Board of the offeree company
The board of the offeree company must obtain competent independent advice as to whether the financial terms of any offer (including any alternative offer) are fair and reasonable and the substance of such advice must be made known to its shareholders. (See also Rule 15.2 and Rule 21.1(f)(i).)
NOTES ON RULE 3.1
Management buy-outs and offers by controllers
The requirement for competent independent advice is of particular importance in cases where the offer is a management buy-out or similar transaction or is being made by the existing controller or group of controllers. In such cases, it is particularly important that the independence of the adviser is beyond question. Furthermore, the responsibility borne by the adviser is considerable and, for this reason, the board of the offeree company or potential offeree company should appoint an independent adviser as soon as possible after it becomes aware of the possibility that an offer may be made.
Where the independent adviser is unable to advise whether the financial terms of the offer are fair and reasonable
If the independent adviser is unable to advise the board of the offeree company whether the financial terms of an offer (or any alternative offer) are, or are not, fair and reasonable, this must be made known to offeree company shareholders and an explanation given in the offeree board circular. The Panel should be consulted in advance about the explanation which is to be given. (See also Note 2 on Rule 25.2.)