Q&A
The short answer is an announcement must be made when if the target company has been approached by a bidder and that approach has not been unequivocally rejected (i.e. discussions are ongoing): and
(1) there is a leak in the media; or
(2) there has been an ‘untoward movement’ in the share price of the target; or
(3) more than six external parties have been informed about the possibility of an offer (the “rule of six”).
The relevant provisions are found in Rule 2 of the Code and the Panel has published an entire practice note on the subject. In fact this is one of the most difficult and sensitive questions in the Takeover Code so we had better unpack the simple answer.
A target that is in talks with a potential bidder must announce that fact if there is speculation in the media or an untoward movement in the target share price (for which the starting point for analysis is a movement of 5% at any point during a trading day or 10% from the moment when the bidder and target started discussions). Unlike the situation where the bidder is in active consideration but has not approached the target, the Panel does not need to have reasonable grounds for concluding that the speculation or share price rise likely resulted from a breach of secrecy. See my post here for the rules for bidders.
There will often be dispute over whether the bidder and target are in talks or not as this affects which party has the leak announcement obligation. If the bidder has made a takeover ‘approach’ and that approach has not been unequivocally rejected then the target has the responsibility for monitoring the media and share price and making the announcement unless the Panel rules otherwise. What the Panel will consider to constitute an ‘approach’ is often far less formal than what the parties expect and there is often confusion over whether talks are ongoing or whether the approach has lapsed or been rejected. These are ultimately a fact sensitive questions to determine and expert advice should be sought.
