Takeover Bid Conditions – Implications Of A Likely Breach

IFM’s current takeover bid for Atlas Arteria includes 10 pages of conditions, some of which Atlas Arteria has claimed are not likely to be satisfied. We look at the rules and implications.

In brief

• There are few restrictions on the sorts of conditions that may be included in a takeover bid.
• A long list of conditions may raise practical and policy issues if the conditions are not satisfied or not likely to be satisfied.

Takeover Bid Conditions – implications of a likely breach

On 27 April 2026, IFM announced a takeover bid for Atlas Arteria, offering $4.75 per share increasing to $5.10 if it reaches control of 45% of issued shares.¹  When the bid was announced, IFM held around 35%. Like the vast majority of takeover bids, IFM’s bid is subject to a various conditions. Atlas Arteria described the list as ‘extensive and highly restrictive’. It spans 10 pages and includes 13 separate categories of conditions and more than 50 separate sub-conditions. 

Even before issuing its target’s statement, Atlas Arteria wrote to its shareholders highlighting three conditions which it considers are unlikely to be satisfied, namely:

• A condition that requires Ontario Teachers’ Pension Plan Board as a co-shareholder in Chicago Skyway to grant a waiver of its change of control rights for no consideration, something which Atlas Arteria describes as ‘commercially unreasonable’;
• A condition related to capital expenditure which Atlas Arteria says will not be satisfied given business-as-usual requirements for its concession companies; and
• Another condition that Atlas Arteria says will be triggered by business-as-usual intragroup capital distributions.

If this is correct (and I would point out that HSF Kramer is not advising the target or the bidder, so I am relying only on public information), it raises some interesting questions.

What are the rules in this context?

There is nothing illegal or improper about including a long list of conditions in a takeover bid under Australian law. The legislation, in fact, provides very few restrictions. Most takeover bids start off with a long list of conditions, particularly where the bidder has not been able to conduct due diligence on private target company information before launching the bid. The conditions enable the bidder to manage its risks.

As I wrote after the 2023 bid by Australian Clinical Labs for Healius (which also had very extensive conditions), there are several consequences that flow from a long list of conditions, particularly where there is a risk one or more conditions may not be satisfied.

The most obvious point is that shareholders may be less likely to accept a conditional takeover offer if there is a reasonable chance that the conditions may not be satisfied. Accepting an offer typically means the shareholder has tied up his or her shares and cannot withdraw their acceptance (other than if the bid is extended for a month or more while conditional). That usually leads to the bidder having to remove conditions as the bid progresses (often after the target’s statement is released with additional information addressing the conditions).² The problem can be addressed (as IFM has done) by an institutional acceptance facility which enables eligible shareholders to lodge acceptances on a non-binding basis, pending the bid becoming unconditional. 

Apart from that commercial issue, there are a few potential legal implications:

• If a condition cannot be satisfied and the non-satisfaction does not have a material impact on the target, it is possible that the Takeovers Panel may decide that relying on the non-satisfaction would create ‘unacceptable circumstances’ and deny the bidder the ability to rely on the failure of the condition (as occurred in the NGM Resources takeover bid in 2010);
• If a condition cannot be satisfied, the target may be freed of restrictions under the Panel’s frustrating action policy on the basis that, so long as the condition is not waived, the bid does not give rise to a ‘genuine opportunity’ for shareholders to dispose of their shares (see Guidance Note 12); and
• Finally, if a condition cannot be satisfied, the bidder may come under pressure to declare whether or not it intends to rely on the non-satisfaction rather than wait until the last 7 days of the offer period as the legislation permits (notwithstanding the old 2004 decision by the Panel in the Novus Petroleum matter which was very favourable to the bidder, describing the issue as a ‘known certainty’ in the market).

How might this apply to Atlas Arteria?

If the views expressed by the directors of Atlas Arteria are right and IFM’s bid conditions are unlikely to be satisfied, this may attract the second point mentioned above, namely it could be argued that shareholders may not have a ‘genuine opportunity’ to dispose of their shares unless and until the bidder waives the condition. This conclusion may be influenced by the precise nature of the condition and whether IFM would be entitled to rely on the non-satisfaction as sufficiently material (the first point mentioned above, that is, the NGM Resources example).

If that argument is correct, that could potentially open the possibility of Atlas Arteria getting on with its plans (which apparently includes potentially selling the Chicago Skyway) without that being a ‘frustrating action’, meaning Atlas Arteria may not have to submit those plans to shareholder approval due to the takeover bid being on foot. 

The target’s statement issued by Atlas Arteria on 26 May 2026 discusses each bid condition and the risk of them not being satisfied. The directors conclude there is a ‘significant risk’ of the conditions not being satisfied.

At the time of writing this note, shares in Atlas Arteria are trading above the offer price, suggesting that the market believes that the bid is likely to succeed and the position about the conditions will be resolved. That may change if a failure to satisfy a condition is announced.³

Is there a larger policy issue?

The issues discussed here are not new. What to do with conditions that are unlikely to be satisfied  (known as ‘hair-trigger conditions’) has been a point of debate for a long time. The takeovers legislation prohibits a condition that depends on the bidder’s opinion. Despite that, the same effect is achieved once a condition cannot be satisfied as the bidder then can determine whether or not to waive that condition (often described as a ‘free option’). 

A stricter approach applies under the UK Takeover Panel. First, under the London rules, the framing of conditions in any bid (which for these purposes includes schemes of arrangement) must be approved by the London Panel. It is typically unwilling to permit conditions which may create the uncertainties discussed here. Secondly, the London Panel must be involved in any decision to rely on an alleged failure to satisfy a condition and the London Panel rarely allows that to occur. Well-known examples include the London Panel’s 2001 refusal to allow WPP Group plc to rely on the September 11 terrorist attack to terminate its offer for Tempus Group plc and the 2020 refusal to allow Brigadier Acquisition Co. to withdraw its offer for Moss Bros Group on account of Covid-19 and government measures taken in response. 

This sort of dispute is not entirely academic. As you would know, last year the scheme for Mayne Pharma was subject to lengthy litigation about whether there had been a material adverse change entitling Cosette to terminate the scheme. That dispute arose in late May 2025, was heard by the court on an ‘expedited’ basis in October and decided on 15 October 2025. That was a four-and-a-half-month process. If the UK approach was available here (or if parties brought their dispute to our Takeovers Panel for resolution), it is likely that these disputes would be resolved far quicker, which would be a good thing for our market. 

Footnotes

1. The mechanics of how the increase would be effected if IFM reached 45% late in the offer period were the subject of proceedings in the Takeovers Panel. These were resolved after some changes were made: Takeovers Panel media release 21 May 2026.

2. In a scheme of arrangement, the bidder can keep its conditions until the second court date. Voting on a scheme of arrangement does not require the shareholder to tie up their shares for any amount of time. The existence and operation of conditions are not relevant to the decision whether to vote in favour of the scheme, though they may be very important to anyone trading shares while the transaction is on foot. 

3. I  learnt this as a young lawyer way back in 1997 when acting for Pasminco on its bid for Savage Resources. The stock market was trading well above the bid price. There was then a breach of a bid condition (one related to a fall in the ASX index). The dynamics changed quickly. The price of the target shares fell. Pasminco’s bid was then seen as attractive and control passed (something which ultimately led to the demise of Pasminco, but that is another story).

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