In its recently published 2010 Annual Report, the Irish Takeover Panel clarified its position on the presumption under the Irish Takeover Rules of the existence of a concert party relationship where a company holds 20% or more of the share capital of a listed company.
Under the Takeover Rules, there is a presumption that an Irish listed company and its directors and their family members are acting in concert with any shareholder who holds 20% or more of the listed company. A consequence of this presumption is that where the directors of the listed company and the 20%+ shareholder hold between them 30% (or thereabouts), the directors may not, in effect, be able to acquire further shares in the listed company (either through market purchases or option exercises) as such acquisitions could trigger a mandatory offer obligation.
The effect of this presumption can, in certain circumstances, have unusual consequences. For instance, under the Rules, Ryanair (as a 29% shareholder of Aer Lingus) is presumed to be acting in concert with the board of Aer Lingus even though in the past it has made two hostile takeover offers for Aer Lingus and could hardly be described as being aligned with the board of Aer Lingus.
In the Annual Report, the Panel acknowledged that, in certain circumstances, it may not be appropriate to maintain this presumption. The Panel elaborated by saying that it is prepared to consider a rebuttal of the presumption that the directors are acting in concert with the 20%+ shareholder where it can be established that the directors are independent of the shareholder. However, the Panel qualified this by saying that it is likely to maintain the presumption during an offer for the listed company or where the listed company is in the process of redeeming or purchasing its own securities.
Separately, the Panel has also confirmed that, following a review, it is considering a number of proposed amendments to the Rules. A number of these amendments will be proposed to address specific issues which have arisen during recent takeovers while others will be proposed following changes that have been made to the UK’s City Code on Takeovers and Mergers.
The Panel will publish consultation papers and invite submissions from market participants on any proposed amendments before amending the Rules.
This article has been authored by Mark Talbot.