03/09/2019 UK takeover rules among most stringent | Financial Times

Fund regulation
UK takeover rules among most stringent

Anousha Sakoui AUGUST 28, 2012

There is one vital feature of the UK takeover rules that makes them among the most stringent in
the world. It is known as Rule 2 and it governs the timing of announcements relating to offers
for a company.

Unlike the US, where companies do not have to comment on speculation or rumour, in the UK
targets can be forced to spill the beans.

Last year’s reform tightened Rule 2 further so that any rumour about a possible bid for a
company or big swings in its share price, can force the target to reveal all the parties it is in talks
with.

The revelation that it is in talks about a possible takeover automatically starts the clock ticking
on the 28-day “put up or shut up” deadline for a firm offer to be made.

That new dynamic means an inadvertent leak could scupper takeover plans. Either media-shy
corporates get cold feet or bidders cannot get financing ready in time.

The Takeover Panel moves to tighten confidentiality coincide with a campaign by the Financial
Services Authority’ to crack down on the leaking of confidential information.

The lack of confirmation of deal speculation can lead investors and advisers to assume the
rumours are false.

However under the rules, the parties can avoid an announcement if they have stopped “actively”
working on a deal.

They have to consult with the regulator privately, but the panel can force an announcement if
speculation persists.

If a bidder pulls out of talks, they are restricted from restarting them for up to six months. One
of the reforms tightened Rule 2 further so that even if the talks are never made public, this
restriction still applies.

One possible example some advisers point to is that of UK engineering company Invensys,
which in May saw its share price swing on talk of a possible bid.

At first the company did not comment but as the speculation persisted, in late June it revealed
that it had been in talks with Emerson of the US about an offer in April, but that talks had
ended.

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03/09/2019 UK takeover rules among most stringent | Financial Times

A consequence of the intensified disclosure requirements is that pre-announcement leaks are

fewer, with speculative approaches being increasingly a thing of the past, advisers say.

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