ISRAEL Law and Practice Contributed by: Benjamin (Benny) Sheffer and Lance Blumenthal, S. Horowitz & Co.
for more than 50% for basic control, or 95% to squeeze out the remainder. • mergers – this requires compliance with statutory requirements such as: (a) approval by the board of both companies; (b) approval by the shareholders (usually a simple majority, but sometimes special majorities); and (c) waiting periods and creditor protections. Friendly deals are far more common than hostile take- overs which may be more prevalent in other jurisdic- tions. 4.4 Consideration and Minimum Price Offers may be made up of: • all cash; • shares in the bidder company; or • a mix of cash and shares. If the bidder bought shares in recent months at a higher price, that price may set the minimum price for the offer. Cash is more common in Israel, especially in regulated industries like energy and infrastructure. Contingent payments (such as those based on project approvals or litigation outcomes) are possible but less common. 4.5 Common Conditions for a Takeover Offer/ Tender Offer Typical conditions for takeovers include: • regulatory approvals which are likely to be required from, inter alia: (c) relevant government ministries (for example, the Energy Ministry, the Defence Ministry etc); • available financing; and • no major adverse change in the target company. It is important to ensure that conditions are not vague or fully under the bidder’s control. 4.6 Deal Documentation It is customary in Israel to enter into a transaction agreement in friendly public takeovers, such as merg- (a) Israel Securities Authority (ISA); (b) competition commissioner; and
ers or recommended tender offers. These agreements focus on practical co-operation where the target assists the bidder with due diligence, prepares regu- latory filings, provides required information, and keeps the business running normally until completion. The board typically undertakes to recommend the transac- tion to shareholders, but this promise is always sub- ject to its fiduciary duties. Practically, that means that the board must consider a better offer if one appears. The scope of commitments that a public target may take on is intentionally limited, because Israeli law places strong emphasis on minority shareholder pro- tection. Measures that would improperly block com- peting bids are generally unfavourable and may be challenged. Break fees can be used, but they must be modest (commonly below 1% of deal value) and proportionate so they do not deter alternative propos- als. Rights for the bidder to match a superior offer are sometimes included, but even those must allow the board flexibility if circumstances change. Regarding representations and warranties, Israeli pub- lic companies typically provide minimal and essential assurances. These normally deal with main issues such as due incorporation and authority, compliance with securities reporting obligations, and accuracy of public disclosures. In regulated infrastructure sec- tors such as energy, additional statements relating to licences and regulatory approvals may also be includ- ed. However, broad commercial warranties, future performance guarantees, and indemnities which are more common in private M&A, are usually not given by a public target, because its shareholders are not act- ing as traditional sellers and cannot fairly bear future liabilities. Instead, bidders rely primarily on their own due diligence, the public reporting regime and clos- ing conditions tied to regulatory approvals or material changes. 4.7 Minimum Acceptance Conditions In Israel, tender offers usually require a minimum level of shareholder acceptance to allow for the bidder to actually gain control in accordance with the Israeli Companies Law. Key legal thresholds are 25% and 45% of the voting rights, which trigger special tender offer rules, and more than 90%, which triggers a full tender offer aimed at acquiring all shares.
224 CHAMBERS.COM
Powered by FlippingBook