EGYPT Law and Practice Contributed by: Nadia Abdallah, Zahra Ashraf, Beshoy Mounir and Yasmine Attia, Matouk Bassiouny & Hennawy
capital or the voting rights must submit an MTO if its shareholding or voting rights increase by more than 5% within 12 consecutive months. • A person/entity owning individually or through its related parties more than 50% of the issued share capital or the voting rights of the target company and less than two-thirds of the issued share capital or the voting rights must submit an MTO if its shareholding or voting rights increase by more than 5% within 12 consecutive months. • A person/entity owning individually or through its related parties more than two-thirds of the issued share capital or the voting rights of the target company and less than 75% of the issued share capital or the voting rights must submit an MTO if its shareholding or voting rights increase by more than 5% within 12 consecutive months. • Another trigger is where the shareholding of a person/entity independently or through its related parties reaches 75% of the share capital or voting rights of the target company. 4.3 Transaction Structures The acquisition of listed shares may take place through any of the following transfer mechanisms: • Open Market Mechanism: Provided that no MTO thresholds are triggered, investors may acquire shares or voting rights – generally free float shares – in the target company through the open market mechanism by placing buy orders via a broker licensed with the FRA. • Block Trade Mechanism: Provided that no MTO thresholds are triggered, investors may acquire privately held shares or voting rights in listed com- panies through the block trade mechanism. Block trading is intended for large-scale transactions, either exceeding the average daily trading volume of the security and involving at least 1% of the vot- ing rights (minimum EGP1,000,000), or with a value above EGP10,000,000, provided that the counter- party’s order value is not less than EGP500,000. • Launching an MTO: if the MTO thresholds are trig- gered, the offeror must acquire the listed shares via launching an MTO. • Mergers of Listed Companies as Regulated Under the Capital Markets Law: Although they are used as a transaction structure less frequently, it is note-
worthy that the execution of merger transactions is exempted from launching an MTO. 4.4 Consideration and Minimum Price Tech Industry Transactions M&A transactions, including technology industry transactions, may combine cash and stock-for- stock elements, specifically with strategic investors, although cash considerations are more common. Merger Cash Consideration Pursuant to the Companies Law, a merger transaction can take place through the merger of two or more companies into an existing company or through the merger of two companies to form a new company. That said, mergers do not include a cash component. Public M&A Pricing Requirements Whilst there are no minimum price requirements for private M&A transactions, public M&As are subject to pricing restrictions, including those outlined below. Block trade transaction pricing The price for block trading transactions should be within the limits of the price movement percentage permitted for the relevant security. Pursuant to the EGX Decree No 681 for the year 2021, the pricing limit for transactions on the main market is 20% of the last closing price. MTO transaction pricing Unless the offer price is based on a fair market value (FMV) of the shares prepared by an independent finan- cial adviser (IFA) registered with the FRA, the FRA may reject the MTO draft or any amendments if the offer price for actively traded shares is lower than the high- est of the following: • the average closing price on the EGX during the three months preceding the announcement of the offeror’s intention to submit the MTO or the six months preceding the filing of the MTO Draft; or • the highest price paid by the offeror or any of its related parties in a previous tender offer during the 12 months preceding the submission of the current offer, unless justified by serious reasons accepted by the FRA.
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