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The Takeovers and Mergers Panel (Takeovers Panel) has upheld the ruling of the Takeovers Executive (Note 1) in relation to an offer for the shares of L&A International Holdings Limited.
On 22 July 2016 Favourite Number Limited (the offeror) informed L&A’s board of directors that it intended to make an offer for the shares of L&A with a combination of cash and securities as consideration. It subsequently came to light that in early July a concert party of the offeror had dealt in L&A shares prior to the approach. As a result the Takeovers Executive required the offeror to match the terms of its offer so that the consideration offered for each L&A share would have a value of at least equal to the highest purchase price paid by the concert party. The offer was publicly announced on 18 August 2016 on this basis.
Subsequently, L&A made an application requesting the Takeovers Executive to rule that the offer did not comply with the Code on Takeovers and Mergers (Takeovers Code) and should be altered so that the consideration offered to shareholders reflected the same ratio of cash to securities as contained in the offeror’s earlier private letter to L&A’s board. The Takeovers Executive ruled that the consideration offered already complied with the Takeovers Code as the purchases were made before the terms of the offer had been publicly announced (Note 2). L&A applied to the panel to review the ruling.
On 22 September 2016 the panel met to consider the matter and upheld the Takeovers Executive’s decision and concluded that there is no basis to alter the offer in the way as requested by L&A. The panel agreed with the Takeovers Executive’s ruling that the requirement to maintain the same ratio of cash to securities as requested by L&A only arises under the Takeovers Code if a concert party has purchased shares after the formal announcement of an offer.
The Takeovers Panel’s decision can be found in the “Takeovers and Mergers Panel and Takeovers Appeal Committee decisions and statements” section on the SFC’s website.
Notes:
- The Executive Director of the SFC’s Corporate Finance Division or his delegate.
- Under Rule 24.2 of the Takeovers Code, if an offer involves a combination of cash and securities and further purchases of the offeree company’s shares oblige the offeror to increase the value of the offer, the offeror must endeavour, as far as practicable, to effect such increase while maintaining the same ratio of cash to securities as is represented by the offer.
