Introduction To Public Takeovers And Mergers (Singapore)

Corporate & Commercial Practice Mergers and Acquisitions Introduction to Public Take-overs and Mergers Christopher Koh Partner Allen & Gle...

Corporate & Commercial Practice Mergers and Acquisitions Introduction to Public Take-overs and Mergers Christopher Koh Partner Allen & Gledhill LLP Scope 2 1. The Take-over Code 2. Types of take-over transactions 3. Approvals required for take-over transactions 4. Concert parties 5. Merger control  3 The Singapore Code on Take-overs and Mergers (the “Take-over Code”) The Take-over Code Singapore Code of Take-overs and Mergers (the “Take-over Code”) Non-statutory set of rules administered by the Securities Industry Council (the “SIC”) Applies to take-overs of:  Corporations, including foreign-incorporated companies, with a primary listing on Singapore Exchange Securities Trading Limited (the “SGX-ST”);  Registered business trusts, including foreign-registered business trusts, with a primary listing on the SGX-ST; 4  5 The Take-over Code  Unlisted Singapore companies with more than 50 shareholders and net tangible assets of S$5 million or more;  Unlisted business trusts with more than 50 unitholders and net tangible assets of S$5 million or more; and  Real estate investment trusts (“REITs”) The Take-over Code The SIC may waive the application of the Take-over Code to: Foreign-incorporated companies or business trusts with a primary listing on the SGX-ST; Singapore-incorporated companies or registered business trusts with a primary listing overseas; or Unlisted Singapore-incorporated public companies or unlisted registered business trusts which are otherwise subject to the Take-over Code 6 The Take-over Code In considering applications, SIC may be concerned regarding: Number of shareholders/unit holders based in Singapore Extent of trading in Singapore Whether these shareholders/unit holders are protected by statutes or codes regulating take-overs outside of Singapore It is necessary to demonstrate: Few shareholders / unit holders based in Singapore who are affected by the takeover; Limited trading of shares of the target entity in Singapore; and Shareholders / unit holders protected by the laws of another jurisdiction. Copyright © 2024, Singapore Institute of Legal Education  8 The Take-over Code Applies to: – All Offerors (individual or company, Singapore resident or not) – All acts done or omitted to be done in and outside Singapore  9 The Take-over Code If the Take-over Code is breached: – Sanctions by SIC – Private reprimand, public censure or, in a flagrant case, to further action as the SIC thinks fit, including deprivation of ability to enjoy facilities of securities market. In the case of advisers, SIC may also require such adviser to abstain from Code-related work for a stated period – Referral of matter to appropriate authorities by SIC if there has been any criminal offence, whether under Companies Act, SFA or any other laws  10 The Take-over Code – Fines and Payments – Where a person has breached the Take-over Code, the SIC may also make a ruling requiring the person concerned to pay, within a specified period, to the holders, or former holders, of securities of the Target Company such amount as the SIC thinks just and reasonable so as to ensure that such holders receive what they would have been entitled to receive if the relevant Rule had been complied with – In addition, the SIC may make a ruling requiring simple or compound interest to be paid at a rate and for a period to be determined, including any period to the date of the ruling and until full payment is made Other Sources of Law/Regulation Companies Act (where Target Company is incorporated in Singapore) Section 210 deals with schemes of arrangements Section 215 deals with compulsory acquisition Sections 215A to 215J deal with amalgamations 11 Other Sources of Law/Regulation Securities and Futures Act Part VIII contains legislative provisions relating to take-overs:  Section 139 - The SIC has the power to administer and enforce the take-over code  Section 140 - It is an offence to make a false offer to make a take-over offer where there are no reasonable grounds for believing that the offer can be paid up 12 Other Sources of Law/Regulation Securities and Futures Act Section 295A deals with compulsory acquisition in relation to REITs Part VII contains legislative provisions relating to insider trading Business Trusts Act Section 40A deals with compulsory acquisition in relation to a business trust 13 Other Sources of Law/Regulation SGX-ST Listing Manual Chapter 7: Continuing Listing Obligations  Rule 723 – 10% free float requirement Chapter 11: Takeovers  Rule 1105 – Suspension of trading in shares of listed company on offeror and concert parties obtaining 90% of total number of shares of listed company Chapter 13: Trading Halt, Suspension and Delisting  Rules 1307 and 1309 – Voluntary Delisting 14  15 Types of Take-over Transactions General Offer 16 Offer Shareholders Offeror Shareholders Offeror 100% Cash / >50% Offeror Target shares Target Mandatory, Voluntary and 17 Partial Offers Mandatory offer : Offeror must make an offer for all shares of Target Company when certain thresholds stipulated in Take-over Code reached Voluntary offer : Offeror makes an offer for all shares of Target Company on a voluntary basis i.e. this offer is not triggered by mandatory offer rules in Take-over Code Partial offer : Offeror makes an offer for a specified number of shares (and not all) in Target Company on a voluntary basis Mandatory Offer: Trigger Thresholds Triggered when Offeror acquires shares, which taken together with shares held or acquired by persons acting in concert with it (“Concert Parties”), amount to 30% or more of shares carrying voting rights of Target Company Also triggered when Offeror and Concert Parties hold between 30% and 50% of the Target Company’s shares carrying voting rights and acquire in aggregate more than 1% of the Target Company’s shares carrying voting rights in any rolling 6-month period 18 Mandatory offers: Conditions Must be conditional upon Offeror obtaining acceptances which will result in Offeror and Concert Parties holding shares carrying more than 50% of voting rights of Target Company. If the offer is launched when Offeror and persons acting in concert with it already hold more than 50%, it is a mandatory unconditional offer Generally, no other conditions permitted except for merger control condition (see “Merger Control”) 19 Mandatory offers: Offer price (Rule 14.3) Offer Price must be: − In cash or accompanied by a cash alternative − At not less than the highest price paid by Offeror or any Concert Party for any Voting Shares during the period of the Offer (“Offer Period”) and in the 6 months leading up to the date of the announcement of the Offer (the “Relevant MGO Period”) Offer Period commences on the date of the announcement of the Offer or possible offer and ends on the close, lapse or withdrawal of the Offer 20 Mandatory offers: Offer price Price paid for Voting Shares acquired through the exercise of: Convertible Instruments; and/or Rights to subscribe for, and Options in respect of Voting Shares, must be taken in account when determining Offer Price Minimum Offer Price determined by, where applicable, calculating the highest price paid by Offeror and Concert Parties for Voting Shares acquired during the Offer Period or Relevant MGO Period through the exercise of Convertible Instruments and/or Rights to subscribe for, and Options in respect of Voting Shares 21 Voluntary offers: Conditions Must always be conditional on Offeror and Concert Parties acquiring more than 50% of Target Company Higher acceptance level condition may be stipulated (e.g. 75% or 90%) Other conditions may be stipulated by Offeror, e.g. shareholders’ approvals or regulatory approval where these are applicable Conditions must not be subjective i.e. fulfilment of conditional cannot be dependent on subjective interpretation or discretion of Offeror 22 Voluntary offers: Offer price Offer Price must be: − In cash or securities or combination of both − At not less than the highest price paid by the Offeror or any Concert Party for any Voting Shares during the Offer Period and in the 3 months leading up to the date of the announcement of the Offer (the “Relevant VGO Period”) 23 Voluntary offers: Offer price Price paid for Voting Shares acquired through the exercise of: Convertible Instruments; and/or Rights to subscribe for, and Options in respect of Voting Shares, must be taken in account when determining Offer Price Methods of determining price paid for Voting Shares acquired through conversion of Convertible Instruments or exercise of Rights or Options same as for Mandatory Offer, except use Relevant VGO Period 24 Partial offers: SIC approval SIC’s consent must be obtained Partial Offers for < 30% (Rule 16.2) SIC will normally grant consent for Partial Offer which does not result in Offeror and Concert Parties holding ≥ 30% of the Voting Shares Partial Offers for between 30% to 50% (Rule 16.3) SIC will not grant consent 25 Partial offers: SIC approval Partial Offers for > 50% (Rule 16.4) SIC will only grant consent for Partial Offer which results in Offeror and Concert Parties holding > 50% of the Voting Shares subject to certain conditions SIC’s consent granted subject to the satisfaction of certain conditions per Rule 16.4. These conditions include:  No acquisition of Voting Shares by Offeror and Concert Parties during: o the 6 months prior to date of announcement of Partial Offer o the period between submission of application for SIC’s consent and announcement of the Partial Offer 26 Partial offers: Conditions Conditions to Partial Offers for > 50% (Rule 16.4)  No acquisition of Voting Shares by Offeror and Concert Parties during: o The Offer Period (except pursuant to the Partial Offer) o The 6 month period following the close of the Partial Offer, if the Partial Offer becomes unconditional as to acceptances 27 Partial offers: Conditions Partial Offers for > 50% (Rule 16.4) Must be approved by shareholders of the Target Company  Shareholder approval must still be obtained if Offeror and Concert Parties hold > 50% in Target Company and the Partial Offer could result in Offeror and Concert Parties holding > 90% of the Voting Shares or Target Company failing to comply with free float requirement  Offeror, Concert Parties and their associates must abstain from voting  Approval must be obtained either in general meeting on a poll or by “tick the box” on acceptance forms 28 Partial offers: Conditions Partial Offers for > 50% (Rule 16.4) Disclosure in the Partial Offer Document that:  If Partial Offer succeeds, Offeror can exercise statutory control over Target Company  The Offeror and Concert Parties will be free, 6 months after the close of the Partial Offer to acquire further shares without incurring any obligation to make general offer Please refer to Rule 16.4 for the full set of conditions applicable to any partial offer for more than 50% of the shares of the Target Company 29 Partial offers: Offer Price Partial Offers Partial Offer Price (Rule 16.5)  Partial Offer Price must be in cash or securities or combination of both 30  31 Indicative Timetable for General Offers (Rule 22) No. Day Action (1) D Offeror announces intention to make Offer (2) D+1 Target Company releases holding announcement and appoints independent financial adviser (“IFA”) (3) D+ 14 to D + 21 = T Offeror posts Offer Document to Target company shareholders (4) T + 14 Target Company issue Offeree Circular (5) T + 28 Earliest possible closing date – Offer closes, unless extended (6) T + 60 Latest date for Offer to become or be declared unconditional as to acceptances** **Offeror is required to effect settlement within 7 business days after the Offer becomes unconditional in all respects. General points relating to offers Irrevocable Undertakings. An Offeror can seek irrevocable undertakings from the shareholders of the Target Company to accept its offer No special deals. All shareholders must be treated equally When a cash offer is required. Offer must be in cash or accompanied by a cash alternative at not less than the highest price paid by Offeror or any concert parties where Offeror and any concert parties have bought for cash during offer period, and within 6 months prior to its commencement, shares of Target Company carrying 10% or more of voting rights of that class 32 General points relating to offers When a securities offer is required. Where the Offeror has acquired more than 10% or more of voting rights in exchange for securities during offer period and in the 3 months prior to the offer period, such securities will also need to be offered to all other shareholders. 33  34 Scheme of Arrangement Shareholders Offeror Scheme 100% Implementation Agreement Target Shareholders Offeror Cash / 100% Offeror shares Target Scheme of Arrangement General Court sanctioned process set out in Section 210 of the Companies Act Target Company will be the company implementing the Scheme of Arrangement (“Scheme”) On Scheme becoming effective, Offeror will hold 100% of the Target Company Scheme must comply with the Take-over Code – SIC will exempt Scheme from compliance with certain rules of the Take-over Code, subject to certain conditions Note: Need to engage with the Target Company’s board, as only the Target Board can propose a scheme ot its shareholders – unlike with a general offer 35 Scheme of Arrangement Approvals Required − Target Company Shareholders’ Approval  Target Company must convene general meeting, with leave of High Court of Singapore (“Court”), to approve Scheme (“Court Meeting”)  Approval Threshold: o Majority in number of Target Company shareholders present and voting in person or by proxy (unless the Court orders otherwise) o Such majority holding at least 75% in value of the Voting Shares held by Target Company shareholders present and voting at the meeting, in person or by proxy  Offeror and its Concert Parties must abstain from voting at Court Meeting 36 Scheme of Arrangement 37 Approvals Required Court Approval  Convening of Court Meeting to approve Scheme  Sanction of Scheme following approval at Court Meeting SGX-ST Approval (if the Target Company is listed on the SGX-ST)  Clearance of Scheme Document  Delisting of Target Company following Scheme becoming effective Scheme becoming effective Scheme becomes effective when the order of Court sanctioning the Scheme is lodged with ACRA  38 Voluntary Delisting General Rule 1307 and Rule 1309 of the SGX-ST Listing Manual – process prescribed in SGX-ST Listing Manual for listed company to be delisted from the Official List of the SGX-ST (“Delisting”) Approval of shareholders of Target Company required to approve the Delisting Majority shareholder or third party must provide an exit offer (“Exit Offer”) to the shareholders of Target Company On close of the Exit Offer, Target Company will be delisted from the Official List of the SGX-ST Only the Target Board can propose a voluntary delisting and make the necessary applications to the SGX-ST.  39 Voluntary Delisting Approvals Required Approval of Shareholders of Target Company  Target Company must convene general meeting to approve Delisting (Rule 1307(1) SGX-ST Listing Manual)  Approval Threshold (Rule 1307(2) SGX-ST Listing Manual): o Approved by a majority of at least 75% of total number of issued shares (excluding treasury shares) held by shareholders present and voting, on a poll, either in person or by proxy at the meeting o The Offeror and parties acting in concert with the Offeror (“Offeror Concert Party Group”) must abstain from voting on the resolution  40 Voluntary Delisting Approvals Required SGX-ST Approval  Clearance of circular to shareholders  Delisting of Target Company subject to: o Exit Offer that must (a) be fair and reasonable and (b) include a cash alternative as the default alternative reasonable (Rule 1309(1) SGX-ST Listing Manual) o Target Company having obtained an IFA opinion that the Exit Offer is fair and reasonable (Rule 1309(2) SGX-ST Listing Manual)  41 Voluntary Delisting Approvals Required SIC Approval (Practice Statement on Offers made under Rule 1307 SGX-ST Listing Manual)  Exit Offer must comply with the Take-over Code  SIC will waive certain rules of the Take-over Code, including the offer timeline, subject to conditions including: o Exit Offer must remain open for acceptances for at least: 21 days after date of despatch of Exit Offer Letter if Exit Offer Letter is being despatched AFTER Target Company shareholders approve Delisting; or 14 days after date of announcement that Target Company shareholders have approved Delisting if Exit Offer Letter is despatched ON SAME DATE as circular  42 Amalgamation Shareholders Offeror 100% Amalgamation Agreement Target Shareholders Amalgamated Offeror Cash / Offeror shares Target Amalgamation General Statutory merger pursuant to Sections 215A to 215K Companies Act Companies to be amalgamated or merged must be Singapore incorporated companies No Court approval required Alternative to General Offers, Schemes of Arrangement for public takeovers, but not used often due to solvency statement requirements 43 Approvals Required for Take-over Transactions Shareholder Approval; Court Approval and SIC Approval 44 Shareholder Approval 45 General Offer Scheme Amalgamation Delisting No Yes Yes Yes However, offer must be conditional on Offeror and its concert parties acquiring more than 50% of Target shares, though Offeror may specify a higher threshold in a voluntary offer Court Sanction 46 General Offer Scheme Amalgamation Delisting No Yes No No  47 SIC Clearance General Offer Scheme Amalgamation Delisting Yes Yes Yes Yes  48 Concert Parties Definition set out in Take-Over Code Acquisition of shares by Offeror includes shares acquired by persons acting in concert with Offeror Persons acting in concert comprise individuals or companies who, pursuant to an agreement, arrangement or understanding (whether formal or informal), co-operate, through the acquisition by any of them of shares in a company, to obtain or consolidate effective control of that company  49 Presumed Concert Parties Various individuals and companies are presumed to be persons acting in concert with each other unless contrary established: Company, its parent, subsidiaries, fellow subsidiaries and their associated companies, companies of which such companies are associated companies, and persons who have provided financial assistance (other than a bank in the ordinary course of business) to any of the foregoing for the purchase of voting rights ownership / control of at least 20% but not more than 50% of equity share capital = associated company) Presumed Concert Parties Company with any of its directors (together with close relatives and related trusts) Company with any of its pension funds and employee share schemes Person with any investment company, unit trust or other fund whose investment such person manages on a discretionary basis Financial / professional adviser with its client in respect of shareholdings of adviser, and all funds which adviser manages on discretionary basis, where shareholdings of adviser and any of those funds in client total 10% or more of client’s equity share capital 50 Presumed Concert Parties Directors of company (together with close relatives and related trusts) which is subject to an offer or where directors have reason to believe bona fide offer for their company imminent Partners Individual, his close relatives, related trusts, any person who is accustomed to act in accordance with his instructions, any companies controlled by such persons, and persons who provided financial assistance (other than a bank in the ordinary course of business) to any of the above for the purchase of voting rights 51 Notice Copyright © 2024, Singapore Institute of Legal Education. 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