SOUTH AFRICA Law and Practice Contributed by: Ulrike Naumann, Alison Mellon, Joshua Janks and Aneria Bouwer, Bowmans
the Takeover Regulations. In addition, acquirers and targets that are listed on the Johannesburg Stock Exchange (JSE) need to comply with the Listings Requirements of the JSE Limited (the “JSE Listings Requirements” ) in certain circum- stances. The extent of compliance will depend on the nature of the transaction and its size rela- tive to the listed entity. Where a transaction involving a regulated tar- get constitutes an “affected transaction” for the purposes of the Companies Act, 2008 (see Sec- tion 117(1)(c) for a full list), the transaction must comply with the Takeover Regulations. Examples of affected transactions in a regulated takeover scenario include: • a scheme of arrangement, between the regu- lated company and its shareholders; • the disposal of all or a greater part of the assets or undertakings by a regulated com- pany; • an amalgamation or a merger where one of the parties is a regulated company; and • mandatory offers. From a financing perspective, banks should take notice of the TRP guarantee requirement in the Companies Regulations 2011, which provide as follows: where an offer consideration is wholly or partly in cash, the offeror offer circular must include either: • an irrevocable unconditional guarantee from a South African bank; or • an irrevocable unconditional confirmation from a third party that sufficient cash is held
in escrow, in favour of the holders of the securities to be acquired, for the sole purpose of satisfying the cash consideration in full. The guarantee or confirmation must empower the TRP to exercise the guarantee or confirma- tion if the offeror has failed to pay the cash con- sideration by the due date. Importantly, a bank guarantee issued for this purpose cannot be subject to any further condi- tions in addition to the conditions of the offer itself. Further, the TRP will not accept condi- tions to the offer that are founded on subjective assessments or permit the bank to withdraw too easily, as the TRP is looking for firm commit- ments from the bank and offeror. In this regard, given the unconditional nature of the guarantee, banks should ensure that the offeror’s funding arrangements to purchase securities in the tar- get are agreed and settled prior to issuing the guarantee. However, funding terms are not pub- licly available to the TRP or target shareholders in South Africa. 10. Jurisdiction-Specific Features 10.1 Other Acquisition Finance Issues Acquisition finance transactions in South Africa are increasingly incorporating and prioritising ESG considerations, both at a due diligence stage and in relation to the financing provided. For example, the pricing of certain tranches of funding may be linked to ESG goals such as sus- tainability performance targets.
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