CHAPTER 01 Takeover Bid Regulation: An Overview
– Bids typically include a higher minimum tender condition to ensure that the bidder can obtain the remaining shares not deposited through a second-step going-private transaction. The condition would typically require a tender of at least (i) two-thirds of outstanding shares and (ii) a majority-of-the-minority. Sufficient Time Rules – The bid must be open for an initial deposit period of at least 105 days. > The initial deposit period can be waived down to 35 days by the target. > This shorter bid period will apply to any other bid outstanding at the time and to certain other bids commenced thereafter. > If the target enters into an “alternative transaction” (e.g., a merger, amalgamation or other similar shareholder-approved transaction), the minimum deposit period is reduced automatically to 35 days for any bid outstanding at the time or any bid commenced after the announcement of the alternative transaction but before the completion/termination of the transaction alternative. ○ This creates an incentive for a target to structure a “white knight” transaction as a bid rather than as an “alternative transaction.” – The bidder is required to take up and pay for securities within 10 days of expiry of the bid if the bid conditions have been satisfied or waived. – The bidder must extend the bid for an additional 10 days after expiry of the initial deposit period if the bidder satisfies the mandatory minimum tender condition, all other conditions have been satisfied or waived and the bidder announces its intention to immediately take up and pay for securities deposited under the bid. – Withdrawal of a tender is permitted in the following circumstances: > at any time before securities are taken up by the bidder; > for 10 days after a change in the bid; or > if securities have not been paid for within three business days of take-up. – The bid must be kept open for 10 days after an amendment (unless it is solely a waiver of a condition in an all-cash bid). Amendments are prohibited after the bidder becomes obligated to take up and pay for securities (other than an extension of the deposit period or an increase in consideration).
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