Shareholder acceptance commitments – when is it okay to accept?

In brief

• If a shareholder commits to accept a takeover bid ‘in the absence of a superior proposal’ and the shares the subject of the commitment, together with any shares already controlled by the bidder, exceed 20%, the Takeovers Panel expects the shareholder to delay accepting to give a rival bidder time to emerge.
• The shareholder should wait until 21 days after the offer period has opened, which should be a week or so after the target’s statement is released. 

Shareholder acceptance commitments

If a shareholder commits to accept a takeover bid ‘in the absence of a superior proposal’, does it have to wait before accepting the bid? And, if so, for how long?

The Takeovers Panel has long held the view that, where the shares the subject of the commitment together with any other shares controlled by the bidder exceed 20%, the shareholder cannot accept the bid straight away but should wait for a period of time to allow a competing proposal to emerge. Otherwise the arrangement would be anti-competitive and unacceptable. 

That was made clear in 2015 when the Panel issued Guidance Note 23. The Panel said that the period of time for the shareholder to wait will depend on the circumstances, but generally the Panel will consider a reasonable time to be 21 days after the offer period opens: see GN 23 at [10]. 

I was a member of the Panel’s working group that developed that Guidance Note. The thinking at the time was that the 21 day period would give enough time for potential rival bidders to emerge and express their interest before the target issued the target’s statement (due 15 days after the offer opens). It would also be before the bidder has to give the notice about the status of conditions or extend the offer if conditional (that is, before the last 7 days of the offer period). 

Notably, this was not expressed as a period after the issue of the target’s statement as that timing would be susceptible to the target delaying issuing its target’s statement and potentially frustrating the bidder and shareholder, and thereby the progress of the takeover bid.

The Cue Energy Resources example

The point was argued in the Panel’s recent decision in Cue Energy Resources Ltd [2026] ATP 5. In that matter, a 50% shareholder agreed to sell a 19.99% stake to the bidder (with settlement to occur after the offer closed, provided the bid is declared unconditional) and announced that it intended to accept for the balance of its stake (circa 30%) 21 days after the offer opened, in the absence of a superior proposal.

The target company applied to the Panel for a declaration of unacceptable circumstances arguing, among other things, that the agreement to sell 19.99% and the commitment to accept for a further 30%, taken together, would deter rival bidders and impede an efficient, competitive and informed market for control of the target’s shares. 

It argued that the shareholder should be released from the commitment to accept and prevented from accepting the bid for a period longer than 21 days after the offer opened, namely 10 business days after all regulatory conditions were satisfied or the bid was recommended.

By the time of the Panel proceedings, the target’s statement had been released. It disclosed that the target had not received any competing proposal nor had any discussions that were likely to lead to a superior proposal being made.

The Panel followed the policy in Guidance Note 23 and rejected the target’s complaint. It decided that the 21 day period was reasonable in this case. The Panel observed that, in fact, 5 weeks had elapsed since the bid was announced and no rival bid had emerged. Therefore, this aspect of the case was rejected.¹ 

Comment

In my view, the Panel’s decision on the point was plainly correct. The 21 day waiting period is intended to strike a balance between the need for takeover bids to be attractive and certain mechanisms for M&A transactions, and still giving a chance for an auction to develop, even if the bidder has commitments over 20%. 

The Panel in this matter appeared to be open to requiring a longer period. I don’t recall that possibility being part of the debate in 2015. The main question at the time was whether 21 days was too restrictive and too long.² 

I think 21 days is the right amount of time and is long enough, particularly when you consider the offer (especially if it is not recommended from the outset) would not open for at least two weeks after the bid is first announced and the bidder’s statement is given. If no rival proposal has emerged by then, it strikes me as entirely reasonably for the shareholder to accept.