Takeovers and Schemes

When a company is being taken over, or there is a merger or scheme, trading in the company’s securities ceases for a minimum of 50 minutes to allow investors and market participants time to assess the situation, contact clients, re-enter orders, etc.

A company may request a trading halt while negotiations are taking place. No shortselling or special crossings are permitted while a security is being taken over or is the subject of a scheme/merger.

Takeovers may be on-market or off-market. Directors of the target company usually advise their shareholders whether or not they regard the offer price as fair.

Off-market bid

In an off-market bid, each shareholder in the target company receives a letter of offer from the bidder.

Shareholders who wish to sell their shares to the bidder sign and return the letter. The offer may be cash, scrip (shares in the bidder), or a mixture of cash and scrip.

New Legislation on takeovers came into force in March 2000. Prior to this, off-market bids were known as Part A Offers of Takeover.

Market bid

In a market bid, the bidder buys shares in the target company through the Exchange.

Market bids take place as follows:

  1. The bidder appoints a broker to buy shares in the target company. With regards to the takeover, the broker is known as the broker 'standing in the market'.
  2. When the broker enters the orders, they indicate that they are buying shares as part of a takeover. In this way, the marketplace is able to see the purpose of the orders.

There are restrictions on how the broker standing in the market may trade:

  • they can only purchase shares during Normal Trading, Closing and After Hours Adjust, i.e. between 10:00 am and 7:00 pm Sydney time.
  • they can only sell shares between 10:00 am and 5:00 pm Sydney time.
  • they can only cross during Normal Trading and Closing, i.e. between 10:00 am and 5:00 pm Sydney time.
  • they cannot trade overnight (7:00 pm to 7:00 am Sydney time) or overseas.
  • they cannot solicit orders or give advice on the securities under takeover.
  • they must advise their clients that they are buying on behalf of the bidder.

The only restriction on other brokers is that they cannot cross at a price less than or equal to the bid (takeover) price. Otherwise, they may trade as normal.

New legislation on takeovers came into force in March 2000. Prior to this, market bids were known as Part C Offers of Takeover.

Target Statements

Target Statements are replies from the target company to the bidder statement. The reply may be to a market bid or an off-market bid.

The reply indicates:

  • whether or not the directors of the takeover company agree with the offer
  • directors’ advice to shareholders on whether or not they should sell their shares
  • whether or not the offer is undervalued
  • any other notes the directors wish to make about the takeover

New Legislation on takeovers came into force in March 2000. Prior to this, Target Statements were known as Part B Statements responding to an off-market bid (formerly known as a Part A Offer of Takeover) or Part D Statements responding to a market bid (formerly known as a Part C Offer of Takeover).

Bidder Statements

Bidder Statements are made by the bidder and detail the terms of the takeover.

New legislation on takeovers came into force in March 2000. Prior to this, Bidder Statements were known as Part A Statements for off-market bids (formerly known as a Part A Offer of Takeover) or Part C Statements for market bids (formerly known as a Part C Offer of Takeover).