Panel Publishes Guidance Note on Broker Handling Fees for Comment

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The Takeovers Panel has today released for public comment a draft Guidance Note on broker handling fees. The Guidance Note aims to assist bidders and the market to determine what is likely to be unacceptable in terms of the handling fees paid to brokers who obtain acceptances under a takeover bid. The Panel notes that the practice of offering broker handling fees has become increasingly widespread recently.

In its discussion of broker handling fees, the Panel points out that broker handling fees may promote the principle set out in section 602(a) of the Corporations Act of having efficient, competitive and informed markets if they encourage brokers to alert and inform their clients about a bid.

There are, however, concerns that arise if broker handling fees are excessively high, or are only available for a limited period of time. In these circumstances, broker handling fees have the potential to cause brokers to place unacceptable pressure on shareholders to accept an offer under the bid before they have had a reasonable time and adequate information to assess the merits of a bid.

The Guidance Note proposes limits on a broker handling fee of 0.75% of the consideration payable to an accepting target shareholder and $750 for each acceptance. A minimum payment should generally not exceed $50 for each acceptance.

The Panel also said that:

(a) once a broker handling has been made, it should generally be available for the balance of the bid period; and

(b) broker handling fees should always be disclosed fully to the market and to the offeree shareholder.

The Panel wishes to thank the sub-committee members, Mr Simon Mordant, Mr Braddon Jolley and Ms Carol Buys. The Panel is especially grateful for the input and assistance received from external sub-committee members, Mr Bruce Skelton and Mr Paul Masi.

Comments are sought on the policy until Friday 9 May 2003. The policy is available on the Panel's website.

Nigel Morris
Director, Takeovers Panel
Level 47 Nauru House
80 Collins Street, Melbourne VIC 3000
Ph: +61 3 9655 3501