Changes to US takeover rules

July 1983
Accountancy;Jul1983, Vol. 94 Issue 1079, p11
Trade Publication
This article provides information on the expected changes in consolidation rules to be proposed by a panel commissioned by the U.S. Securities and Exchange Commission (SEC) in July 1983. The panel has agreed in principle to a provision which will restrict open market purchases by a bidder after it has acquired a 15% stake in the target company. A bidder wanting to increase its stake beyond 15% would have to make a public tender offer. This follows a number of well-publicized bids in the U.S. where the bidder has built up a substantial stake by purchases through brokers and shareholders who sold first have made the largest profit. The proposed changes would be in line with practice in Great Britain, where in December 1980 the Council for the Securities Industry formalized Rules Governing Substantial Acquisitions of Shares, which restricted the effectiveness of dawn raids. Acquisitions resulting in holdings of between 15% and 30% of the voting rights in a listed company are, under these rules, made by tender offer. The panel is also expected to give shareholders of companies the opportunity to vote on whether a company should retain golden parachutes--lucrative severance pay contracts for top executives which are triggered off by takeovers. A further proposal is for a simplification of the SEC disclosure requirements in a bid situation, so that investors receive a summary highlighting the price and key conditions of the offer.


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