TAIWAN Law and Practice Contributed by: Ken-Ying Tseng, Vivian Cheng, Julia Kuei-Fang Yung and Gail Chang, Lee and Li Attorneys-at-Law
• The threshold for the offer: For example, the bidder may specify in the tender offer prospectus that it intends to acquire 100% of the target company’s shares and if it fails to acquire 50% of the target company’s shares, the offer will fail. • Regulatory approvals: The commonly seen regula - tory approvals are the DIR’s approval for a foreign bidder’s investment in the target company, and the FTC’s approval if the tender offer is a combination and meets the filing threshold (see 2.4 Antitrust Regulations ). The bidder may also specify in the tender offer pro - spectus the maximum number of shares it intends to acquire. If the number of shares tendered exceeds the number of shares intended to be acquired, the bidder shall purchase the shares pro rata from all the tenderers. No other conditions other than the above would be allowed by the regulator in a tender offer. 6.5 Minimum Acceptance Conditions In a tender offer, usually the offerors set the threshold of the offer at 51% of the issued shares of the tar - get company, as a 51% equity interest usually means the offeror would have control of the target company including the majority of the board. Some would even set the threshold at 67% to gain an absolute control of the target company because under the Compa - ny Act, material decisions require the approval from shareholders holding two-thirds of the voting shares present at a meeting. However, in practice, given that not all shareholders attend shareholders’ meetings, to control the man - agement or operation of a listed company, it is some - times sufficient for one investor to control 30% to 40% of the voting rights in a listed company. In sum, this would largely depend on the shareholding structure of the listed company. 6.6 Requirement to Obtain Financing Though generally speaking, a business combination in Taiwan may be conditional on the bidder obtain - ing financing, most negotiated transactions do not include this condition. Commitment letters issued by
financial institutions might be required by prudent sell - ers in a leveraged transaction. For a tender offer, it is not permitted for the bidder to have the tender offer consideration payment being subject to obtaining financing. Under the TO Regula - tions, if the consideration is cash, the offeror must provide proof that the offeror has sufficient funds to make the payment of the tender offer consideration (eg, a performance bond issued by a financial institu - tion with the offeror’s agent as beneficiary). 6.7 Types of Deal Security Measures In local practice, a buyer may require that the definitive agreement includes non-solicitation provisions that prohibit the target company from soliciting alterna - tive transaction proposals. Transactions may also involve agreements with major shareholders of the target company to vote to approve the transaction at the shareholders’ meeting of the target company. In the case of a friendly tender offer, the offeror usually will enter into the tender agreement with major share - holders of the target company to ensure that such major shareholders will tender their shares to the offer - or once the tender offer is launched. All contractual arrangements between the offeror and the insiders of the target company (including major shareholders holding more than 10% of the shares and directors, etc) must be fully disclosed in the tender offer pro - spectus. While it is not uncommon for the parties to agree on the bidder’s exclusivity on the dealing within a period of time, it is not common for the target company, or the bidder, to agree to pay a break fee if the bid is not successful. For transactions involving a period between signing and closing, the parties usually will negotiate standstill covenants requiring the target company to conduct its business in the ordinary course of business consistent with past practice.
1287 CHAMBERS.COM
Powered by FlippingBook