By Jonathan Deverill


Published 03 June 2020


The Takeover Panel has again considered whether an offeror should be able to rely on a material adverse change condition in the context of a takeover offer under the Takeover Code.

On 12 March 2020, Brigadier Acquisition Company Limited ("Brigadier") announced a recommended cash offer for Moss Bros Group PLC ("Moss Bros"), to be effected by way of a scheme of arrangement under Part 26 of the Companies Act 2006 ("Scheme"). The scheme document was published on 7 April 2020.

Subsequently, Brigadier argued that it should be entitled to invoke four conditions to the Scheme on account of the impact on Moss Bros of the COVID-19 pandemic and related UK Government measures. However, the Takeover Panel Executive ruled that Brigadier had not established that the circumstances which gave rise to its right to invoke the relevant conditions were of material significance to Brigadier in the context of its offer as required by Rule 13.5(a) of the Takeover Code and, therefore, that Brigadier should not be permitted to invoke any of the relevant conditions.

This ruling is consistent with the stance taken by the Takeover Panel in the aftermath of 9/11, in the context of WPP Group PLC's ("WPP") offer for Tempus Group PLC ("Tempus"). In that case, WPP argued that there had been a material adverse change in the prospects of Tempus after the announcement of WPP's offer and, in particular, following the events in the United States on 11 September 2001. The Takeover Panel came to the conclusion, on the evidence before it, that WPP had failed to demonstrate that there had been a material adverse change in the context of the bid such as to entitle WPP to invoke the material adverse change condition in its offer.

This article examines these Takeover Panel decisions in more detail and concludes that it seems clear that offerors will be required to press ahead with their offers, notwithstanding MAC conditions, in the absence of a circumstance "sufficient to frustrate a legal contract", a threshold which in the context of the Takeover Code neither 9/11 nor COVID-19 has been deemed sufficient to meet. Accordingly, in general, it remains the case that offerors must assume, when contemplating an offer, that they will not be able to rely on any conditions to the offer or scheme of arrangement other than those relating to target shareholder acceptance levels, shareholder and/or court approval, admission of shares to trading or for competition law and certain other significant regulatory approvals.

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