Takeover Panel publishes 2021-2022 Annual Report

Deal flow

As the UK began to emerge from the COVID-19 pandemic, the first half of the year saw a high volume of activity with 33 firm offers announced, totalling a value of £45 billion. The second half of the year indicated a slowdown in public M&A activity with 27 firm offers totalling £11 billion, as the impact of the economic climate, including the war in Ukraine, took hold. The year to March 2023 began very slowly, with no firm offer at all announced in April. The Panel Executive (the "Executive"), which is responsible for the day-to-day work of takeover regulation and supervision, successfully oversaw the resolution of two auctions between competing bidders, namely the acquisition of Wm Morrison Supermarkets by successful bidder Clayton Dubilier & Rice LLC, and the acquisition of Augean plc by Ancala Partners and Diera Infrastructure.  Several other cases involving competing bidders during the year were resolved prior to auction.

Code transactions

Contractual offers vs Schemes

Schemes of arrangement continue to dominate the landscape when it comes to bidders' choice for structuring takeover bids (which also speaks to the continuing dominance of recommended bids over hostile approaches): 12 out of the 60 firm offers announced during the year (20%) were structured as contractual offers (they numbered 14 out of 48 firm offers (29%) in 2020-21) with 48 schemes of arrangement (up from 34 in 2020-21).

Mandatory bids and whitewashes

Four of the firm offers announced in the 2021-22 period were mandatory bids under the Code at the time of the firm offer announcement (there were two in the previous period). The Executive granted 30 whitewash dispensations in 2021-22 (slightly down on the 39 granted in the period 2020-21).

Disciplinary matters

The Executive issued one letter of private censure and four educational/warning letters.

The Code Committee Report

As part of the Panel's report, the Code Committee (the "Committee") reported on its activities over the past year: the Committee published three Public Consultation Papers and two Response Statements.

Of note:

• the Miscellaneous Code amendments were published, proposing amendments such as 1) announcing a minimum level that a potential offeror is obliged to offer; 2) restricting a mandatory offeror from obtaining additional interests in the shares of the offeree company; and 3) clarifying the application of the "look-back period" (see our ECM Insight dated 6 May 2022);
• the Committee published PCP 2022/2, on proposed amendments to the Code's presumptions set out in the definition of "acting in concert". The proposals include creating two new presumptions "1" and "2" in the definition, to: (a) raise the threshold for the "associated company" status to 30%; (b) clarify that the presumption applies equally to shares carrying voting rights as well as equity share capital; and (c) explain how the 30% threshold operates differently as between voting share capital and (voting or non-voting) equity share capital. For more information on these proposals, see our ECM Insight dated 27 May 2022.

The changes to the Takeover Code in relation to offer timetables and offer conditions came into effect in July 2021 but are yet to be fully tested given that takeover bids continue to be largely structured as schemes of arrangement as opposed to contractual offers (where most of these changes are set to apply).