Opinion of the offeree board on the offer, including views on the offeror’s plans for the company and its employees
The offeree board circular must:
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set out the opinion of the board on the offer (including any alternative offer ) and the board’s reasons for forming its opinion and must include its views on:
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the effects of implementation of the offer on all the company’s interests, including, specifically, employment; and
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the offeror’s strategic plans for the offeree company and their likely repercussions on employment and the locations of the offeree company’s places of business, as set out in the offer document pursuant to Rule 24.2;
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include the substance of the advice given to the board of the offeree company by the independent adviser appointed under Rule 3.1 in relation to the financial terms of the offer (including any alternative offer); and
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include a recommendation from the board of the offeree company as to the action that shareholders should take in respect of the offer (including any alternative offer). (See also Note 2 and Note 3.)
NOTES ON RULE 25.2
Factors which may be taken into account
The provisions of the Code do not limit the factors that the board of the offeree company may take into account in giving its opinion on the offer under Rule 25.2(a) and its recommendation under Rule 25.2(c). In particular, the board is not required by the Code to consider the offer price as the determining factor and is not precluded by the Code from taking into account any other factors which it considers relevant.
Where there is no clear opinion and/or recommendation or where there is a divergence of views
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If the board of the offeree company is unable to form a clear opinion on, or recommendation in respect of, the offer (or any alternative offer), this must be stated and an explanation given, including the key arguments for acceptance or rejection of the offer (or any alternative offer) and emphasising the key factors.
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An explanation must also be given if there is a divergence of views among the members of the board (in which case, the opinion and recommendation of the minority should be included in the circular in addition to that of the majority) or between the board and the independent adviser appointed under Rule 3.1.
The Panel should be consulted in advance about the explanation which is to be given.
Alternative offers
Where there are alternative offers and:
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more than one of the offers can, in the board’s opinion, be recommended to shareholders; but
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the appropriate action for individual shareholders to take will depend on various factors and their particular circumstances,
the board may satisfy the requirement in Rule 25.2(c) by including statements to that effect and explaining the key factors which it considers that shareholders should take into account in making their decision as to what action to take.
Conflicts of interest
A director who has a conflict of interest should normally be excluded from the opinion and recommendation of the board and the nature of the conflict should be clearly explained. Depending on the circumstances, such a director may nonetheless have to make the responsibility statement required by Rule 19.2, amended so that the director does not accept responsibility for the board’s opinion and recommendation.
Management buy-outs
If the offer is a management buy-out or similar transaction, a director will normally be regarded as having a conflict of interest where it is intended that the director should have any continuing role (whether in an executive or non-executive capacity) in either the offeror or offeree company in the event of the offer being successful.