CSP01/067
The Takeovers Panel advises that it has today released its draft policy on Lock-Up devices for public comment. Comments are due by 14 September. Lock-up devices include Break Fees, No-Shop and No-Talk Agreements, and Pre-Emptive Rights.
The Panel's policy accepts the use of break fees in Australia, subject to the Panel's primary concerns about competition for control of companies. The Panel has said that, in general, it won't declare break fees and other lock-up devices unacceptable where they are, in the circumstances of the bid, reasonable, in line with the Eggleston Principles, and will not impede competition for the target company. Proper and timely disclosure is an important part of the protections for shareholders in the Panel's policy.
The Panel has said that its role is not to consider the legality or enforceability of break fees, but it won't intentionally facilitate a lock-up device that appears clearly invalid.
The Panel has taken account of a range of factors, including overseas experience and rules on break fees and other lock-up devices. It believes that it has developed a draft policy which suits the Australian market and jurisdiction.
The Panel has set a general limit of 1% of the bid value for break fees. It has said that 1% will be too high in the case of large bids and may be too low for some small bids.
The elements that the Panel considers are acceptable in break fees are the reasonable third party costs paid out by a bidder (legal fees, funding costs); similar internal costs; and, in appropriate cases, opportunity costs of a bidder that are connected with the bid.
The Panel's policy on pre-emptive rights and on no-shop and no-talk agreements is also primarily based on the Panel's role as a market regulator concerned with fair and effective competition for control of companies in the interests of shareholders.
The Panel's President, Mr Simon McKeon, said that he was delighted with the excellent work that the Panel's subcommittee on the break fees policy had put into this project. He said "This policy is the first in a line of policies that the Panel will be publishing over time, that will provide forward guidance for the market. Break fees are an area where there is little or no specific guidance in Australian case law or policy. The Panel felt that the recent increase in the use of break fees in Australia meant the policy void needed filling quickly."
The policy is on the Panel's website.
Nigel Morris
Director, Corporations and Securities Panel
Level 47 Nauru House, 80 Collins Street, Melbourne VIC 3000
Ph: +61 3 9655 3501 email: nigel.morris@takeovers.gov.au