Since the launch of the takeover offer for ADI, I have seen...

Since the launch of the takeover offer for ADI, I have seen various questions, and have had some myself, on the details of the offer. Some of these amount to questions on the takeover rules found in the Corporations Act 2001. You'll also see a few references to this in the original Macquarie Equities announcement. I'll attempt to answer a few of these questions but first I must stress that this amounts to my own interpretation of the rules in the Act and how I think they would be applied. As always you should do your own research.

1. Can the bidder buy ADI stock for more than 40c?

The simple answer to this is yes. The bidder is free to vary the terms of the offer, including raising the price, by announcing this to the market. However, the bidder cannot increase the offer price during the last 5 days of the offer period.

2. Can the bidder buy stock for more than 40c without disclosing that to the market?

This is where things get a little hazy. To try and answer this I need to make a distinction between the offer period of 1 June to 9 July and the announcement period from the announcement date to 31 May.

During the offer period, my understanding is that the bidder would have to announce an increase in the offer price if they want to pay more than 40c. So the answer to the question is I believe no.

During the announcement period, it may be possible for the bidder to acquire stock above 40c but the bidder is still bound by the substantial holder notice rules. So even if the bidder was allowed to buy stock above 40c, they would have to disclose this to the market if the buying amounted to greater than 1% voting interest (about 1.7m shares in this case). Not to mention the credibility problem the bidder would have trying to convince shareholders to sell at 40c during the offer period if the bidder had already demonstrated a willingness to pay more. So in my view the answer is possibly yes, but practically unlikely.

3. If I sell my shares to the bidder at 40c, will I benefit from any subsequent increase in the offer price?

No. This is an unconditional on-market bid. Once you sell your shares you're out. No different than if you sold your shares to another party on any other trading day.

4. Can the bidder withdraw the offer before the end of the offer period?

Yes, but only under certain circumstances. Many of the acceptable reasons to withdraw are technical in nature and unlikely to happen so I'll stick to the ones which are more relevant. The bidder can request a written consent from ASIC to withdraw the offer. Because this offer is unconditional, the bar is pretty high for the bidder to get over if they go down this path. ASIC assumes that the bidder did their homework before announcing the takeover so any case of cold feet won't be enough to convince ASIC. It must be a material negative change in commercial circumstances for either the bidder or target as judged by ASIC.

If the bidder holds 50% or less of the target, and the target issues new shares or options over shares or disposes of a substantial part of the business, the bidder has the option to withdraw the offer.

I'll stop there and hope that this has been of interest. Best of luck to long term holders and arbitragers alike! And to AWE, pay up, you know you want to :)