AUSTRALIA Law and Practice Contributed by: Alberto Colla, Keith Tan, Hugh McDonald and Dean Zinn, MinterEllison
If a target board is minded to grant exclusivity at the non-binding indicative proposal stage, it should ideally negotiate a so-called “fiduciary carve out” . This allows the target to disregard its exclusivity obligations if it receives an unsolicited proposal from another party that is or could be superior. Increasingly, prospective acquirers are seeking and receiving, at the non-binding indica - tive proposal stage, so-called “hard” exclusiv - ity; that is, a fixed period of exclusivity with no fiduciary carve-out for the target to be relieved of its exclusivity obligations during that period. The Takeovers Panel’s guidance is that any “hard” exclusivity grant at the non-binding indicative proposal stage should be the exception, not the rule, and should not exceed four weeks. If a non-binding indicative proposal evolves into a binding one, the definitive agreement usually includes a suite of exclusivity provisions for the prospective acquirer’s benefit. These supersede any exclusivity arrangements that were negotiat - ed at the non-binding indicative proposal stage and apply between signing and expected com - pletion. These exclusivity provisions comprise undertakings from the target around “no shop” , “no talk” , “no third-party due diligence access” , “notification of competing proposals” , and “right to match” an unsolicited superior offer. At the binding proposal stage, the “no talk” and “no third-party due diligence access” must be sub-
• specifies the price, conditions and other terms of the offers to be made by the bidder to all target shareholders; • obliges the target board to support the takeo - ver bid, including by accepting the offer for all of their own shares and publicly recommend - ing that target shareholders accept the offer, in each case in the absence of a superior proposal; • sets out the respective procedural obligations of the bidder and target throughout the takeo - ver bid process, including for satisfying con - ditions and the despatch of the offer docu - ments to target shareholders (comprising the “bidder’s statement” , the target’s statement and any supplementary statements); • imposes exclusivity obligations on the target board (see 5.4 Standstills or Exclusivity ); and • imposes an obligation on the target board to pay the bidder a break fee (generally not exceeding 1% of the equity value of the target) in various circumstances, including if the target board withdraws or changes its public recommendation (eg, in response to the receipt of a superior offer that the bidder elects not to match). If the friendly takeover is being structured as a scheme, the definitive agreement is known as “scheme implementation agreement” . Its pro - visions are similar to those for a takeover bid implementation agreement, with appropriate adjustments to reflect the scheme process. Hostile Takeover Bid A hostile takeover bid necessarily proceeds without the target company’s co-operation or public support. Therefore, there is no definitive agreement between the bidder and the target. Instead, the price, conditions and other terms of the bidder’s offers are contained in a docu - ment that is mailed to target shareholders. This
ject to the fiduciary carve-out. 5.5 Definitive Agreements Friendly Takeover Bid
In a friendly takeover bid, immediately before the takeover bid is publicly announced, the bidder and the target will typically enter into “takeover bid implementation agreement” which:
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