Panel Publishes for Comment Draft Guidelines on Financing Arrangements for Takeovers Bids

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The Takeovers Panel has today released for public comment a draft Guidance Note on financing arrangements for takeover bids. The Guidance Note aims to assist bidders and the market to determine the funding arrangements that may give rise to unacceptable circumstances. The Guidance Note also provides some guidance on the obligation to disclose funding arrangements in bidder's statements.

The principle underlying the Guidance Note is that a bidder should only announce a takeover offer after careful and responsible consideration and when it has every reason to believe that it will be able to implement the offer.

If a bidder proposes to pay for shares with borrowed funds, it must have funding arrangements in place with a lender when it announces and makes its offers. Although those arrangements need not necessarily at those times be formally documented or free of conditions precedent, they need to provide the bidder with a reasonable basis for believing that it will be able to pay for acceptances under the bid. Formal documentation should be completed prior to the offers being sent to target shareholders.

It will be unacceptable for a bid to be declared unconditional with material conditions to the funding remaining outstanding unless the bidder has reasonable grounds for believing that those conditions will be satisfied and unless the status of those conditions is properly disclosed.

Deficient funding arrangements will create unacceptable circumstances because they will lead to a false market in the target's securities, contrary to the policy in section 602 of the Corporations Act of having efficient, competitive and informed markets.

The Panel thanks the sub-committee members, Mr Braddon Jolley, Mr Kevin McCann and Dr Tro Kortian. The Panel is especially grateful for the input and assistance received from external sub-committee members, Mr Rod Halstead, Mr Trevor Rowe and Mr Jason Lee.

Comments are sought on the policy by Thursday 11 December 2003. The policy is available on the Panel's website.

George Durbridge
Director, Takeovers Panel
Level 47 Nauru House
80 Collins Street
Melbourne VIC 3000,
Ph: +61 3 9655 3553