Take-Over Bid Disclosure Issues
See Chinese version below [中文版参阅下文].
Canadian public companies are required by securities laws to issue a press release and file a material change report whenever a material change occurs. The possibility of a take-over bid can be expected to impact the share price of the target company sufficiently to constitute a material change, so careful consideration must be given to the appropriate time for a public announcement. Premature disclosure can be just as damaging as late disclosure. A public company does not want to cause excitement in its share price based on a premature announcement, and then have the share price collapse if a transaction fails to materialize. Not only can this be damaging to the company’s reputation in the capital markets, it can be very disruptive amongst employees, customers and suppliers.
The preferred approach is for the initial contact and any early discussions to be conducted confidentially, with no press release or other disclosure by either the bidder or the target.
If there is a leak and rumours of an impending transaction appear in the press, the target company may be forced to make a public statement earlier than it would have preferred; a typical statement is to the effect that “Preliminary discussions are underway, but there can be no assurance a transaction will result”.
More often, assuming that there are no leaks which result in unusual market trading activity, a public announcement will be made either that the target company has signed a support agreement and its board is recommending that shareholders accept the proposed transaction, or (if the announcement is made earlier in the process) that the public company is exploring strategic alternatives or has decided to put itself up for sale and has retained investment bankers to canvass the market for transactions that would be in the interests of the target company and its shareholders.