Takeover Panel Bulletin in Relation to Irrevocable Commitments and Letters of Intent

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Key Takeaways

  • If a giver of an irrevocable commitment or letter of intent is unable, or no longer intends, to comply with the terms of the commitment or letter, either in whole or in part, they must promptly make an announcement or notify the relevant bid party and the Panel Executive; and
  • If bidders and targets are notified by a giver of an irrevocable commitment or letter of intent that they will no longer comply with it, the bid parties must make a prompt announcement to that effect.

On 17 November 2021, the Takeover Panel (the “Panel”) published Panel Bulletin 3 (the “Bulletin”) relating to the requirements of Rule 2.10(c) of the Takeover Code (the “Code”). Under Rule 2.10(c), a person who has given an irrevocable commitment or a letter of intent must promptly make an announcement if they become aware that they can no longer comply with the terms of that commitment or letter, or if they no longer intend to comply.

Panel Bulletins were introduced by the Panel Executive in October 2021 to remind practitioners and market participants of how specific provisions of the Code operate in response to issues that the Panel has identified as occurring on live transactions.

In the Bulletin, the Panel Executive stated that it is aware of a number of cases recently in which a shareholder had given a letter of intent to accept an offer or to vote in favour of a scheme of arrangement, but subsequently sold the shares subject to the letter without a prompt announcement being made by either the shareholder or the bidder, contrary to Rule 2.10 of the Code.

The Bulletin contains two key reminders:

  • If a giver of an irrevocable commitment or letter of intent is unable, or no longer intends, to comply with the terms of the commitment or letter, either in whole or in part, they must promptly make an announcement or notify the relevant bid party and the Panel Executive; and
  • If bidders and targets are notified by a giver of an irrevocable commitment or letter of intent that they will no longer comply with it, the bid parties must make a prompt announcement to that effect.

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