UK bolsters Takeover Code

The UK’s merger and competition watchdog, the Takeover Panel, updated its rules on Monday to ensure that companies stand by their takeover promises.

The new regime distinguishes between “post-offer undertakings” and “statements of intention”, which clarifies whether or not a company will be bound by the statements it makes. Post-offer undertakings are binding while statements of intention are not.

The move comes after the Takeover Panel received political flak on whether or not statements are binding after Pfizer’s £70 billion ($119 billion; €88 billion) bid for UK drug company AstraZeneca last year. Critics of the Pfizer bid said the company’s assurances during the acquisition process were vague and raised concerns of UK job cuts and a drop in medical research.

At the time the government’s top business policymaker, Vince Cable, told the BBC there must be “no wiggle room” for firms to walk away from promises made during an acquisition or face “tough” fines.

Cable got his wish and now firm’s that make post-offer undertakings must have the promises agreed with the panel and also file a report describing compliance with the promise.

The Panel also has the right to insist that an independent supervisor, approved by the Panel and responsible for monitoring compliance, is appointed and paid for by the offeror,” Stephen Walters, partner in the business and finance practice of law firm Morgan Lewis, told pfm. “Supervisors’ terms of engagement will have to be approved by the Panel and they will have reporting and other obligations to it.”

However, Walters added that the market was generally supportive of the changes although some reservations have been expressed.

“One is the concern of mission creep by the Panel; these new rules about monitoring of compliance can take the Panel into areas that are not its core remit,”said Walters.