Is It Possible to Submit a Competing Acquisition Offer?
In the last part of this series “The laws of Mergers & Acquisitions in the UAE - Part 5”, we went through the different types of acquisition. However, it worth to be highlighted if it is possible to submit competing offer to acquire the target company. This is what we will discuss today.
The short answer is YES. however, the competing offer shall meet certain criteria, first the intent shall be announced no later than the 53rd day from the next day of receiving the primary offer by the target company. As well as, the competing offer must be better, for the securities’ holders, than the primary offer or the previous competing offer, and SCA may approve the draft competing offer in the following cases:
- If it contains a material amendment to the proposed conditions in favor of the holders of the securities subject of the offer, even if it does not include a higher price.
- If the competing offer is recommended by the target company, if it has no relation with the members of the board of directors/ managers of the entity which presented the competing offer.
The question now, are there any other details should be taken into consideration while processing this transaction? this article will focus on some important tips on how to submit successful competing acquisition offer.
What is the time frame of the competing offer?
In the event SCA approves the competing offer, its validity term shall be calculated from the next day after it is received by the target company and until the second closing date. SCA may extend this term whenever it is necessary.
The securities’ holders who have not responded to the offer may submit their requests of acceptance within (14) days from the first/second closing date, unless the acquirer stipulates the rejection of such requests in the offer document, or before (14) days from the first/second closing date provided that the securities’ holders are informed of such condition in writing. Accordingly, the validity term of the primary offer/ previous competing offer shall be extended for the same validity term of the competing offer. The offers may be adjusted for competition purposes. In the event the competition among the offers continues and reaches the 46th day, which is the last day of the grace period granted to amend the offers, of the competing offer’s validity term, SCA may require an extension of the term to 5 more days maximum to finalize the offers, and then the best offer shall be executed.
Is it permissible to submit offers for all categories of Securities?
If the target company has more than one category of shares in the capital, the acquirer shall submit a (comparable) offer for each category. The offer submitted for shares that have no voting rights should not be conditional on a certain level of acceptance of such category, unless the offer submitted to acquire the securities is conditional on the success of the offer submitted to acquire the shares that do not enjoy voting rights, this shall apply to all security categories in the capital of the target company.
In which cases Cash Offer should be submitted?
The acquirer must submit a cash offer in the following cases:
- In the event the acquirer, the associated group and the related parties therein obtained, by way of buying in cash, a percentage of (10%) and above of the shares during the offer validity term.
- In the event the acquirer, the associated group and the related parties therein obtained, by way of buying in cash, a percentage of (10%) and above of the shares during the 6 months preceding the knowledge of the potential offer or the announcement of the intent of acquisition, whichever occurs earlier.
- In the event of the mandatory acquisition, unless the minority shareholders accept other than the cash offer.
In which cases swap shares offer should be submitted?
The acquirer should submit an offer to swap shares in the following cases:
- In the event the acquirer, the associated group and the related parties therein obtained, by way of swapping of shares, a percentage of (10%) and above of the shares during the offer validity term.
- In the event the acquirer and the associated group and related parties therein obtained, by way of swapping of shares, a percentage of (10%) and above of the shares during the 3 months preceding the knowledge of the potential offer or the announcement of the intent of acquisition, whichever occurs earlier.
What is the termination fee?
Termination fee means the arrangement that can be agreed upon by the acquirer and the target company under which the target company pays a specific sum when it triggers a certain event that would suspend the offer or make it fail. This includes, but is not limited to, making a recommendation by the board of directors of the target company to accept a higher competing offer.
Any proposed termination fees may not exceed (2%) of the value of the terminated offer. The board of directors and financial consultant of the target company should confirm to SCA in writing that such fees shall be paid in favor of the securities’ holders. The arrangement related to the termination fees shall be fully disclosed in the offer document.
SCA’s prior approval must be obtained in all the cases which involve a proposal to agree on the termination fees or any other similar proposed arrangement.
Stay tuned for the next article where we will continue highlighting some more tips on how to submit successful competing acquisition offer.
For further assistance or information regarding M&A please find out how our experts at Al Safar & Partners can help. Call +97144221944 or email reception@alsafarpartners.com www.alsafarpartners.com to get started.