The Code Committee of the Takeover Panel has published PCP2017/1 consulting on a number of proposed amendments to the Takeover Code in relation to asset sales in competition with an offer and other matters.

The background to one of the consultation issues is that in late 2016, there were two cases in which the board of an offeree company subject to a unilateral offer decided that shareholders would receive better value by the company selling all of its assets to a third party, returning the proceeds to shareholders and winding up the company, rather than accepting the offer. These cases raised a number of issues under the Takeover Code and in part led to this PCP.

In the Code Committee’s view it is undesirable that certain provisions of the Takeover Code might be capable of being circumvented through an offeror or potential offeror purchasing the assets of an offeree company. Accordingly, the Code Committee proposes to introduce an additional restriction into Rules 2.8, 12.2(b)(i) and 35.1 prohibiting persons subject to these Rules from purchasing, agreeing to purchase, or making any statement which raises or confirms the possibility that it is interested in purchasing, the assets of an offeree company. Furthermore, in order to cast the net wider, the Code Committee proposes that the prohibition should apply not only in relation to the purchase of all or substantially all of the assets of the offeree company but rather in relation to the purchase of assets which are significant in relation to the offeree company. In determining whether assets are “significant”, the Panel will look at the consideration, assets and profits tests similar to those set out in Note 2 on Rule 21.1 and relative values of more than 50% will generally be regarded as significant.

Responses to the consultation are requested by 22 September 2017.