IRISH TAKEOVER PANEL
Panel Announcement
alphyra group plc (“alphyra”)
The Panel met on 17 and 18 February 2003 to consider a submission by the Federated Kaufmann Fund (“FKF”), a shareholder in alphyra, which raised certain issues in relation to the conduct of the offer by Rendina Limited (“Rendina”) (“the submission”).
The submission requested the Panel to suspend the Rendina offer timetable and to conduct a Panel investigation into the actions of the alphyra management buy-out team (“the MBO team”). FKF stated in the submission that it did not believe that the Rendina Rule 2.5 announcement or its offer document contained sufficient information on the nature of alphyra’s business and its financial and trading prospects to satisfy General Principle 4 and Rule 24.2(c). FKF also stated that it is its view that circumstances exist which merit an investigation by the Panel to determine whether the actions of the MBO team constituted frustrating action, as set out in General Principle 6 and Rule 21.1.
The Panel sought comments from the independent directors of alphyra, First Data Corporation (“FDC”), Rendina and the MBO team in relation to the matters raised in the submission.
General Principle 4 states inter alia that shareholders to whom an offer is made shall be entitled to receive such information and advice as will enable them to make an informed decision on the offer. Rule 24.2(c) sets out the detailed financial and other information on an offeree which is required to be disclosed in an offer document. The Rule does not contain a requirement to disclose in the offer document information on the nature of the offeree’s business and its financial and trading prospects. The Panel therefore ruled that there had been no breach of General Principle 4 or of Rule 24.2(c).
General Principle 6 and Rule 21.1 require the directors of an offeree when an offer is made or when they have reason to believe that the making of an offer is imminent to refrain from doing anything as respects the conduct of the affairs of the offeree which might frustrate that offer except with the authority of the offeree shareholders.
The Panel noted that FDC stated in its response that it did not wish to comment on the submission other than to state that certain of the stipulated pre-conditions to it proceeding with an offer could not be met to its satisfaction and that accordingly, FDC wrote to the independent directors of alphyra to terminate discussions. The Panel noted that none of the aforementioned pre-conditions related to the retention of the entire alphyra management team.
The Panel recognises the difficulties that can arise as a result of the inherent conflicts of interest in management buy-out transactions. In such transactions, the independent directors of the offeree and its advisers will usually seek to establish procedural practices designed to minimise the extent of any resulting problems. In accordance with Rule 3, two of the directors of alphyra were appointed as independent directors for the purposes of formulating and communicating advice to alphyra shareholders.
The Panel noted the press comments on 15 January, 2003 attributed to the MBO team regarding a possible offer for alphyra from FDC that any bid for the company would be seen as hostile. The Panel believes that if such comments were made they were inappropriate. The Panel also noted that the independent directors issued an announcement on 15 January stating that the sole responsibility for considering any offer lay with the independent directors and that any possible offer that would increase shareholder value would be welcomed.
The Panel concluded, on the basis of the evidence before it, that no sustainable case had been made to justify a conclusion that a breach of General Principle 6 or Rule 21.1 had occurred. In coming to this conclusion, the Panel took the view that there was no evidence that the actions of the directors of alphyra as respects the conduct of the affairs of alphyra were such as might frustrate an offer.
Accordingly, FKF’s request to suspend the Rendina offer timetable is refused.
