Fundamentals of Business

Example of disadvantages of issuing shares

Factors that can trigger

A takeover in business refers to one company (the acquirer, or bidder ) purchasing another (the target ). In the UK the term properly refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.

Takeovers in the United Kingdom (meaning acquisitions of public companies only) are governed by the City Code on Takeovers and Mergers. In 2006 the Code was put onto a statutory footing as part of the UK's compliance with the European Directive on Takeovers (2004/25/EC).

The Code requires that all shareholders in a company should be treated equally, regulates when and what information companies must and cannot release publicly in relation to the bid, sets timetables for certain aspects of the bid, and sets minimum bid levels following a previous purchase of shares.

In particular:
a shareholder must make an offer when its shareholding, including that of parties acting reaches 30% of the target;
information relating to the bid must not be released except by announcements regulated by the Code; the bidder must make an announcement if rumour or speculation have affected a company's share price;
the level of the offer must not be less than any price paid by the bidder in the three months before the announcement of a firm intention to make an offer;
if shares are bought during the offer period at a price higher than the offer price, the offer must be increased to that price;
The Rules Governing the Substantial Acquisition of Shares, which used to accompany the Code and which regulated the announcement of certain levels of shareholdings, have now been abolished, though similar provisions still exist in the Companies Act 1985.

Example
Extract from bbc·co·uk

Glazer gets 98% of Man Utd shares American billionaire Malcolm Glazer has said he has acquired enough shares in Manchester United to force remaining investors to sell their stock to him. A statement from his Red Football bidding vehicle said he now owned 98% of the Old Trafford club. This takes him past the 97.6% level needed to force a compulsory buyout of remaining shareholders. But Mr Glazer, who took over United in a £790m buyout, is keeping open his £3 a share offer to investors for now. Red owns or has received valid acceptances of the offer in respect of a total of 259,950,194 Manchester United Shares, representing approximately 98.0% of the issued share capital of Manchester United, Mr Glazer's representatives told the London Stock Exchange.