There are potential risks associated with extending the offer period for a partial offer if the offer is likely to become unconditional before the end of the extended offer period.

A partial offer is an offer made by a bidder to all shareholders in a target company for less than 100% of those persons’ voting securities. A partial offer made under the Code is subject to the same rules as those which apply to a full offer, apart from the special provisions in relation to partial offers set out in Subpart 2 of Part 3 of the Code.

A partial offer must specify the period for which it will remain open and it must remain open for that period. The offer period must commence with the date of the offer and be not shorter than 30 days and not longer than 90 days (rule 24 of the Code). The offer period may be extended by way of a variation of the offer but must not be extended beyond the maximum 90-day period (rule 24A).

A shareholder in the target company may accept a partial offer in respect of any number of their voting securities. The Code (rules 11 to 13) prescribes how the offeror is to scale acceptances to ensure that voting securities are taken up under the partial offer appropriately as between acceptors when excess acceptances have been received. Any scaling of acceptances can only occur after the close of the offer period, once all acceptances have been received.

Rule 33 of the Code provides that the offer must state a date by which the consideration for the offer must be sent to those persons whose securities are taken up under the offer. The date must be not later than seven days after the later of –

(a) the date on which the offer becomes unconditional; or

(b) the date on which an acceptance is received; or

(c) the end of the offer period as first specified in the offer document.

In the case of a partial offer, it is wise to use the full rule 33 formulation so that, even if the offer becomes unconditional during the initial offer period, consideration is not payable until seven days after the end of the offer period as first specified in the offer document.

An offeror who extends a partial offer beyond the initial closing date first specified in the offer document risks the offer becoming unconditional before the new closing date. If this occurs, the offeror may be unable to comply with the Code’s requirements to pay the offer consideration because the amount of any scaling is determined by the number of acceptances received through the entire offer period, not just in the period up to when the offer became unconditional. Until scaling is completed, the offeror will not know how many securities it may take up from each offeree and, accordingly, how much consideration to pay each offeree.

The Panel advises offerors to set a realistic initial offer period, and if it is necessary to extend that period, to do so in reasonably small segments, to minimise the risk of the offer going unconditional earlier than seven days before the end of the offer period. An offeror may also consider making its intentions clear about the date by which the offer will definitely close, by way of a last and final statement. The Panel expects that last and final statements will be adhered to as to a promise (refer to CodeWord No.22 for further information). Such a last and final statement can help shareholders (who may want to delay accepting the offer until just before the offer closes) to understand that the offeror will not keep extending the offer period.

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