BT 2016 Annual Report Download - page 252

258 BT Group plc
Annual Report 2016
The exceptions to the Standstill Provisions include circumstances:
(i) where the Deutsche Telekom Group acquires an interest in
any shares or other securities of BT from the Orange Group
provided that such acquisition does not increase the aggregate
interest of the Deutsche Telekom Group and its concert parties
above 15% of the Ordinary Shares in issue;
(ii) where the Deutsche Telekom Group announces an offer under
Rule 2.7 of the City Code on Takeovers and Mergers (the
“Code”) or takes any action requiring it to make an offer under
Rule 9 of the Code, in each case if such offer is recommended
by the Directors of BT;
(iii) where any third party makes or announces under Rule 2.7 of
the Code an offer to acquire the issued ordinary share capital
of BT, whether such offer is recommended by the Directors of
BT or not; and
(iv) where BT makes any offering or issue of shares or other
securities and the Deutsche Telekom Group takes up its rights
to subscribe for or acquire the shares or other securities
offered to it by BT.
Under the Relationship Agreement, Deutsche Telekom AG
undertakes, among other things, that for a period of two years
from the expiry of the Initial Standstill Period, in the event that
the Deutsche Telekom Group acquires (other than as a result of
a reduction or re-organisation of share capital or re-purchase of
shares or other securities of BT) any Shares in excess of 15% of the
Ordinary Shares in issue (the “Excess Shares”), it shall procure that
the votes attaching to such Excess Shares shall be exercised (subject
to the provisions of the Code and applicable law or regulation) in
accordance with the recommendation of the Board of Directors of
BT on all shareholder resolutions which relate to a transfer of an
interest in Ordinary Shares carrying in aggregate 30% or more of
the voting rights of BT and on all special resolutions of BT. After
expiry of the Initial Standstill Period, the Deutsche Telekom Group
will otherwise be free to increase its shareholding in BT.
3. Lock-up Provisions
The Relationship Agreement contains lock-up provisions pursuant
to which Deutsche Telekom AG and Deutsche Telekom undertake
for a period of 18 months from the date of the Relationship
Agreement, subject to certain exceptions, that neither they nor
any of their group members will, directly or indirectly, offer, sell,
contract to sell, grant or sell options over, purchase any option or
contract to sell, transfer, charge, pledge, grant any right or warrant
or otherwise transfer, lend or dispose of any shares in BT or any
securities convertible into or exercisable or exchangeable for such
shares, or announce or otherwise publish an intention to do any of
the foregoing (each of the above activities being a “Disposal”). The
exceptions include:
(i) where Deutsche Telekom AG or Deutsche Telekom accepts
any offer by a third party for the whole of the ordinary
share capital of BT, whether by tender offer or scheme of
arrangement, or provides an irrevocable undertaking or letter
of intent to accept or vote in favour of any such offer;
(ii) any Disposal to any member of the Deutsche Telekom Group,
provided that the transferee agrees to be bound by the
restrictions of the Relationship Agreement; and
(iii) any sale of shares via any single off-market trade to a Financial
Investor of no more than 5% each of the Ordinary Shares in
issue of BT (or, on one occasion only, the sale of two stakes
of not more than 5% each at the same time to two different
Financial Investors), provided that any transferee enters into
a lock-up agreement on substantially similar terms to the
lock-up provisions of the Relationship Agreement.
4. DT CP Contract
Prior to any Disposal by Deutsche Telekom AG, Deutsche Telekom
or any of their group members in accordance with paragraph 3(iii)
above, BT has a right of first offer in relation to the relevant shares
(subject to the passing of the Buy-Back Resolution), and such right
is set out in the DT CP Contract.
Pursuant to the DT CP Contract, prior to an intended Disposal to
Financial Investors, the relevant selling entity is obliged to issue a
notice to BT specifying the number of Ordinary Shares proposed
to be sold or transferred. BT has nine Business Days within which
to make an offer for all of the Ordinary Shares detailed in the
notice, or else its right to make an offer will lapse. If the offer is not
accepted, the selling entity may make the sale or transfer within
three months of the delivery of the notice to BT at a price equal
to or greater than the price offered by BT. If BT does not make
an offer within the allotted time, the selling entity may sell the
Ordinary Shares within three months of the delivery of the notice
to BT at any price. The DT CP Contract will terminate 18 months
from Completion.
The notice from the selling entity may be issued to BT during a
close period or prohibited period (as such terms are defined in the
Model Code of Chapter 9 of the Listing Rules) of BT. If any such
period does not expire prior to the end of the nine Business Day
period within which BT may elect to make an offer to buy-back the
shares, BT will not be able to exercise its right of first offer.
When exercised in conjunction with BT’s right of first offer in
relation to Ordinary Shares held by Orange and Orange SA, the
maximum amount of Ordinary Shares BT can acquire by exercise
of its rights of first offer is approximately 14% of BT’s share capital
on an enlarged basis post-Acquisition. The price at which Ordinary
Shares can be bought back shall be no more than the higher of
the closing price of the Ordinary Shares on (i) the date on which
BT makes an offer to buy-back the Ordinary Shares and (ii) the
last trading day before the buy-back takes place. In addition, BT
has separately undertaken to give the Sponsor prior notice of its
intention to make an offer for Ordinary Shares under the DT CP
Contract, to consult with the Sponsor regarding such offer and not
to make such offer unless at the relevant time the Board, having
been so advised by the Sponsor, considers such offer to be fair and
reasonable as far as Shareholders are concerned. After expiry of
the lock-up period described above, the Deutsche Telekom Group
will be free to dispose of its shareholding in BT without further
restriction.
5. Rights of Deutsche Telekom AG
Under the Relationship Agreement, subject to compliance with
any applicable regulatory requirements, Deutsche Telekom AG
is able to appoint one Non-Executive Director (the “Deutsche
Telekom Representative Director”) to the Board for so long as the
Deutsche Telekom Group holds 10% or more of the issued share
capital of BT (provided that, if the shareholding is reduced below
10% as a result of a non-pre-emptive share issuance by BT, the
board appointment right shall continue for as long as the Deutsche
Telekom Group holds at least 8% of BT’s shares but provided
further that such reduced shareholding shall not have occurred as
a result of the Deutsche Telekom Group selling Ordinary Shares,
and also provided that the Deutsche Telekom Group must top
up to 10% within 12 months or the right will lapse). Any such
appointment shall be made in consultation with the BT Nominating
& Governance Committee
and the appointee must be approved by
the BT Chairman (such approval not to be unreasonably withheld or
delayed).
The Relationship Agreement provides for the establishment of a
new committee of BT (the “Conflicted Matters Committee”) which
shall assess whether and to what extent the Board papers and