bid. Where there are large shareholders in a target company, bidders will sometimes include a requirement in their indica- tive offer letter for irrevocable undertakings to be obtained from such shareholders as a pre-condition A “hard” irrevocable undertaking is a commitment that continues to bind even if a rival third-party offer is made for the target (including a higher offer). A “soft” irrevocable is a commitment that ceases to be binding if any rival offer is made for the target. A “semi-hard” irrevocable is a commitment that ceases to be binding if a rival offer is made for the target which exceeds the current offer by [x] per cent or more. Such percentage to announcing a bid. Types of Undertaking by way of a scheme of arrangement). 6.12 Irrevocable Commitments Irrevocable Shareholder Undertakings
for semi-hard irrevocable undertakings is generally – but not always – set at around 10%. For recommended takeover offers, target director shareholders will be expected to provide hard irrevo- cable undertakings, although there is no regulatory obligation on them to do so. Non-Legally Binding Expressions of Support Non-legally binding letters of intent may instead be provided by target shareholders, including various institutional shareholders. Shareholders are permit- ted to act or deal contrary to their stated intentions in their letters of intent. 6.13 Securities Regulator’s or Stock Exchange Process Pre-Approval of Takeover Offers The Takeover Panel does not customarily formally approve a takeover offer in advance of its making. Instead, it has a reactive role, responding to queries from a bidder or target in relation to the terms and form of an offer complying with the Takeover Code. Because of the requirements contained in various pro- visions of the Takeover Code, parties will inevitably need to discuss various elements of an offer with the Takeover Panel before a bid is announced and made. Provided a bidder complied with any mandatory price/ type of consideration setting rules, the Takeover Panel does not interrogate the offer price for an offer, as this is a commercial matter for consideration between a Contractual takeover offers are subject to a relatively formal timetable set out in the Takeover Code, provid- ing for, amongst other things, a default offer period of 60 days following the publication of an offer docu- ment. For takeover schemes of arrangement, this timetable is instead mainly determined by the target (since a scheme is a process driven by the target) in consultation with the bidder and, for certain dates, in consultation with the court. Impact of Competing Offers on Completion Timelines If a competing offer is announced, the Takeover Panel will need to be consulted on timetable implications, bidder and the target board. Timeline for the Tender Offer
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