SINGAPORE Law and Practice Contributed by: Benjamin Gaw and Joel Tan, Drew & Napier LLC
and persons acting in concert with it holding shares with 30% or more of the voting rights in the target company, and provided that the bidder complies with the conditions set out under the Takeover Code. The SIC will not consent to any partial offer that results in the bidder and persons acting in concert with the bidder, holding shares with not less than 30% but not more than 50% of the voting rights of the target com - pany. 6.6 Requirement to Obtain Financing 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 and persons acting in concert with it holding shares with 30% or more of the voting rights in the target company, and provided that the bidder complies with the conditions set out under the Takeover Code. The SIC will not consent to any partial offer that results in the bidder and persons acting in concert with the bidder, holding shares with not less than 30% but not more than 50% of the voting rights of the target com - pany. 6.7 Types of Deal Security Measures It is generally open to bidders to propose deal security measures. Where the Takeover Code applies, the tar - get company should note its duty under the Takeover Code not to undertake any deal security measures
that could frustrate a bona fide offer or deny its share - holders an opportunity to decide on its merits. Two commonly used measures are exclusivity agree -
ments and break fees. Exclusivity Agreements
Exclusivity agreements hinder the target company’s board from proposing alternative bids to sharehold - ers, by precluding it from actively shopping for, or responding to, other bidders during a certain period of time. Break Fees A bidder may negotiate break fees (imposed on the target company) or reverse break fees (imposed on a bidder), although these are less commonly used in acquisitions involving private companies. Break fees may not be enforceable if they constitute a penalty, as opposed to liquidated damages (ie, a genuine pre- estimate of loss). Further, directors would need to ensure that agreeing to break fees would be in line with the fiduciary duties they owe to the company (eg, to act in a bona fide manner in the company’s best interests). In acquisitions involving a target company to which the Takeover Code applies, the SIC should be con - sulted at the earliest opportunity in all cases where a break fee or any similar arrangement is proposed. Further, the rules under the Takeover Code governing break fees must be complied with – eg: • the break fee must be minimal, normally no more than 1% of the value of the target company calcu - lated by reference to the offer price; • the target company’s board and its financial adviser must provide, in writing, to the SIC: (a) confirmation that the break fee arrangements were agreed as a result of normal commercial negotiations; (b) an explanation of the basis (including appro - priateness) and the circumstances in which the break fee becomes payable; (c) any relevant information concerning possi - ble competing bidders – eg, the status of any discussions, the possible terms, any pre-con - ditions to the making of an offer, the timing of
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