MSC Insight
Tender Offer – A key for Business Takeovers
What is Tender Offer
Tender Offer is a legal procedure used when an individual or juristic person intends to acquire a significant portion of a listed company’s securities—often to the extent of gaining control over the company (a takeover). The purpose of the Tender Offer is to protect each of the existing holders of securities of the Business (the “Shareholder”) as it is a kind of public bid for the Shareholder to sell their securities. It can be deemed that the Tender Offer is a significant mechanism for preventing an unfair or unequal treatment toward the Shareholder upon the Business Takeovers.
Under the governing laws, the Securities and Exchange Act B.E. 2535 (as amended), there is a provision specifying that; any person offering to purchase, acquiring, or holding securities in the Business across the ratio as prescribed by laws, such acquisition will be deemed as an acquisition of securities for the purpose of taking over a business; in which, such person shall be obliged to make a Tender Offer for Acquisition of Securities for Business Takeovers, according to the Notification of the Capital Market Supervisory Board No. Tor Jor. 12/2554 Re: Rules, Conditions and Procedures for the Acquisition of Securities for Business Takeovers (as amended) (the “Takeovers Rules”).
When to make Tender Offer
Tender Offer is created to prevent secretive accumulation of shares (Creeping Takeover). This rule prevents any party from gradually acquiring control of the company without notifying or fairly compensating existing shareholders. Therefore, when an investor, regardless of whether being an individual or juristic person intends to acquire securities of the Business listing in the Stock Exchange of Thailand, reaching or exceeding the trigger point of 25 percent, 50 percent and 75 percent of the total voting rights (the “Trigger Points”) in the Business, such investor shall be required to launch the Tender Offer as set out the Takeovers Rules (the “Offeror”), as the aforesaid shareholding ratio may enable the Offeror to have control (either directly or indirectly) over the management of the Business.
The Takeovers Rules categorizes the Tender Offer into 4 types as follows;
(1.) Mandatory Tender Offer | Must be made upon the investor, either by individually or altogether with related person or acting in concert acquiring shares reaching the Trigger Points. |
(2.) Voluntary Tender Offer | The investor may at any time launching a Voluntary Tender Offer for acquiring all securities of the business. In this case, the investor can set out a condition precedent for the completion of the Voluntary Tender Offer, and if the condition precedent cannot be met, the investor may cancel the Voluntary Tender Offer. |
(3.) Partial Tender Offer | If the investor’s intention is to acquire only part of shares in the Business but upon the completion of the acquisition, the shareholding ratio of the investor will reach the Trigger Points, the investor can apply for getting an approval from the Securities and Exchange Commission (the “SEC”) on waiver of making Tender Offer for all securities of the Business. However, for this case, the Business must first obtain a shareholder’s approval by vote of not less than half of the total votes of shareholder attending the meeting and entitling to vote. |
(4.) Tender Offer for Delisting of Securities from the Stock Exchange | The Regulations of the Stock Exchange of Thailand Re: Delisting of Securities B.E. 2564 specifying that a listed company wishing to delist the shares must find an offeror to make a general offer to purchase shares and convertible securities from the shareholders and holders of securities (the “Delisting”). In this regard, the Delisting must also be proceeded in according with the provisions under the Takeovers Rules, |
How does the Shareholder acts if the Tender Offer has been launched
The Takeovers Rules determines a minimum offer period of 25 consecutive business days, but not exceed 45 consecutive business days (the “Offer Period”). During the Offer Period the Shareholder should carefully consider details and information of the Tender Offer Document to understand whether the offer is financially attractive, and whether the bidder’s intentions align with their interests and to weight the pros and cons of selling the securities or maintaining the shareholding. Moreover, the Shareholder shall consider the recommendation of the Business’s independent financial advisor, then decide whether to accept or reject the offer of which must be made within the Offer Period,
The significant details and information of the Tender Offer that the Shareholder need to know will be set out in the following reliable sources.
• Tender Offer Document (Form 247-4)
Tender Offer Document or called as Form 247-4 is the document that the Offeror needs to submit to SEC according to the Takeovers Rules (the “Form 247-4”). The Form 247-4 shall be prepared by a financial advisor whose name appears on the approved list of the SEC.
The Shareholder can find details of the offeror along with the proposal offered to the Shareholder, includes (but not limited to) the offering price, relevant terms and conditions, business plan after the successful of the Tender Offer, source of fund, relation between the Offeror and the Business, Offer Period, cancellation of intention to sell and Tender Offer acceptance procedure in such Form 247-4.
• Opinion of the Business Concerning the Tender Offer (Form 250-2)
The Takeovers Rules stipulates that upon the Business received the Form 247-4, the Business shall prepare the opinion concerning the tender offer (the “Opinion of the Business”) according to the Notification of the Capital Market Supervisory Board No. TorChor. 40/2552 Re: Statement Form and Period for Preparing Opinion Concerning Tender Offer (as amended) and disseminate to the Shareholder.
In the Opinion of the Business, the Shareholder can acknowledge the opinion of the Board of Directors, at least, regarding the reasonability of the offering price, business plan, suggestion on acceptance or reject the Tender Offer including the analysis on pros and cons of the Tender Offer and effect to the Shareholder. Such information can be a supporting information for further decision.
• Independent Financial Advisor Report
Apart from Opinion of the Business, the Business is also required to appoint an Independent Financial Advisor (the “IFA”) to act as the Shareholder’s advisor. The IFA shall prepare IFA’s Report for the Shareholder.
In rendering the opinion to the Shareholder, the IFA will consider the appropriateness of the Tender Offer Price, Benefit and Impact to the Shareholder, and all other relevant factors for the decision to accept or reject the Tender Offer together with the reason. The Shareholder can find opinion of the IFA on such IFA Report.
For further guidance on Takeovers Rules, for example “What if the Shareholder does nothing?” or the Possible Next Steps If the Bidder Gains Control, or any legal advice on capital markets in Thailand, please contact MSC International Law Office.
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