Professional Documents
Culture Documents
1. Overview
1.1 Meaning of Takeovers and Mergers
Takeover
Offeror / Bidder
Merger
Difference
Takeover
Acquirer usually offers a cash price per share to the target company.
Mergers
Shareholders usually have their shares in the old company exchanged for
an equal number of shares in the merged entity.
Eg 1998
Chryster
Corp(American
Automaker)
Daimler Benz
(German
Automaker)
Daimler Chryster
2. The Code
s 217(5) CMSA
efficient, competitive and informed market
s 217(3) CMSA.
S 3 CMSA
The entities prescribed in the Code are:
(a) a company that is incorporated outside of Malaysia but listed on any
stock exchange in
Malaysia; and
(b) a real estate investment trust that is listed on any stock exchange in
Malaysia.
* As compared to the 1998 Code, the 2010 Code widens its jurisdiction to
cover foreign
incorporated companies and real estate investment trusts (REITs) that are
listed on Bursa
Malaysia.
s 217(4) CMSA
Rulings = set out in the form of Practice Notes.
3. Types of Acquisitions
The trigger point for having to extend a mandatory offer is >33% of the
voting rights i.e. threshold where acquirer obtains control of a company
s 218(2) CMSA an acquirer who has obtained control in a company shall make
a take-over offer, other than in respect of voting shares of the company or voting
rights which at the date of the offer are already held by the acquirer or which the
acquirer is entitled to exercise.
s 218(3) CMSA - an acquirer who has obtained control shall not acquire any
additional voting shares in that company or voting rights.
s 9(1) of the Code.
(a) control (threshold)
(b)consolidate control
Chin Yew Loy Holdings Sdn Bhd v AU Metalvest (M) Sdn Bhd
Once the 33% threshold is passed, acquirer is obliged to execute a Mandatory
General Offer immediately after the acquisition no discretion.
Aun Huat & Brothers Sdn Bhd & Ors v Sime Darby Bhd & Anor
Followed Petaling Tin Bhd although the acquisition by D1 of UMBC had been
disallowed by Bank Negara under the provisions of BAFIA, this did not adsolve D1
from its obligations arising from the MGO to the minority shareholders of UMBC.
Securities Commission v Up & Famous Sdn Bhd & Ors [2010] 7 MLJ 701
Initially, D1-D7 combined holding = 49.3% (>33% and <50%), out of which D1
held 41.93%
On 17/1/2002, D1 purchased 2m shares in Takaso increased its stake in the
paid-up share capital or Takaso from 41.93% to 50.54%.
D2,D3,D4,D5 = directors of Takaso
D5 = D4s wife
D4, D6 and D7 = children of D2 and D3
Every D = person acting in concert with each other within the meaning of S 33(2)
and (3) SCA (now s 216 CMSA)
The increase was deemed under SCA to have been combined with the
shareholdings of D2-D7 increased the collective interest of all Ds to 57.91%.
Held : Under s33B SCA (now s 2189(3) CMSA read together with s 6(1)(b) and s
6(4) of the Malaysian Code on Takeovers and Mergers 1998 (now s 9 of the 2010
Code) and Practice Note 2.3(2), Ds were obliged to make a Mandatory General
Offer to the offer existing shareholders of Takaso.
3.1.4. Other instances where a mandatory offer is required to be made:
Practice Note 9, para 4.1 and 5.1.
3.1.5. Vendor selling part of his controlling voting shares or voting
rights
See: Practice Note 9, para 6.1 and 6.2.
3.1.6. Special features of the Mandatory Offer
(a) Consideration for offer
ss 21(1), 22(2) of the Code.
(b) Offer to be conditional upon acceptances (Conditional Bid)
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4.1.6. Offeror announced proposed offer by way of a press notice: s 11(7) of the
Code.
Information in the press notice as set out in s 11(9) of the Code.
4.1.7. After the announcement, the offeror must send a written notice of his
intended/proposed intention to the board of directors (BOD) or adviser of the
company, the SC and the stock exchange: s 11(8) of the Code.
4.1.8. BOD must make an announcement by way of press notice of the proposed
offer within 24 hours which sets out the information disclosed by the proposed
offeror to the company and a statement as to whether the BOD is seeking an
alternative person to make a takeover offer of its voting shares. BOD must also
post such notification to all offeree shareholders within 7 days. See: s 11(10),
(11) of the Code.
4.1.9. At the same time must send written notice of his proposed. Under the
new Code 2010, a potential offeror is required to announce possible offers where
there is untoward movement or increase in the volume of share turnover of an
offeree. Potential offerors will be prohibited from making a takeover offer within a
period of 6 months should they deny making an offer. See s 11(1), (6) of the
Code.
5. Compulsory Acquisitions
5.1 Section 222 CMSA confers on the offeror the right to make a compulsory
acquisition of the shares of the dissenting shareholders. [squeeze-out right]
Pre-requisites for making a compulsory acquisition under s 122(1) CMSA
The 90% threshold.
Procedure to compulsorily acquire the remainder of shares:
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losing their position to a successful offeror increases the costs of acquiring full
control of the company.
(b) Employee stock ownership schemes
- placing large blocks of shares in the hands of employees through an
employees trust fund.
(c) Share buy-back
Share repurchases can divert shares away from a hostile bidder.
Malaysia share buy-back may be exercised by virtue of s 67A of the Companies
Act 1965
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