Silence Therapeutics Acquisition: Outside the Takeover Code

Silence Therapeutics agreed to sell itself to Merck KGaA, Darmstadt, Germany for $20.00 in cash per American depositary share, but the UK Takeover Code itself does not apply. The transaction agreement, signed Sunday, October 18, 2026, says the Takeover Panel advised Silence that, based on where its directors live, the Code does not apply. Its only break fee runs from Silence to Merck, and it needed no Panel consent.

Why the UK Takeover Code Does Not Apply

Silence said in a 6-K furnished May 1, 2024 that the Takeover Panel had confirmed the Code would stop applying once director Alistair Gray retired that day. It added: "As a result, our shareholders will not be entitled to the benefit of certain takeover offer protections provided under the Takeover Code."

The same filing said Article 159 of Silence's articles, "which includes certain takeover protections," would apply once the Code ceased to. Shareholders renewed it 48,307,317 votes to 9,333 at the June 16, 2026 annual meeting, an 8-K filed that day shows. Article 159 bars anyone from crossing 30% of the votes except through a permitted acquisition, such as one with board consent, a Code-style offer or shareholder approval. It applies the Code's Rules 4, 5 and 15 as if the Code applied and gives the board the Panel's discretions. Section 4.26 records the board's determination under Article 159.8 that no Rule 15 offer is needed. An acquisition through an offer the board recommends is a permitted acquisition, and the board recommends this deal. Article 159 contains no break-fee provision.

What Rule 21.2 Would Have Required

Had the Code applied, its Rule 21.2 would have barred any Silence-paid fee, and other offer-related commitments to a bidder, without Panel consent. The rule's notes describe two cases in which the Panel will normally consent: a rival bid for a target facing an unrecommended offer, and a formal sale process, the Code's term for an auction the target's board announces publicly. Either way the fee is normally at most 1% of the target's value at the offer price. Silence's $13 million is about 1.0% of share value, a TradeFlock calculation, so its size is in that range; what differs is that no consent was needed, and when the fee is payable. Silence's release cites a competitive sale process; the filings do not show an announced formal one.

The notes also require a permitted fee to be payable only if an offer becomes or is declared unconditional, while Section 9.3 has Silence pay on a termination after a board change of recommendation or to accept a superior proposal, whether or not any rival deal closes. Other arrangements, such as the Section 6.2 no-shop and Merck's four-business-day matching right, would have needed consent that the notes reserve, in a formal sale process, for "exceptional circumstances."

The fee also applies after an outside-date, failed-vote or breach termination if a rival proposal was public and not withdrawn at least five business days before the meetings and within 12 months Silence signs a deal for more than 50% of itself that later closes, or closes one. Section 9.3 sets no fee payable by Merck, and Section 9.3(c) makes it Merck's sole monetary remedy, except for fraud or a willful breach by Silence.

What the Scheme Vote Requires

Silence's 8-K filed Monday, October 19, says the scheme of arrangement under Part 26 of the UK Companies Act 2006 needs a majority in number representing at least 75% in value of the members present and voting, plus a 75% special resolution, court sanction and US and German antitrust clearance.

The majority in number test counts members, not shares. Section 4.5's share counts put 99.6% of the ordinary shares in issue on October 15, 2026 with the depositary, a TradeFlock calculation. The filings do not say how ADS holders' votes will be counted toward that test.

The $20 Price and the $13 Million Fee

At three ordinary shares per ADS, $20.00 is $6.6667 a share, or about $1.24 billion for all 186,609,072 shares, a TradeFlock calculation. The October 19 release puts equity value at about $1.3 billion and enterprise value at $1.1 billion without breaking down either. Options over 7,609,878 ADSs are cashed out for any excess over their exercise prices, which are not disclosed, so TradeFlock cannot test whether they explain the gap. IonQ's "up to $1.3 billion" for Elisity is another headline figure that needs unpacking: it leaves out a $100 million retention pool.

The release calls $20.00 a 130% premium to the Friday, October 16 close. The $13 million fee compares with $211.7 million payable by Varonis in certain cases under its Proofpoint agreement.

What Happens Next

US antitrust filings are due within 10 business days of signing. Silence must also hold the scheme meeting and general meeting back to back, then seek court sanction. The release expects closing in the first quarter of 2027. Either side can walk away if the deal has not closed by 11:59 p.m. London time on Friday, April 30, 2027, subject to a five business day extension tied to court sanction timing.

Cover photo: Glass vials in a laboratory carousel (brand marks blurred), by Jess Loiterton on Pexels, used under the Pexels License.