Below, we have picked out 5 main highlights of the revised takeover and mergers framework, to bring to your attention:
- Wider, but also narrower, applicability
The previous Malaysian Code on Takeover and Mergers 2010 (“2010 Code”) was applicable to any target company which is a listed company, a public company, REITs and companies incorporated outside of Malaysia but listed on a Malaysian stock exchange. The application of the revised Takeover Code and new Takeover Rules has been extended to include business trusts, and although still includes public companies, this is limited to public companies with more than 50 shareholders and net assets of RM15 million and above.
- Abolishment of 20% – 33% numerical range to assess control.
Under the 2010 Code, an acquirer between 20% – 33% of a company could have obtained control of a company such that a mandatory offer is triggered. The new Takeover Rules does away with the 20% – 33% quantitative range, and instead sets out several factors to consider the substance of the acquisition and whether the acquirer has acquired a significant degree of control such that a mandatory offer should be made. These factors include:
- Whether the vendor was an ‘insider’; less likelihood of a significant degree of control if the vendor was not an ‘insider’
- The payment made for the shares; payment of a very high price would tend to suggest control over the entire holding was being secured
- Whether the retained shares are a significant part of the company’s capital
- Abolishment of minimum 50% equity requirement for takeover scheme
The Takeover Rules abolishes the requirement that at least a 50% equity stake has to be acquired for takeovers initiated by schemes of arrangement. Hence, a party with less than 50% shareholding can now rely on a scheme of arrangement takeover.
- Potentially fairer price for mandatory general offers
Under the new Takeover Rules, the offer price for a mandatory offer shall be not less than the highest price paid/ offered to be paid by the offeror or person acting in concert within 6 months from before the beginning of the offer period OR the volume weighted average trade price for the last 20 market days prior to the triggering of the offer, whichever is the higher. Whilst the former factor of highest price offered or paid remains unchanged from the 2010 rules, the consideration of the preceding volume weighted average trade price is a new addition, and would encourage fairer prices reflecting market value.
- Stricter disclosure requirements imposed
The new Takeover Rules require offerors to announce the takeover offer within one hour of triggering the obligation to announce, and the offeror must give notice to the offeree board beforehand. The offeree board likewise is to announce the takeover offer within one hour of receiving the offer. Note that there are also additional requirements as to the content of documents and information to be submitted to the SC.
Aside from the above, other changes brought about by the new Takeover Rules include clarification of factors to be considered to determine if parties are acting in concert, changes to applicability for acquisitions through an upstream entity, and procedure for appointment and resignation of directors where a takeover is to occur.
Such changes to the takeover and mergers framework are aimed to facilitate mergers and acquisition while at the same time continuing to adequately protect shareholders’ interests.