ISRAEL Law and Practice Contributed by: Barak Platt, Micki Shapira, Liron Hacohen and Nataly Margalit, Arnon, Tadmor-Levy
of Companies (which is not filed until the merger agreement is executed); and • 30 days following the approval of the merger by the shareholders of the merging companies. Accordingly, it typically takes nearly two months at least following signing to consummate a statutory merger in Israel. 6.2 Mandatory Offer Threshold The Israeli Companies Law provides that holdings of certain thresholds in public companies may only be obtained through a special tender offer. A purchaser who wishes to acquire a 25% interest in a public com - pany may only do so by way of a special tender offer for at least 5% of the company’s shares. This require - ment does not apply if the target company already has a shareholder holding of at least 25% of the target’s shares. Similarly, a purchaser who wishes to exceed the 45% threshold may only do so by way of a 5% or more special tender offer, unless there is already a share - holder of the target company holding at least 45% of the target company’s shares. 6.3 Consideration Israeli law does not dictate the type of consideration which can be used to make an acquisition. While cash is most commonly used, shares of the acquirer or a combination of cash and shares are both permissible and not uncommon. Earn-outs are frequently used in acquisitions in Israel to bridge valuation gaps. 6.4 Common Conditions for a Takeover Offer Depending on the circumstances of the parties to a transaction, various regulatory consents may be required in order to consummate the transaction. The size of the transaction and the market share of the parties may also trigger a requirement to obtain the approval of the ICA. If the target company has received funding from the IIA or tax benefits from the ITA, pre-approval may then be required in order to consummate the transaction. Furthermore, if a research and development grant from the IIA has been received by the target com - pany, and the acquirer wants to transfer the target
company’s IP out of Israel, an additional payment will likely be required by the IIA. If the acquirer is using securities as consideration, the target company will typically seek a ruling from the ITA deferring payment of taxes and, if no exemption applies under Israeli securities law, the acquirer will need to file a prospectus in Israel. 6.5 Minimum Acceptance Conditions The Israeli Companies Law provides that, in order to acquire 100% of the issued shares of a company by way of a tender offer, shareholders holding at least 95% of the issued share capital must accept the offer. Additionally, as noted in 6.2 Mandatory Offer Thresh - old , a purchaser that wishes to acquire a 25% inter - est in a public company may only do so by way of a special tender offer for at least 5% of the company’s shares. This requirement does not apply if the target company already has a shareholder holding of at least 25% of the target company’s shares. Similarly, a purchaser that wishes to exceed the 45% threshold may only do so by way of a 5% or more special tender offer, unless there is already a share - holder of the target company holding at least 45% of the target company’s shares. 6.6 Requirement to Obtain Financing A business combination can be conditional on the bid - der obtaining financing. Israeli law does not prevent an acquirer from subjecting the transaction to a condi - tion that the acquirer obtain financing to support the transaction. 6.7 Types of Deal Security Measures Break-up fees are common in acquisitions of Israeli public companies. There is no clear Israeli statute or case law addressing “fiduciary outs” in Israel. Many Israeli practitioners believe that, in the absence of any clear restrictions, a board of directors of an Israeli company has the authority to agree to a limited no- shop period as part of the negotiations to finalise a transaction. Others believe that, if an Israeli court were presented with the issue, it would look to Delaware law for guid -
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