UK Takeover Code – Bidder Elects to Give Post-Offer Undertakings for the First Time

A bidder seeking to acquire a UK listed company has given "post-offer undertakings" in relation to increasing the target's employee headcount and keeping the target's headquarters in the UK if its offer is successful. It is the first time a bidder has elected to give a post-offer undertaking (or POU) under the regime, which was introduced into the UK Takeover Code in January 2015.

There is no obligation under the Code to give a post-offer undertaking, with most bidders choosing instead the softer option of making a statement of intent. Under the Code, a statement of intention must be both an accurate statement of the party's intentions at the time and made on reasonable grounds. It is not, however, legally binding. It will give rise to an expectation that the party will take that course of action in the 12 months from the end of the offer period, but the party will not be forced to do so. A post-offer undertaking, by contrast, is a binding commitment. There is no obligation under the Code to give a post-offer undertaking, but any party choosing to give one must comply with it.

In this case, Softbank, a Japanese investor in the technology, internet and wireless sectors, has given POUs in connection with its recommended cash offer for ARM Holdings, a UK-incorporated and listed semiconductor intellectual property supplier.

Softbank has undertaken to:

• at least double the employee headcount of ARM in the UK;
• increase the employee headcount of ARM outside the UK; and
• keep ARM's headquarters in Cambridge for five years

by, and at the end of, five years after the effective date of the takeover.

Softbank has also agreed to procure that ARM also gives post-offer undertakings relating to the employee headcount and headquarters.

The political environment in the UK, with the bid following shortly after the vote by the UK to leave the European Union and the appointment of Theresa May as prime minister, will have featured in the bidder's decision to give a post-offer undertaking and will have played a role in the pressure on them to give binding commitments, rather than simply make statements of intent. Theresa May personally spoke to the chief executive of Softbank and, once the offer was announced, welcomed the investment and commitment to doubling the number of jobs in the UK as a clear vote of confidence in Britain. This deal, the size of the investment, and the commitment to invest heavily in the target post-deal were heralded as being evidence of Britain's continued attraction as a country for investment.

Notwithstanding the fact that these POUs were welcomed, their binding nature, and the limitations on the qualifications and conditions that are permitted, suggest that they will remain relatively rare.

Further information can be found here. 

Gillian Fairfield is a partner and Antonia Kirkby is a professional support lawyer at Herbert Smith Freehills.