SOUTH AFRICA Law and Practice Contributed by: Michael Katz, Matthew Morrison, Madison Liebmann and Sinovuyo Damane, ENS
as consideration for an acquisition, a cash subscrip - tion for shares in the target company, or pursuant to a rights offer by the target, may be waived if independ - ent shareholders holding more than 50% of the shares of the target have agreed to waive the benefit of such a mandatory offer. 6.3 Consideration The consideration for acquisitions may be in the form of cash, securities or a combination of cash and secu - rities. In SA, a cash consideration is the usual form of consideration for public market transactions. Where cash is the form of consideration offered, the offeror is obliged to deliver either (i) a cash confir - mation to the TRP in the form of an irrevocable and unconditional bank guarantee, or (ii) a confirmation that sufficient cash is held in escrow for the cash com - ponent of the offer consideration. When securities are offered as the form of consid - eration, there are enhanced disclosures relating to the securities which are triggered (see 7.2 Type of Disclosure Required ). This allows shareholders to properly assess and consider the merits of the offer consideration. See 4.3 Hurdles to Stakebuilding for offer require - ments where the bidder, or any person acting in con - cert with the bidder, has acquired shares in the target within the six-month period before the commence - ment of the offer period. Valuation Gaps Common tools to bridge valuation gaps in private transactions include deferring a portion of the pur - chase consideration and linking the amount to achievement of certain financial metrics by the tar - get. Such a mechanism is not common in public/listed transactions. 6.4 Common Conditions for a Takeover Offer A takeover offer would usually include the following conditions: • a requirement for the offer to be accepted by, or approved by, a minimum percentage of the share - holders of the target;
• in a scheme of arrangement, there may be a condi - tion that dissenting shareholder appraisal rights are not exercised by more than a specific percentage of the shareholders of the target company; • that the approval of the relevant regulators has been obtained; • that counterparties to any of the target’s material contracts have, where necessary, given their con - sent to the proposed change of control; • that no material adverse change has occurred in respect of the target’s business during the offer period; and • that the TRP has issued a compliance certificate for the proposed takeover. The Takeover Regulations expressly state that an offer must not be subject to any condition that either: • depends solely on the subjective judgement of the bidder’s directors; or • provides the bidder’s directors can themselves control whether or not it will be fulfilled. As a result of these requirements, material adverse change conditions are typically linked to measurable negative impacts on the earnings or net asset value of the target. 6.5 Minimum Acceptance Conditions An offeror may include a minimum acceptance con - dition as a condition precedent to the offer becom - ing operative, save in the case of a mandatory offer. This minimum acceptance condition would usually be phrased appropriately to state that the offer is condi - tional on at least a certain percentage (which percent - age is expressly stated) of the offeree shareholders accepting the offer. As regards any relevant control thresholds, share - holder approvals may be in the form of either an ordinary resolution or a special resolution. Ordinary resolutions require the approval of more than 50% of the shareholders to exercise voting rights on the resolution. Special resolutions require that at least 75% of the shareholders exercise voting rights on the resolution. It is therefore not uncommon to see that an offer is stipulated to be conditional upon accept -
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