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Earlier, more specific statements of intention to be required during UK takeovers

Bidders for UK publicly-listed companies would be required to publish earlier, more specific 'statements of intention' for their targets, under proposed reforms to the way in which takeovers operate in the UK21 Sep 2017

The proposed reforms to the Takeover Code (46-page / 385KB PDF) would also require successful bidders to report back one year after completing their acquisition on their compliance with the plans they announced during the course of an offer.

Business secretary Greg Clark welcomed the proposed changes. He also confirmed that the government would shortly be publishing its proposals to "address the national security concerns that can arise from foreign investment", as set out in the Queen's Speech in June.

"One of Britain's biggest assets in competing in the global economy is our deserved reputation for being a dependable and confident place in which to do business," he said.

"The Takeover Panel is a respected and important part of this regime and the government welcomes the valuable changes it is proposing. They will require bidders to make earlier and fuller disclosure of their plans for the target company, including its research and development, location of HQ, and the composition and skills of its workforce; and give companies subject to a bid more time to prepare their response," he said.

The Takeover Code sets out an orderly framework for how takeovers of publicly-listed companies must be conducted. It is issued and overseen by the independent Takeover Panel.

Under the current rules, bidders are required to publish 'statements of intention', setting out their plans for certain aspects of the target company including staff, fixed assets, pension schemes and strategic direction. The Takeover Panel has proposed expanding the topics covered to include the company's research and development, the balance of skills and functions of the company's employees, and the location of the company's headquarters.

Bidders would be required to produce these statements of intention alongside their firm intention to make an offer, rather than when the bid document is released as is currently the case. Bidders would also have to refrain from publishing an offer document for 14 days after the announcement of their intention to make an offer, unless the board of the target company consents.

"The fallout from the Kraft takeover of Cadbury in 2010 is continuing to be felt in these amendments, which follow the theme of other relatively recent amendments designed to give target companies greater protection from bidders that was previously the case," said corporate finance expert Rosalie Chadwick of Pinsent Masons, the law firm behind Out-Law.com.

Corporate finance expert Jonathan Beastall of Pinsent Masons added that the proposed changes were "also consistent with wider political moves, such as the creation of an industrial strategy and mooted European legislation to subject takeover bids by foreign bidders to greater scrutiny".

The government announced plans in June to "consolidate and strengthen" its powers to scrutinise the potential acquisition of "critical national infrastructure" by foreign investors. These powers would be used "only for the purposes of protecting national security" and would allow the government to intervene in transactions which raise unspecified "national security concerns", according to explanatory notes published alongside the Queen's Speech in June.

Although employee share schemes were not specifically mentioned in the Takeover Panel's consultation, share plans and incentives expert Suzannah Crookes of Pinsent Masons said that bidding companies tended to cover these as part of their statements of intention.

"Currently, the amount of detail around the intention varies to some degree, and we anticipate some variation in approach to remain given the different circumstances of the relevant transactions," she said. "However, if there is a move towards more developed proposals around pensions and other elements of reward at an earlier stage, we may well see practice evolving in a similar way for equity incentives where this will not cause undue delay or complexity."