SINGAPORE Law and Practice Contributed by: Benjamin Gaw and Joel Tan, Drew & Napier LLC
6.3 Consideration For takeovers and mergers involving private compa - nies, consideration more commonly takes the form of cash. Selection of the form of consideration depends on factors such as the availability of financing to the buyer and the tax implications of the payment method. For public companies, consideration for a general offer can take the form of cash, securities (typically the bidder’s shares) or a combination of the two. How - ever, under the Takeover Code, where the mandatory offer thresholds are triggered, the consideration must be in cash or be accompanied by a cash alternative at not less than the highest price paid by the bidder or any person acting in concert with it for voting rights of the target company during the offer period and within six months prior to its commencement. When voting rights have been acquired for a consideration other than cash, the offer must nevertheless be in cash or be accompanied by a cash alternative of at least equal value, which must be determined by an independent valuation. Furthermore, except with the SIC’s consent, a cash offer is required where: • the bidder or any party acting in concert with it has bought for cash, during the offer period and within six months prior to its commencement, shares of any class under offer in the target company carry - ing 10% or more of the voting rights of that class; or • in the view of the SIC there are circumstances which render such a course necessary. Where there is high valuation uncertainty, some com - mon tools used to bridge valuation gaps include deferred consideration, price adjustments based on completion accounts and earn-outs. On the flipside, sellers should consider whether any form of security in respect of the buyer’s payment obligations, such as a parent company or bank guarantee, a charge over the buyer’s assets or a cash escrow, is necessary. 6.4 Common Conditions for a Takeover Offer For public takeovers, all general offers are subject to a minimum level of acceptance. For mandatory and voluntary offers, the offer must be conditional upon
the bidder receiving acceptances in respect of voting rights in the target company which, together with vot - ing rights acquired or agreed to be acquired before or during the offer, will result in the bidder and any party acting in concert with it holding more than 50% of the voting rights. Separate approval thresholds apply for partial offers. In relation to mandatory offers, bidders cannot impose any other condition or a higher level of acceptance (above 50%). In relation to voluntary offers, bidders may impose other conditions, provided that fulfilment of such conditions does not depend on the bidder’s sub - jective interpretation or judgement, or lie in the bid - der’s hands. Normal conditions such as shareholder approval for the issue of new shares and the SGX’s approval for listing may be attached without reference to the SIC. The SIC should be consulted where other conditions would be attached. A condition requiring a level of acceptance higher than 50% needs to be approved by the SIC, and the bidder would need to demonstrate that it is acting in good faith in imposing a higher level of acceptance. 6.5 Minimum Acceptance Conditions All general offers must be conditional upon the bidder receiving acceptances in respect of voting rights in the target company which, together with voting rights acquired or agreed to be acquired before or during the offer, will result in the bidder and any party acting in concert with it holding more than 50% of the voting rights (see 6.4 Common Conditions for a Takeover Offer). Voluntary offers that are conditional on a level of acceptance higher than 50% must be approved by the SIC, and the bidder would need to demonstrate that it is acting in good faith in imposing the higher level of acceptance. Where the bidder is seeking to privatise the target company, a 90% minimum accept - ance condition is common, as it allows the bidder to avail itself of the compulsory acquisition procedure under the Companies Act 1967. In relation to partial offers, the SIC will normally con - sent to a partial offer that does not result in the bidder
1156 CHAMBERS.COM
Powered by FlippingBook