ISRAEL Law and Practice Contributed by: Benjamin (Benny) Sheffer and Lance Blumenthal, S. Horowitz & Co.
This includes the start of serious negotiations regarding a takeover, merger or acquisition of control, even before a binding agreement is signed, especially if there are rumours, market speculation or abnormal trading activity; and (b) once a firm intention to make an offer exists (for example, when a bidder delivers a formal proposal to the target’s board), the target com- pany must make an immediate public report through the Magna system (the ISA’s online disclosure platform). • Form of disclosure: (a) the disclosure is required to be made via a current report (Immediate Report) filed by the target or bidder, summarising the key details of the bid, including the bidder’s identity, the offer terms and any conditions attached; (b) the bid constitutes a Special Tender Offer (crossing 45% ownership) or a Full Tender Offer (crossing 90%), a formal tender offer document must be published to all shareholders and filed with the ISA and the TASE; and (c) the ISA can require immediate clarification or additional disclosure if information is incom- plete or market activity suggests inside infor- mation has leaked. 8.2 Prospectus Requirements The issuance of securities in connection with a takeo- ver or merger may trigger prospectus requirements under the Israeli Securities Law, 1968, unless a statu- tory exemption applies. When a public company offers its shares or other securities to the public, it must file a prospectus approved by the ISA. In a stock-for-stock acquisi- tion (where the consideration consists of the bidder’s shares), this would generally be considered a public offer unless the transaction qualifies for an exemption. Several exemptions from the prospectus requirement are commonly used in takeover or merger transac- tions: • private offer exemption – if the shares are offered to no more than 35 offerees (excluding qualified investors), and there is no public marketing;
• merger exemption – if the offer is made as part of a merger approved under the Israeli Companies Law, 1999, the exchange of shares is treated as a corporate restructuring, not a public offer; and • qualified investor exemption – if the offer is limited to institutional or qualified investors as defined by ISA regulations. In practice, most Israeli mergers and acquisitions involving public companies are structured either as a court-approved merger or a statutory tender offer, both of which typically fall within these exemptions. Therefore, a prospectus is rarely required, provided no separate public offering or fundraising accompanies the transaction. The ISA reviews whether the transaction structure properly relies on an exemption and may require a simplified report or disclosure document (such as a merger report or immediate report) to ensure that investors receive sufficient information. While there is no legal requirement that a bidder’s shares be listed on a specified exchange, either in Israel or abroad, in order to proceed with a takeo- ver, merger or share-for-share acquisition, the listing status of the bidder’s shares affects the disclosure obligations, regulatory review and the form of consid- eration that can be offered. 8.3 Producing Financial Statements Bidders are required to provide financial statements in tender offer or merger disclosures that demonstrate financial capacity and allow shareholders to assess the consideration offered. Financials must be pre- pared under IFRS (or US GAAP for foreign issuers) and audited. Full pro forma statements are not mandatory unless the transaction significantly changes the bid- der’s financial structure or results in a new listed entity. 8.4 Disclosure of Transaction Documents Bidders are required to provide sufficient financial disclosure to allow shareholders and the market to assess the bidder’s financial condition and the fairness of the offer but the formality and extent of the required financial statements depend on the type of transaction (cash versus stock-for-stock) and the listing status of the bidder. Accordingly, transaction documents them-
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