ARGENTINA Law and Practice Contributed by: Agustin Ferrari, Hernán Alal and Astrid Nottebohm, Naveira, Truffat, Martínez, Ferrari & Mallo Abogados
6.3 Consideration Cash has tended to be the predominant form of con - sideration when acquiring/selling a business. How - ever, certain transactions by public companies have incorporated an in-kind component, replacing cur - rency with stocks, including the following. • Pampa Energía/EDENOR/EDELCOS – Pampa Energía sold its 51% stake in EDENOR to EDEL - COS for a mix of consideration, including the transfer of Class B shares of EDENOR (in-kind payment), an upfront payment in cash, and a cash payment contingent on profits generated. • Banco Galicia & Grupo Financiero Galicia (GFG)/ HSBC Argentina – GFG, a publicly traded entity, partially funded its acquisition of HSBC Argentina by issuing and transferring its own ADRs as part of the payment. • Columbus/Banco Valores Columbus sharehold- ers consented to a merger with Banco Valores, a publicly traded bank, where they received shares in Banco Valores rather than a cash payout. • Some of the common tools seen in Argentina used to bridge value gaps between the parties in a deal environment with high valuation uncertainty are the following. • Earn-outs, usually deferring payment tied to the agreed financial metrics of target companies – suc - cessive one-year earn-out periods for a two-to- five-year term post-closing are common. • Instalment payments – the interest rate may be added or can be priced in ex-ante. • Rollovers by management a mix of cash and equity of the acquired target is sometimes offered to sell - ers. Ratchets that track post-closing performance may be a part of the mix and help both sides to bridge valuation gaps. • Sale of minority stakes – coupled with a call option in favour of the buyer at a value to be based on financial metrics observed prior to exercise of the option and once the buyer has been involved in the management of the target company. 6.4 Common Conditions for a Takeover Offer In Argentina, tender offers are the primary method for acquiring control of a publicly traded company. The offers can be either mandatory or voluntary, with key differences in their purpose and conditions.
Mandatory Tender Offer Conditions As previously explained, a mandatory tender offer is required when an investor acquires control or a “sig - nificant interest” in a public company, and in cases of de-listings. Mandatory tender offers must be uncon - ditional, and the bidder cannot impose any conditions on the offer. Voluntary Tender Offer Conditions A voluntary offer is initiated by a bidder without legal obligation to do so and with no requirement on the number of shares to be potentially acquired. Voluntary offers can be made with or without the co-operation of the target’s board and may include conditions, such as a minimum acceptance threshold or regula - tory approvals. The CNV, acting as the regulator, must approve any conditions to ensure they are fair and transparent. 6.5 Minimum Acceptance Conditions With respect to voluntary tender offers, Argentine laws do not require a minimum percentage of stock at which the target company must accept the bid, and bidders may freely set the minimum acceptance threshold. However, CNV rules do not allow pre-con - ditions other than an acceptance threshold. 6.6 Requirement to Obtain Financing Mandatory public tender offers for the acquisition of shares of companies under the public offer regime cannot be conditional on the bidder obtaining financ - ing. These types of offers must be irrevocable during their term of duration. Notwithstanding the above, we note that a bidder must secure its offer using cash, securities, or a finan - cial entity’s guarantee and must demonstrate to the CNV that the guarantee is valid and sufficient. In a specific squeeze-out method using what is called a Declaración Unilateral de Voluntad de Adquisición, or DUVA (see 6.10 Squeeze-Out Mechanisms ), once the CNV approval is obtained, the controlling share - holder issuing the unilateral statement must deposit the necessary funds in a special account at a local financial institution to acquire the remaining shares at a fair price. The amount may exceed the proposed
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