Drawing a Line in the Sand

One constant issue facing bidders is how to legitimately apply pressure on shareholders to accept a bid before control has passed. Shareholders are increasingly reluctant to accept any bid, even if it is unconditional, before control passes as there is a danger that they may be giving up some further potential profit on their holding if a rival bid emerged or if the bidder felt compelled to increase the bid to achieve the acceptances.

In three takeover bids this year, bidders have adopted the technique of announcing that they will not extend their bid past the scheduled closing date, but noting that, if they pass the 50 per cent threshold during the last seven days of the bid, the bid is automatically extended under the Corporations Act for a further 14 day period. As a further incentive, if the bid is conditional, the bidders have also announced that, upon reaching 50 per cent, they would declare their bids unconditional.