Takeover bids, step by step

Section 621(3) sets a floor: what the bid offers must be at least the most the bidder or an associate gave, or agreed to give, as consideration for a security in the bid class during the 4 months before the date of the bid. RG 9 says the rule applies to every form of consideration, and that it should be weighed before a bidder publicly proposes a bid, because a public proposal must not be reckless or misleading.

ASIC takes the view that a cash sum means Australian dollars, not foreign currency. For quoted securities offered as consideration, ASIC Instrument 2026/101 lets a bidder value them up to five business days before it sends its first offer.

Section 623 adds a second limit: during the offer period the bidder or an associate must not give, offer or agree to give a benefit that is likely to induce a holder to accept or sell, unless the benefit is offered to all holders in the bid class under the bid.

Section 633 lists, as a table, what a bidder has to do for an off-market bid to be effective, and what the target does in reply. Below is a condensed reading; the notices to ASIC and the market at each stage are left out.

RG 9 calls the bidder’s statement the bidder’s primary disclosure document. In an off-market bid it must include, or come with, the offers; in a market bid, it has to be released to the market on the day the bid is announced. It must give holders enough information to make an informed decision about how to respond, and ASIC expects meaningful disclosure about the bidder’s intentions and, for a cash bid, its financing.

RG 9 lists the provisions that back these disclosures up. Among them, under sections 670A and 670B, liability attaches to the bidder, its directors, people named with their consent and others for sending out a bidder’s statement that is misleading or deceptive, or that leaves out required information.

The target’s statement answers it. Section 638 says it must include all the information that holders and their professional advisers would reasonably require to decide whether to accept, to the extent investors and their advisers could reasonably expect to find it there, and only if any of the target’s directors knows it. If the bidder’s voting power in the target is 30% or more when the bidder’s statement is sent to the target, or the bidder, or one of its directors, is a director of the target, section 640 requires an expert’s report saying whether the offers are fair and reasonable.

When off-market offers carry defeating conditions, the bidder must give notices on their status during the offer period, to the market operator if the securities are quoted, or to ASIC if not. Freeing the offers from a defeating condition takes a separate notice to the target under section 650F. For a condition about the events in section 652C(1) or (2), that notice can come up to three business days after the offer period ends; for any other condition, it is due no less than seven days before the offer period ends. Under section 650G, if a defeating condition hasn’t been fulfilled when the offer period ends, and the bidder hasn’t declared the offers free of it, the takeover contracts and acceptances are void.

Section 624(2) extends the offer period automatically if, in its last 7 days, an off-market bidder improves the consideration, or any bidder’s voting power in the target rises above 50%. The period then ends 14 days after that event. The bidder must give written notice of the extension within 3 days.

At the far end, section 661A lets a bidder compulsorily acquire the rest of the bid class if, during or at the end of the offer period, it and its associates hold relevant interests in at least 90% of the securities and have acquired at least 75% of those it offered for. This applies to a market bid, or an off-market bid for all the securities in the class.

The other formal route past 20%, where the members vote, is in schemes of arrangement. The 9.30 am deadline for holders’ notices during a bid is in substantial holding notices.