PRICE PRIOR

MEMORANDUM
To: Peter Price
Cc:

Date: 18 July 2016

From: Transaction Team

Subject Matter: Eagle
Ref:
______________________________________________________________________
Further to your request on information concerning Eagles proposed market acquisitions, our
research results are set out below.
Summary

Facts
- Two years ago, Eagle acquired 3 million shares in Thistle.
- Eagle now wants to acquire the entire issued share capital of Thistle.
Eagle approached Thistles board on 12 July 2016 to seek a recommendation for a
takeover.
- However, Eagle failed to secure a recommendation.
- Thistle indicated that the proposed price of 220p per share was too low.
- Eagle still wants to make a takeover offer.

Issues
To strengthen its takeover offer, Eagle proposes to make market purchases of Thistle
shares. Eagle has formulated three alternative acquisition proposals by which to do this:
-

Acquisition Proposal 1: Eagle acquires a further 900,000 Thistle shares for cash at
220 pence each.

Acquisition Proposal 2: CS, Eagles financial adviser, agrees with Eagle that it will
acquire 3.3 million Thistle shares for cash at 225 pence each, from a single
shareholder, to facilitate Eagles bid. CS does not currently hold any shares in
Thistle.

Acquisition Proposal 3: Eagle acquires a further 6.75 million Thistle shares for cash
at 220 pence from a single shareholder.

Eagle will want to ensure that its purchase is not prevented by the Listing Rules and any
purchase undertaken will not restrict a subsequent takeover. Eagle will also want to know if a
purchase will force it to make a mandatory offer. In addition, Eagle will be concerned about
the price at which it will have to buy subsequent shares following the proposed market
purchase and the form of consideration that will need to be given.

Law and application

1. Acquisition Proposal 1
Disclosure Requirements
A further purchase of 900,000 shares will give Eagle a shareholding of 13% of the issued
share capital in Thistle. This will mark a 3% increase in their shareholding and so they will be
required to notify Thistle [DTR 5.1.2R] within 4 trading days of the acquisition taking place
[DTR 5.8.13R]. Eagle will also be required to make a public dealing disclosure of the shares
they have acquired by 3:30 on the trading day following the date they acquire them [Rule
8.1(b) Takeover Code].
On receipt of this information, Thistle will be required to disclose this information by making it
public by the end of the trading day following receipt of the notification from Eagle [DTR
5.8.12R].
Potential problems with the Bid
This proposal is unlikely to result in any major problems for Eagle. However, it will need to
acquire further shares in Thistle in the future if it wishes to gain a significant enough
proportion to successfully acquire Thistle in the future.
Conclusion
Overall, this offer is unlikely to provoke significant issues with Thistle as the price offered for
the shares is the same as that offered to the board of Thistle and so will not be considered to
be a revised offer. Furthermore this acquisition will not require a mandatory offer and so
Eagle will not have to make an offer at the highest price for any interest in shares over the
last 12 months. However, Eagle will still be unable to significantly influence any decisions by
Thistle as they will lack the 25% shareholding required to block a special resolution.
Consequently, I would argue that this acquisition proposal is inappropriate for Eagles
ambitions as it is unlikely to lead to a successful takeover.
2. Acquisition Proposal 2
DTR 5 Disclosure
The disclosure provisions under DTR 5 mentioned under Proposal 1 above will also apply to
Proposal 2.
CS will acquire, as an indirect shareholder (acting in concert with Eagle), 3.3 million shares.
This shareholding will be aggregated with the 3 million that Eagle already has. 6.3 million
shares amounts to 21% of the total voting rights in Thistle. Multiple percentage thresholds
will clearly have been crossed; notification to Thistle will be required.
The notification requirement will apply to both CS and Eagle. The disclosure to Thistle would
have to identify CS as the concert party (DTR 5.2.3G). CS and Eagle will be able to make a
single common notification but this does not relieve any of those persons from their
responsibilities in relation to the notification (DTR 5.8.4R(4)).

The notification to Thistle must be made not later than four trading days after the date of the
acquisition of the shares (DTR 5.8.3R).
The notification should be made using the standard form available from the FCA's website
(DTR 5.8.10R).
Again, Thistle too will have to make a public disclosure using a Regulatory Information
Service (RIS), as soon as possible on receipt of the notification from CS and/or Eagle, and in
any event no later than the end of trading on the day following receipt (DTR 5.8.12R).
Rule 8 Disclosure
For the purposes of Rule 8.4 of the Code, CS will be a person acting in concert with Eagle.
Therefore, if this proposal goes ahead, CS will have to make a public dealing disclosure.
Note 2(c)(ii) to Rule 8 states that this disclosure must be made no later than 12 noon on the
business day following the date of the dealing.
Public disclosures (which may be made by the party concerned or an agent acting on its
behalf) are made to a RIS in typed format, by fax or electronic delivery. Copies of the
disclosures must be sent to the Panel in electronic form (Note 3 on Rule 8).
Potential problems with Proposal 2
If Proposal 2 goes ahead, Eagle, together with CS, will have acquired an interest
representing 10% or more of shares of one class during the offer period, and will have paid
cash. Pursuant to Rule 11.1, any subsequent offer made by Eagle must therefore be in cash,
or with a cash alternative, and must be at not less than the highest price paid to that point.
This would therefore impose a new minimum price for any offer that Eagle makes to Thistle ,
increasing the minimum price per share from the original 220p to 225p.
Another problem for Eagle may be that any shares held at the time of the offer by the bidder
and its associates (as defined in s.988 of the Companies Act 2006 (CA 2006) - CS may be
deemed to be an associate) are not shares to which the offer relates. These newly acquired
shares would then be excluded for the purposes of calculating the 90% target necessary to
trigger a compulsory acquisition of any outstanding minority. It may therefore be more
difficult to reach the 90% level.
Conclusion
There are significant disclosure requirements that would be triggered by Proposal 2. Whether
these alone would be sufficient to dissuade Eagle from this proposal remains to be seen,
and we should seek further instruction on this point. Disclosure aside, the commercial
ramification of the imposed minimum offer price may also suggest that Proposal 2 is not the
best option for Eagle.

3. Acquisition Proposal 3

Advice

Please let us know if we can be of any further assistance.

[Transaction Team]

Source
Takeover Code
Listing Rules