Are there circumstances where a buyer may have to make a mandatory or compulsory offer for a target company?
Mergers & Acquisitions (3rd edition)
The acquisition of a certain percentage of securities carrying voting rights of a publicly traded company or the holding company thereof, may give rise to a mandatory public offer in the following scenarios:
(i) when a person, as a result of its acquisition or the acquisition by a person acting in concert, holds more than 30% of the securities carrying voting rights of a publicly traded company ;
(ii) when , as a result of an acquisition, a person directly or indirectly acquires control of a holding company, i.e. a legal entity holding more than 30% of the securities carrying voting rights of a publicly traded company;
(iii) when persons acting in concert, as a result of an acquisition of securities by one of those persons, exceed the threshold of 50 % of the voting securities of a holding company, i.e. a legal entity holding more than 30% of the securities carrying voting rights of a publicly traded company;
(iv) when persons acting in concert acquire more than 50 % of the voting securities of a person who directly or indirectly exercises legal control over the holding company, i.e. a legal entity holding more than 30% of the securities carrying voting rights of a publicly traded company.
There are additional requirements to launch a mandatory public offer for persons acting in concert.
Section 102 of the Companies Act gives dissenting shareholders the ability to compel the acquirer to acquire their shares on the same terms as set out in the initial bid or on such other terms as the parties may agree or as the court deems fit upon application by either party. Where a purchaser makes an offer to acquire the shares of the company, and in pursuance of that offer has transferred to it more than 90% of the shares of the company, the purchaser must, within one month of the date of the transfer which caused it to exceed the 90% threshold, give notice of that fact to the holders of the remaining shares who have not consented to the scheme or contract. Any such holder may, within three months from receiving the notice from the purchaser that the purchaser has acquired 90% of the shares of the company, him/herself give notice compelling the purchaser to acquire his/her shares. Where a remaining shareholder gives such a notice, the purchaser is entitled and bound to acquire those shares on the same terms as set out in the scheme or contract or on other terms as may be agreed or as the court, on application by either party, thinks fit to order.
Yes, please refer to the answer set forth in question number 5 related to public tender offers.
The bidder is obliged to submit the offer (mandatory offer) when directly or indirectly, independently or jointly, acquires the target company’s shares with the voting right so that, together with the shares already acquired, exceeds the threshold of 25% of the target company’s shares with the voting rights (control threshold).
After the bidder has exceed the control threshold and has published the offer, it is required to publish the takeover offer when, independently or jointly, directly or indirectly, acquires the target company’s shares with voting right and thus increases the percentage of voting rights by more than 10%.
Not in our market.
If a controlling shareholding of more than 30% in a listed joint stock corporation is directly or indirectly acquired, a mandatory offer needs to be submitted to the remaining shareholders. Mandatory offers are subject to minimum pricing rules, cannot be made conditional (except for legal conditions such as regulatory approvals) and cannot foresee a withdrawal right.
Holding up to 30% of the shares does not trigger a mandatory offer but a shareholding between 26% and 30% needs to be reported to the Takeover Commission and in principle voting rights exceeding 26% are suspended.
In case that a buyer directly or indirectly acquires a decisive share of voting rights (i.e. a shareholding of more than 30% in a publicly traded joint stock company), the buyer (whether by the share deal or by purchasing the target company’s shares on the stock exchange) has an obligation to publish the acquisition of control and to make a mandatory offer to the remaining shareholders of the target company in order to acquire the remaining shares within 30 days after the buyer acquired the decisive share of the voting rights. Mandatory offers are subject to minimum pricing rules (as mentioned in Question 18).
British Virgin Islands
The BVI does not have any laws or regulations requiring an acquirer to make a mandatory or compulsory offer for a target company.
The Cayman Islands do not have a law or regulation requiring an acquirer to make a mandatory or compulsory offer for a target company. In the case of a company listed on the CSX, the Code requires that, where there has been an announcement of a firm intention to make an offer, the offeror must, except with the consent of the Council Executive, proceed with the offer unless the posting of the offer is subject to the prior fulfilment of a previously disclosed specific condition and that condition has not been fulfilled. The offeror must publish its offer document within 30 days of the announcement of a firm intention to make an offer.
There is such obligation where a person who, alone or in concert, exceeds (even unintentionally) the 30% threshold of the shares or voting rights in the target.
A mandatory offer is also required when a person who already holds between 30% and 50% of the target, increases its shareholding in the target by over one percent of the total capital or voting rights within 12 months.
Exemptions to mandatory offer requirements may be granted by the AMF in some limited circumstances.
Please see section 5.
The tender offer rules under the laws of Japan are very complicated, but unless any of the exemptions (e.g., exercise of stock options, transactions within a group, acquisition by a parent) apply, if the target company is a corporation or other entity that is obliged to submit an annual securities report, a tender offer is typically required in the following instances:
(i) a purchase of shares outside of any stock exchange market from more than ten (10) sellers within a sixty-one (61)–day period and where, as a result of such purchases, the shareholding ratio of the acquirer exceeds five percent (5%);
(ii) a purchase of shares outside of any stock exchange market where, as a result of such purchase, the shareholding ratio of the acquirer exceeds one-third (1/3); or
(iii) a purchase of shares in excess of ten percent (10%) of the total voting rights of the target company during a three (3)-month period by way of purchases of shares or by way of the acquisition of newly issued shares (but only if such acquisition is in excess of ten percent (10%), which includes purchases of more than five percent (5%) of the shares made outside of the stock exchange market or through off-hour trading), and where, as a result of such purchases, the shareholding ratio of the acquirer exceeds one-third (1/3).
If the acquirer seeks to acquire two-thirds (2/3) or more of the voting rights of the target company, the acquirer is not permitted to set an upper limit and is required to acquire all tendered securities.
Where the Takeover Code applies, a mandatory offer must be made when the bidder either:
- acquires an interest in shares which carry (when taken together with shares in which persons acting in concert with the bidder are interested) 30% of more of the voting rights of the company; or
- is, together with any person acting in concert with them, interested in shares which in the aggregate carry not less than 30% of the voting rights of a company but does not hold shares carrying more than 50% of such voting rights, and the bidder (or any person acting in concert with them) acquires an interest in any other shares of the company which increases the percentage of shares carrying voting rights held by the bidder.
Pursuant to Rule 33 of the Securities (Takeover) Rules 2010, a mandatory offer must be made when the offeror:
- holds more than 30% of the rights attached to voting shares of a company and acquires or contracts to acquire additional voting shares of the company;
- acquires effective control of a company; or
- following a dealing in securities of a company, acquires the right to exercise or control the exercise of more than 50% of the rights attached to the voting shares of the company.
Pursuant to the STA, any person or legal entity, that directly, indirectly, or through consolidation of ownership (following one or more voluntary offers), acquires shares representing more than one-third of the voting rights of a Norwegian company listed on a regulated market, is required to make an unconditional offer of the remaining shares in such company. This obligation to issue such mandatory offer is repeated when the shareholdings exceeds 40% of the voting rights and 50 % of the voting rights, however, such repeated offer is not mandatory when the thresholds are passed in connection with the original mandatory offer. The same rules will apply to acquisitions of the relevant number of shares in a foreign domiciled company listed in Norway but not in its home country. Certain exceptions apply, and the most practical being when shares are acquired as consideration in mergers or demergers.
Consolidation rules apply for shares held by certain affiliates and closely related parties. Hence, the combined holdings of both the acquirer or disposer and such a party’s close associates are relevant when deciding if any disclosure obligations have been triggered.
Some derivative arrangements (total return swaps) may also be considered as controlling votes in relation to the mandatory offer rules, and could under certain circumstances trigger a mandatory offer obligation, even though the bidder owns less than one third of the shares. Acquisitions of more than 50% of the voting rights in a company owning more than 1/3rd of the shares in a company whose shares are listed on a Norwegian regulated market, could also trigger an obligation to issue a mandatory offer, if such owner company’s principal business consists of holding shares in such listed company.
A shareholder exceeding the above mentioned thresholds may sell a portion of its shares to avoid the obligation of a mandatory offer. Such sale must be made within four weeks after the mandatory offer obligation was triggered, and must include all shares exceeding one-third of the shares, or thresholds in the repeated offer.
In addition to the above mentioned rules for companies listed on a regulated market, there are rules on compulsory acquisition for limited liability companies in general. A shareholder who becomes the owner of 90% or more of the total number of issued shares in Norwegian limited company, as well as 90% or more of the total voting rights, is obliged to acquire the remaining shares in the company if a minority shareholder so requests. Please see question 27 for further information of the statutory rules in this respect.
Yes, under the context of the acquisition of voting shares of a publicly traded company, if a person intends to acquire a “substantial interest” in the target company it will be required by law to launch a Tender Offer. According to Peruvian Tender Offer Regulations, a substantial interest is acquired when a buyer purchases shares that (i) will result in such buyer beneficially owning at least 25% of the shares with voting rights of the target company, in one or a series of transactions, or surpasses the 50% or 60% ownership thresholds, or (ii) allows that buyer to appoint a majority of the directors or amend the bylaws of the target company.
Tender Offer Regulations allow the potential acquirer of the substantial interest to, instead of launching a tender offer beforehand, negotiate directly with the controlling shareholder and acquire the shares directly, agreeing specific terms with such shareholder. In these cases, the acquirer will be obliged to launch a Mandatory Tender Offer addressed to the minority shareholders for a price that will be the highest between the price paid to the controlling shareholder or the obtained after a valuation of the target company. This Mandatory Tender Offer shall occur within the following six (6) months after the acquisition of control took place.
On the other hand, a Voluntary Tender Offer is launched by a person who intends to acquire substantial interest in a target company. This tender offer is launched prior the acquisition of the shares and is directed to all the shareholders of the target company. Once the tender offer is launched, it acquires the condition of irrevocable and of mandatory fulfilment.
Regardless of whether there is a Mandatory or Voluntary Tender Offer, the offeror must notify the target company, the Superintendency of the Securities Market and the Lima Stock Exchange of the proposed tender offer.
As noted under our answer to Question 15, if a person or group of persons intends to acquire at least 35% of the voting shares of a public company in one or more transactions within a 12-month period, the acquirer is required to disclose such intention and make a tender offer. Further, if a person or group of persons which already holds at least 35% of the voting shares intend to acquire more than 50% of the voting shares of a public company, a similar tender offer requirement is imposed. Under the 2015 SRC Implementing Rules and Regulations, which the SEC began enforcing in March 2016, the acquisition of at least 15% of the equity shares of a public company triggers a disclosure action.
Isle of Man
If the Takeover Code applies, Rule 9 specifies that a mandatory offer must be made where the bidder (and parties acting in concert):
- acquires shares carrying 30% or more of the voting rights of a target; or
- is interested in shares carrying not less than 30% but not more than 50% of the target's voting rights, and that person acquires an interest in any other voting shares in the target.
A bidder will be required to issue a mandatory PTO whenever it is attributed with more than 1/3 or 50% of the voting rights over the target company.
As further detailed in our answer to 15 above, for this purpose the sum of voting rights includes those arising from shares held in the company and those arising from the attribution of voting rights of another shareholder.
When the voting rights attributed to an acquirer exceed 1/3 but not 1/2 of the total voting rights over the target, the CMVM may waive the mandatory PTO should the acquirer evidence that its stake does not allow it to exert control over the company.
Yes – in line with EU directives.
Pursuant to Federal law ‘On joint-stock companies,’ the person that acquires more than 30%, 50% or 75% of shares of a public joint-stock company (taking into account the shares already owned by the acquirer and its affiliates) has to make a tender offer to other shareholders of the company to buy out their remaining shares of the same category.
The person that acquires more than 95% of shares of a public joint-stock company as a result of the above mandatory tender offer or a voluntary offer, is obliged to buy out the remaining shares of the company (and has the right to compel such buy-out).
Once a bidder has acquired 35% of the voting rights of the shares in a target company, the bidder is obliged to give notice to shareholders stating that they are in a position to exercise 35% of the voting rights attached to the securities of the company and offering to acquire the remaining securities of all the shareholders on the terms and conditions set out in the Takeover Regulations.
With respect to publicly listed companies, where the holdings of a shareholder (either alone or together with a closely related party), as a consequence of a purchase of shares, reaches 30 per cent of the total voting rights in a publicly listed company, the shareholder is obliged to launch a mandatory offer to acquire the remaining securities in the company. However, the obligation to launch a mandatory offer is not triggered if the threshold has been exceeded as a result of a voluntary offer made for all shares and securities in the company. Further, a shareholder who becomes subject to the requirement to launch a mandatory offer may apply for a dispensation from the Swedish Securities Council. Such dispensation may be approved if there are specific reasons (e.g. dispensation has been approved in several cases where the threshold has been exceeded as a result of a subscription of shares in a rights issue). A dispensation by the Swedish Securities Council may be made subject to conditions.
A bidder is required to make a mandatory offer if such bidder (alone or in concert with others) directly or indirectly exceeds 33⅓% of the voting rights of the target company. However, an issuer may adopt a higher threshold of up to 49% (opting-up) or may opt-out from the tender duty regime entirely by including a respective clause in its articles of association. Approximately one quarter of all SIX-listed issuers have adopted a full opting-out.
In a private M&A transaction, there is no requirement to make a compulsory offer for a target company unless it is specified in a shareholders’ agreement.
In the case the acquirer acquires shares in the target company, which is a listed company, resulting in its shareholding reaching or exceeding 25, 50 or 75 percent of the voting rights in the target company, the acquirer is required to make a tender offer for all securities of the target company.
In relation to onshore companies: In 2015, a SCA Board Decision was passed, adding a provision which states that any person or group of connected persons acquiring 50% or more of the share capital of a public company must submit an offer to all shareholders of the company in accordance with the controls, conditions and procedures determined by the SCA.
In relation to companies resisted in DIFC: the DFSA Takeover Rules include a mandatory bid rule which will be triggered if 30% or more of the voting shares of the target company are acquired by any person. The DFSA states that a mandatory offer must be conditional only upon the bidder having received acceptances in respect of shares carrying more than 50% of the voting rights. The minimum acceptance condition in any offer is more than 50% of the voting rights.
Yes, in the case of listed companies when the acquirer acquires 25% or more of the shares or voting rights of a target or otherwise acquires ‘control’ over a target. The term ‘control’ is defined under the Takeover Code to include the right to appoint a majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders’ agreements or voting agreements or in any other manner.
Yes. Please refer to our analysis above in response to Question No. 24.
Neither federal law nor Delaware law requires shareholders that have obtained significant stakes in companies to make mandatory or compulsory offers for the remaining outstanding shares. However, some states have combined aspects of control share acquisition and fair price statutes and adopted so-called “control share cash-out” provisions in their corporation laws. These statutes require that, unless the organizational documents of a corporation provide otherwise, if a shareholder obtains a certain level of voting power, other shareholders can demand that such shareholder purchase their shares at a fair price.
If an acquiror intends to acquire more than 30% of the shares of a public company, or if it already holds 30% or more of the shares of a public company (e.g., by way of transfer by agreement or block trade) and intends to acquire more shares, the acquiror is required to make a tender offer to all other shareholders of the target company if the acquiror intends to acquire such target shares.
25.1 Pursuant to CML, an obligation to launch an MTO for up to 100% of the shares and convertible bonds of a Publicly Traded Company is triggered in the following cases:
- if a party, directly or indirectly, alone or through related parties, wishes to acquire one third or more of the issued shares or voting rights of the Publicly Traded Company.
- if a shareholder who holds, alone or together with its related parties, one third or more and less than half the shares or voting rights increases its shares or voting rights in the Publicly Traded Company by more than (5%) of the issued shares or voting rights during any twelve consecutive months. In all cases, the obligation to launch an MTO shall remain valid and will be triggered in case the ownership of shares or voting rights exceeds 50% at any time;
- if a shareholder, who holds, whether directly or together with its related parties, more than half and not more than two thirds/66.6% of the issued shares or voting rights increases its shares or voting rights by more than (5%) of the issued shares or voting rights during any 12 consecutive months.
- if a shareholder who holds, alone or together with its related parties, more than [two thirds 66.66] of the issued shares or voting rights and less than 75% of the shares or voting rights increases its shares or voting rights in the Publicly Traded Company by more than (5%) of the issued shares or voting rights during any twelve consecutive months. In all cases, the obligation to launch an MTO shall remain valid and will be triggered in case the ownership of shares or voting rights exceeds 75% at any time.
As an exception to the above, the FRA may exempt the party in default from the MTO requirement if the excess shares purchased by the defaulting party, or through its related parties, are disposed of within a preset period of time determined by the FRA. The FRA may also take measures against the defaulting party including freezing the excess shares or prohibiting exercise of voting or any other measure it deems appropriate until the defaulting party submits the MTO.
25.2 In addition to the forgoing, the CML has listed certain cases in which the obligation to launch an MTO does not apply, as follows:
- the Transaction is concluded between ascendants and descendants of natural persons;
- succession by inheritance, will or donation;
- execution of a merger in accordance with Egyptian law;
- sale of pledged securities by a bank in accordance with the provisions of the Banking Law;
- capital restructuring between related parties and/or related group of companies;
- if the acquisition is executed by a financial institution licensed to undertake underwriting activities in the course of executing its obligation of underwriting;
- capital reduction resulting from the treasury shares cancellation;
- all shareholders of the target company approving the sale;
- capital increase of the target company provided such increase is not arising from the purchase of subscription rights in the capital increase; and
- the transfer of all shares owned by any employees union in a Publicly Traded Company that has an affiliate status under the Public Enterprise Law No. 203 for the year 1991 executed for the purposes of restructuring and procuring additional financing for such companies.
Pursuant to Rule 9 of the Takeover Code (where applicable), a mandatory offer to acquire all of the target’s share capital must be made when the bidder (or parties acting in concert) either:
- acquires an interest that results in the bidder holding a stake of 30% of more of the voting rights of the company. This includes any interest acquired through derivatives; or
- is interested in shares which in the aggregate carry not less than 30% of the voting rights of a company but does not hold shares carrying more than 50% of such voting rights, and the bidder (or any person acting in concert with it) acquires an interest in any other voting shares of the company.
Acquisitions that result in a change of control of an Offshore Listing Vehicle trigger a mandatory general offer to all shareholders of the Offshore Listing Vehicle pursuant to the Takeover Code, notwithstanding that such general offer requirement may be waived by the Hong Kong Securities and Futures Commission.
Please refer to the relevant Offshore Chapter for detail regarding each offshore jurisdiction.
In a private M&A transaction there are no requirements to make a mandatory offer unless such an obligation is contained in the articles of association of the target company or a shareholders’ agreement, for example under a tag right.
In public M&A transactions, where a person (including persons acting in concert with it) acquires (whether in one or a series of transactions) interests in shares of a target company carrying voting rights in excess of 30%, or where a person (including persons acting in concert with it) who holds interests in shares of a target company carrying more than 30% but not more than 50% of the voting rights acquires an interest in any other shares of the target company that increases its percentage of the voting rights, that person must make an offer to acquire all of the shares of the target company.
The consideration for such an offer must be in cash (or accompanied by a full cash alternative) at the highest price paid for the shares by the mandatory bidder in the previous 12 months. The only permitted condition for such a mandatory offer is that the bidder receive acceptances to its offer from shareholders holding shares carrying more than 50% of the voting rights of the target company.
Pursuant to the provisions of the Public Takeover Law, where a person, as a result of their acquisition or the acquisition by persons acting in concert with them, holds securities of a company which, when added to any existing holdings of those securities and the holdings of those securities of persons acting in concert with them, directly or indirectly give them a percentage of thirty per cent (30%) or more of existing voting rights in that company at the date of the acquisition, then such a person is required to make a bid at the earliest opportunity to all the holders of those securities for all their holdings at an equitable price.
It must be noted, however, that in case the acquirer already holds more than fifty per cent (50%) of the voting rights of a company, the further acquisition of securities does not create an obligation to make a mandatory bid, provided the Commission grants an exception pursuant to the provisions of the law.
Under the Capital Market Act, a public takeover bid must be made if more than 33% of the votes, or, if no other shareholder owns more than 10% of the votes in the target company, more than 25% of the votes is acquired in a public company.
In addition to the cases where a mandatory public takeover bid must be made, there are instances when shareholders may exercise statutory put option rights vis-à-vis a shareholder acquiring a certain level of ownership. As a general rule set out in the Civil Code, shareholders may require a shareholder acquiring 75 % of the votes in a limited liability company (Kft.) or a private company limited by shares (Zrt.) to purchase their shares at equal terms. Additionally, the Capital Market Act provides that minority shareholders may require the offeror to purchase their shares if, as a result of the public takeover bid, the offeror acquired at least a 90 % interest in a public company limited by shares (Nyrt.).
Under the Commercial Companies Law, where an acquisition is approved by the shareholders of the target, the remaining minority shareholders may be required to acquire their shares at the offered price or at a price determined by a valuer undertaking a formal valuation.
The QFMA Mergers & Acquisitions Rules requires a person who wants to acquire 75 percent or more of the shares to notify the authority and he may submit a mandatory offer to buy the remaining shares of the company (Article 34).
In cases where the Takeovers Act (ZPre-1) is applicable, namely when the target company is a listed public limited company or an unlisted public limited company with at least 250 shareholders or total capital of not less than 4 million EUR, the acquirer of a takeover threshold of a 1/3 share of all voting rights in the company is obliged to offer to buy shares from all the remaining shareholders at a price not lower than the one at which the 1/3 threshold was acquired.