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ACCA Strategic Professional · Advanced Financial Management · Regulatory framework and processes

Under the UK City Code on Takeovers and Mergers, a bidder acquires shares in the target that take its total holding (with concert parties) to 30% of the voting rights. What is the usual consequence?

Crossing the 30% voting rights threshold normally forces the bidder to make a mandatory offer to all other shareholders. It must be in cash or have a cash alternative, priced at no less than the highest price the bidder paid in the preceding twelve months.

  1. AThe bidder must make a mandatory cash offer, or offer with a cash alternative, to all remaining shareholders at not less than the highest price paid in the prior 12 monthsCorrect
  2. BThe bidder must sell down to below 25% within 28 days
  3. CThe bidder must make a voluntary share-for-share offer only
  4. DThe bidder may continue buying freely until it reaches 50%

Explanation

Crossing 30% triggers a mandatory offer under the Code. The offer must be in cash (or with a cash alternative) at no less than the highest price paid by the bidder in the previous 12 months. Buying freely up to 50% is wrong because the 30% threshold is the trigger.

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