What are the types of Acquisitions?
In the previous part of this series, we went through the scope of application of “SCA” Board of Directors’ Decision No. (18 / R.M) of 2017 Concerning the Rules of Acquisition and Merger of Public Shareholding Companies and the exception of such decision. Be sure to check out “The laws of Mergers & Acquisitions in the UAE - Part 4” in case you missed it!
Today, we will focus on the four types of acquisitions mentioned in Decision No. (18 / R.M) of 2017 , Let's dive through them one by one.
Mandatory Acquisition:
In the event the ownership ratio of any person, or a group of associated persons or related parties amounts to (30% + 1 Security) and more of the target company, he/they shall take the following actions:
- Immediately stop increasing the ownership ratio in the target company.
- Immediately inform SCA of the ownership ratio, and whether there is an intent of acquisition.
- In the event there is an intent of acquisition, submit an offer and the securities which exceeds the (30%) shall not have voting rights until the acquisition is performed successfully, unless otherwise is decided by SCA.
In the event there is no intent of acquisition, the ownership ratio shall be lowered to (30%) and below provided that no damage is caused to the security market, within a period of no more than 3 months from the date of notifying SCA. The securities exceed the (30%) shall have no voting rights.
Any person or a group of associated persons or related parties holding an ownership ratio ranging between (30%) and (50% + 1 security), shall submit an offer in case he/they has/have increased his/their ownership ratio by (1%) of the securities. For the purpose of calculating such (1%), the ratio of the last purchase transaction shall be added to the ratios bought in the preceding last (6) months without counting the transactions completed.
This shall apply to any person or groups of associated persons or related parties holding (50% + 1 security) and above if their ownership ratio fell to between (30%) and (50% + 1 security).
Upon executing the Offer, the following conditions shall apply:
- If the number of the securities offered in the end of the offer term equals (50 + 1 security) and above, the transaction shall be executed.
- If the number of the securities offered in the end of the offer term is below (50 + 1 security), the transaction shall be canceled.
Voluntary Acquisition:
Any person or a group of associated persons or related parties wishing to acquire securities resulting in holding (30% + 1 Security) and above of the target company may submit a voluntary offer.
Upon executing the offer, the following conditions shall apply:
- If the number of the securities offered in the end of the offer term equals (50 + 1 security) and above, the transaction shall be executed.
- If the number of the securities offered in the end of the offer term is below (50 + 1 security), the transaction shall be canceled.
Partial Acquisition:
Any person or a group of associated persons or related parties wishing to acquire a specific number of securities that leads them to hold (50% + 1 security) and above of the target company shall notify SCA and submit a draft offer. To complete the acquisition, the number of securities offered in the end of the offer term must equal at least the number of securities sought to be acquired in the target company.
Any person or a group of associated persons or related parties wishing to acquire a specific number of securities that leads them to hold a maximum of 30% of the securities of the target company, shall submit an offer. To complete the acquisition, the number of securities offered in the end of the offer term must equal at least the number of securities sought to be acquired in the target company.
The approval of the target company’s board of directors on the acquisition must be obtained in case the number of securities sought to be acquired is not more than 30% and the offer shall be executed in accordance with the security market mechanisms.
Upon executing the partial offer, the following conditions shall be met:
- If the number of securities offered in the end of the offer term is less than the specific number of securities required to be acquired, the transaction shall be canceled.
- If the number of securities offered in the end of the offer term is more than the specific number of securities required to be acquired, the acquirer must acquire from all securities holders who responded to the offer thereof a number of securities representing the percentage of their respective offers to the total of the securities required to be acquired. Fractions shall be adjusted to the benefit of minor holders.
Obligatory Acquisition:
Any of the other securities’ holders who hold a percentage representing at least (3%) of the securities may submit an offer to the acquirer which acquired (90% + 1 security) and above an application to make an offer to acquire the minority securities. The acquirer shall decide on the application no later than 60 days from the date of receiving the application. In the event the acquirer rejects the application or fails to respond within the said period, such holders may apply to SCA to enforce the acquirer to submit an offer. If SCA accepts the application, it shall inform the acquirer which shall then submit a draft offer within 60 days from the date of being notified of SCA’s decision.
The Acquirer, which acquired (90% + 1 security) and above, may apply to SCA for approval to submit a mandatory offer to enforce the minority securities’ holders to sell / swap all the securities held by them in favor of the acquirer where this is permitted by the articles of association of the acquired target company, within 60 days from the date of final settlement of the primary offer.
The minority holders may resort to the competent court within 60 days from receiving a written notification of the acquirer’s application. The mandatory offer procedures may not be suspended except by a court order, otherwise the mandatory offer shall be settled within the next 7 days following the expiry of the grace period given to the minority securities’ holders.
Now we have explained the different types of acquisitions as per the SCA Decision, stay tuned for next part where we will highlight the conditions of submitting an offer to acquire the target company.
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