Clifford Chance - A guide to takeovers in...

A guide to takeovers in Singapore, Clifford Chance 2

A guide to takeovers in Singapore

© Clifford Chance Pte. Limited, September 2010.One George Street, 19th Floor, Singapore 049145

3 A guide to takeovers in Singapore, Clifford Chance

Clifford Chance

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Corporate and M&A expertise in SingaporeClifford Chance’s corporate and M&A group in Singapore includes some of the region’s leading practitioners, who combine international experience with a comprehensive knowledge of the local environment in south east Asia, Indochina and the Indian sub-continent.

Our team has broad sector experience, with particular depth in financial institutions, telecoms, oil and gas, and private equity.We offer advice on a range of corporate transactions, including mergers and acquisitions and private equity, foreign investment and joint ventures, corporate restructurings and reorganisations, commercial contracts, outsourcing, fund establishment and management, and regulatory matters.

Our Singapore corporate and M&A team is backed by Clifford Chance’s international corporate practice, an acknowledged leader worldwide, and forms part of the Clifford Chance Asian M&A practice.

For further information on corporate, M&A and private equity matters, please contact:

Simon ClintonPartnerTel: +65 6410 [email protected]

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Lee TaylorPartnerTel: +65 6410 [email protected]

This guide provides an overview of takeovers of public companies (whether listed or otherwise) in Singapore, including acquiring a stake in a Singapore public company and launching - or defending - a formal takeover offer.

It considers, from both a legal and regulatory perspective, the various stages of a takeover from planning an offer through to achieving control of the target. It offers clear explanations on key issues including pre-offer planning (Section 2), implementing a takeover by scheme of arrangement (Section 3), competition clearances (Section 4) and stakebuilding before an offer (Section 5).

This guide also covers the making of an offer (Section 7), defence tactics on a hostile offer (Section 8), events following a successful offer and consequences of an unsuccessful offer (Sections 9 and 10 respectively) and issues arising on MBOs and similar transactions (Section 11). It does not, however, consider any tax or accounting implications of a takeover or the impact of securities laws of other jurisdictions where the target has shareholders resident overseas.

Definitions of words and expressions used are contained in the Glossary at the end of the Guide.This guide does not purport to be comprehensive or to render legal advice. The position stated is at 1 October 2010.

Foreword


Summary of the General Principles of the Code 4Implications of acting in concert with a bidder 19Outline scheme timetable 24Summary of legal and regulatory implications of interests in Singapore companies at various percentage levels 42Outline offer timetable 49Comparative table of principal documents involved in recommended and hostile offers 54Offer document content requirements 55Target board circular content requirements 68Glossary 88

List of tables


1. Overview of regulatory framework 12. Pre-offer planning 7 3. Schemes of arrangement 204. Competition 255. Acquiring a strategic stake before an offer 326. Acquiring control 407. Making an offer 478. The defence 649. Declaring the offer unconditional and completing the acquisition 7410. Consequences of an unsuccessful offer 8011. MBOs and similar transactions 83 Glossary 88 Index 89


1. Overview of regulatory framework

1.1 Regulation of takeovers 21.2 Statutory and regulatory provisions affecting takeovers 61.3 Statutory shareholding restrictions in specific industries 6



1.1 Regulation of takeovers

1.1.1 Regulatory frameworkThe Singapore Code on Takeovers and Mergers (Code) provides the main framework regulating the conduct of takeover and merger transactions in Singapore. The Code applies to takeovers of companies incorporated in any jurisdiction with a primary listing of their equity securities in Singapore and business trusts registered in any jurisdiction with a primary listing of their units in Singapore. While the Code is drafted with listed public companies and listed business trusts in mind, where appropriate, it also applies to takeovers of unlisted public companies incorporated in Singapore only and unlisted business trusts registered in Singapore only with more than 50 shareholders or unitholders (as the case may be) and net tangible assets of S$5 million or more.

The Code does not apply to takeovers of other unlisted public companies, unlisted business trusts or private companies.

The Code applies to all bidders whether natural persons (resident in Singapore or not and whether citizens of Singapore or not), corporations or bodies unincorporate (be they incorporated or carrying on business in Singapore or not), and extends to acts done or omitted to be done in and outside Singapore.

The Code applies to takeover and merger transactions, however they are effected, including by way of a general offer, Court-approved scheme of arrangement or amalgamation, as well as other transactions which amount to an acquisition of voting control of the relevant company. The Code is drafted from the perspective of a general offer but contains some guidance on certain adaptations which would apply on a takeover implemented by a scheme or amalgamation. This guide is therefore drafted from the perspective of a general offer with commentary as necessary in relation to takeovers implemented by scheme. Section 3 describes the scheme process.

1.1.2 The SICThe Code is issued by the Monetary Authority of Singapore (MAS), but is administered and enforced by the Securities Industry Council (SIC). The SIC’s membership is drawn from representatives from the government and the MAS, as well as representatives from the private sector. The MAS is a statutory board formed under the Monetary Authority of Singapore Act (Cap. 186), and is the de facto central bank of Singapore, as well as the integrated regulator of the banking, insurance, financial, securities and futures industries.

The Code and the SIC operate principally to ensure the fair and equal treatment of shareholders and the orderly conduct

Section 1: Overview of regulatory framework


of takeovers. The SIC is not concerned with the financial or commercial merits of a takeover or with competition issues.

1.1.3 SecretariatThe day-to-day functions of the SIC are conducted by a professionally-staffed full-time Secretariat.

The Secretariat is available at all times for confidential consultation on points of interpretation of the Code.

1.1.4 General PrinciplesThe Code consists of 13 General Principles (summarised below), which are essentially statements of good commercial practice, and 34 Rules which amplify the General Principles and govern specific aspects of takeover procedure, as well as Notes which assist in the interpretation of the Rules. The fundamental cornerstone of the Code is that all shareholders of the same class should be afforded equivalent treatment (General Principle 3).

1.1.5 Spirit and letter of the CodeNonetheless, the Code acknowledges that it is impracticable to devise rules in sufficient detail to cover all the circumstances which can arise in takeovers. Accordingly, the General Principles and Rules are interpreted by the SIC in accordance with their spirit, as well as their precise wording, to achieve their underlying

purpose. The great advantage of the system is its flexibility, as the Rules can be (and frequently are) extended to cover situations not explicitly covered by the Code or can be relaxed in appropriate circumstances.

1.1.6 Rulings and practice statementsThe SIC may also issue rulings on the interpretation of the General Principles and the Rules in the Code and lay down the practices to be followed by the parties in a takeover or a matter connected therewith. In the course of a takeover, it is not unusual to require rulings from the SIC. Such rulings or practices issued by the SIC shall be final and not be capable of being challenged in any court.

1.1.7 Enforcement of the CodeThe Code is non-statutory and does not have the force of law. Responsibility for compliance with the Code lies with the directors of both the bidder and the target, as well as their professional advisers.

If there appears to be a breach of the Code, the SIC may summon the alleged offenders to appear before the SIC for a hearing, where every alleged offender will have the opportunity to answer allegations and also to call witnesses. If the SIC finds that there has been a breach of the Code, it may privately reprimand or publicly censure the offender or, in a flagrant case of breach, it may deprive the offender temporarily or permanently of its ability



to enjoy the facilities of the relevant securities market. If the SIC finds evidence to show that a criminal offence has taken place whether under the Companies Act (Cap. 50) (Companies Act), the Securities and Futures Act (Cap. 289) (SFA) or under criminal law, it may recommend to the Attorney-General, the prosecutorial authority in Singapore, that the alleged offender be prosecuted.

Summary of the General Principles of the Code1. All persons engaged in takeover and merger transactions

must observe both the spirit and the precise wording of the General Principles and Rules. The General Principles and the spirit of the Code will apply in areas not explicitly covered by any Rule.

2. The manner in which the boards of a bidder and a target and their respective advisers and associates pursue their primary duty to act in the best interests of their respective shareholders will inevitably be impinged upon by the General Principles and Rules.

3. A bidder must treat all shareholders of the same class in a target equally.

4. Rights of control must be exercised in good faith and oppression of the minority is wholly unacceptable.

5. Where effective control of a company is acquired or consolidated by a person, or persons acting in concert, a general offer to all other shareholders is normally required.

6. A bidder should announce an offer only after the most careful consideration. Before taking any action which may lead to an obligation to make a general offer, a potential bidder and his financial advisers should be satisfied that he can and will continue to be able to implement the offer in full.

7. If the board of a target has received a bona fide offer or has reason to believe that a bona fide offer is imminent, it must not, without the approval of its shareholders in general meeting, take any action on the affairs of the target that could effectively result in any bona fide offer being frustrated or the shareholders being denied an opportunity to decide on its merits.

8. The board of a target which receives an offer or is approached with a view to an offer being made, should, in the interests of its shareholders, seek competent independent advice.



9. In the course of a takeover or merger transaction, or when such transaction is in contemplation, the bidder, the target and their respective advisers must not give information to some shareholders that is not made available to all shareholders. This principle does not apply to the provision of information in confidence by the target to a bona fide potential bidder or vice versa.

10. Shareholders should be given sufficient information, advice and time to enable them to reach an informed decision on an offer. No relevant information should be withheld from them.

11. Any document or advertisement addressed to shareholders containing information, opinions or recommendations from the board of a bidder or target or its advisers, should, as with a prospectus, meet the highest standards of care and accuracy. Profit forecasts require special care.

12. All parties to a takeover or merger transaction should make full and prompt disclosure of all relevant information and use every endeavour to prevent the creation of a false market in the shares of a bidder or

target. Parties to such transactions must take care not to make statements which may mislead shareholders or the market.

13. Directors of a target should, in advising their shareholders, have regard to the interests of shareholders as a whole, and not to their own interests or those derived from personal or family relationships. There may be good reasons for the board rejecting an offer or preferring the lower of two offers. However, the board must carefully examine its reasons for doing so and be prepared to explain its decision to shareholders.

1.1.8 Timely consultationThe efficiency of the system relies very much on timely consultation with the SIC, both before and during an offer, to enable it to provide expertise and to arbitrate informally. Parties are encouraged to consult the SIC (normally via their advisers) in the event of any doubt as to the interpretation or application of the Code, as only the SIC can give a definitive ruling on the Code. The SIC will also intervene in an offer on its own initiative if it considers that shareholders’ interests require it to do so or that a breach of the Code may arise.



1.2 Statutory and regulatory provisions affecting takeoversA number of statutory and regulatory provisions impact upon the offer process. The SFA provides the statutory underpinning for the Code and the regulatory activities of the SIC. The SFA also lists the offences relating to takeover offers and the offer documentation offence (see section 7.3.4).

The Companies Act contains the procedures for squeeze-out of the minority and the right of the minority to be bought out, in each case once the bidder has acquired 90 per cent of the target shares (see section 9.3). The Companies Act also contains the statutory procedure applying to schemes of arrangement, amalgamations and provisions relating to financial assistance.

This guide briefly covers these statutory provisions and their interaction with the Code. It also refers to the Listing Manual (Listing Manual) of the Singapore Exchange Securities Trading Limited (SGX-ST) which will be relevant where either the bidder or the target is a company listed on the SGX-ST.

1.3 Statutory shareholding restrictions in specific industriesOther statutes relating to particular industries also govern takeover activity in Singapore insofar as they limit or require prior regulatory approval for share ownership in companies engaged in those industries. Those industries are generally industries perceived to be critical to national interests, for instance, banking, finance, insurance and media. Examples of such statutes include the Banking Act (Cap. 19), the Finance Companies Act (Cap. 108), the Insurance Act (Cap. 142) and the Newspaper and Printing Presses Act (Cap. 206).



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© Clifford Chance Pte. Limited, September 2010.One George Street, 19th Floor, Singapore 049145

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