Public mergers and acquisitions in Singapore: overview
A Q&A guide to public mergers and acquisitions law in Singapore.
The country-specific Q&A looks at current market activity; the regulation of recommended and hostile bids; pre-bid formalities, including due diligence, stakebuilding and agreements; procedures for announcing and making an offer (including documentation and mandatory offers); consideration; post-bid considerations (including squeeze-out and de-listing procedures); defending hostile bids; tax issues; other regulatory requirements and restrictions; as well as any proposals for reform.
To compare answers across multiple jurisdictions, visit the M&A Country Q&A tool. This Q&A is part of the PLC multi-jurisdictional guide to mergers and acquisitions law. For a full list of jurisdictional Q&As visit www.practicallaw.com/acquisitions-mjg.
After a modest recovery in 2010, which followed through to the first half of 2011, the M&A market in Singapore experienced an overall slowdown in deal activity in the second half of the year due in large part to the global economic uncertainty arising from the Eurozone and US debt crises. Overall, the value of announced deals in Singapore fell by about 1% from about US$17.2 billion in 2011 (as at 1 March 2012, US$1 was about EUR0.74) to about US$17.0 billion in 2011, and the number of announced deals has also dropped from 439 in 2010 to 396 in 2011 (source: Thomson Reuters).
Notable announced trade deals (deals involving companies in the same industry) in 2011 included:
The acquisition of a 60% stake in Hsu Fu Chi International Limited by Nestlé SA by way of a scheme of arrangement and a share acquisition. The transaction values the target at approximately S$2.1 billion (as at 1 March 2012, US$1 was about S$1.25).
A mandatory general offer by Mayban IB Holdings Sdn Bhd, a wholly-owned subsidiary of Malayan Banking Berhad, for Kim Eng Holdings Limited, following the purchase of an approximate 44.6% stake in the target. The transaction values the target at about S$1.8 billion.
A voluntary general offer by Mitsui & Co, Ltd for Portek International Limited. The transaction value was approximately S$221.0 million. An initial competing offer for the target was also made by ICTSI Far East Pte Ltd (an indirect wholly-owned subsidiary of International Container Terminal Services Inc), which was unsuccessful.
Notable announced non-trade deals in 2011 include:
The voluntary general offer by Clean Water Investment Limited (a special purpose vehicle wholly-owned by CDH China Management Company Limited) for Sinomem Technology Limited. The transaction value was about S$351.3 million.
The mandatory unconditional cash offer by a Deutsche Bank-led consortium for Jaya Holdings Limited, following the purchase of about a 54.7% stake in the target. The transaction values the target at about S$370.4 million.
Control of a public company may be obtained through various means such as a general offer, a scheme of arrangement or an amalgamation proposal.
General offers can be voluntary offers or mandatory offers, and are regulated mainly by the Singapore Code on Take-overs and Mergers (Code) (see Question 4):
Mandatory offer. The requirement under the Code to make a mandatory offer for all of the target's shares is triggered when a person's shareholding in the target exceeds certain percentage thresholds (see Question 16).
Voluntary offer. Voluntary offers can be made for all or part of the target's shares. However, all partial offers require the prior consent of the Securities Industry Council (SIC) (see box, The regulatory authorities). Generally:
partial offers that would not result in the bidder and persons acting in concert with it (concert parties) holding 30% or more of the voting rights of the target are normally allowed by the SIC, subject to the bidder complying with certain conditions set out in the Code;
the SIC will not consent if the partial offer would result in the bidder and its concert parties holding between 30% and 50% of the voting rights of the target;
the SIC may grant consent to a partial offer that would result in the bidder and its concert parties holding more than 50% of the voting rights of the target, if certain conditions set out in the Code are fulfilled.
Schemes of arrangement
A scheme of arrangement is a legislative procedure allowing a company to be restructured under the Companies Act (see Question 4). The company proposes the scheme to its shareholders and, if approved by a statutory majority, it is binding on all shareholders once approved by the High Court.
It can be used to structure a takeover, usually on a recommended basis, but is subject to the Code unless certain conditions are met. In such cases, exemptions from the Code's material obligations can be obtained from the SIC. If approval by the statutory majority is not obtained and the scheme fails, the bidder does not acquire any shares in the target through the scheme.
The key advantage in structuring a takeover through a scheme of arrangement is that the statutory majority approval threshold to compulsorily acquire the shares of non-accepting shareholders is lower than that required for an acquisition of shares by a general offer (see Question 20).
Voluntary amalgamation can be made without a court order, if approved by the shareholders of the amalgamating companies by special resolution at a general meeting (and by any other person, if the proposal requires the approval of that person). In addition, solvency statements must be made by all the directors of each amalgamating company, in relation to the amalgamating companies and the amalgamated company.
Perhaps due to the requirements for solvency statements, voluntary amalgamation, as an acquisition method, has yet to be adopted in a public company takeover situation.
Regulation and regulatory bodies
Public takeovers are regulated by:
Code. The Code, issued by the Monetary Authority of Singapore (MAS) (see box, The regulatory authorities) under the Securities and Futures Act (SFA) (see below), applies to takeovers and mergers of:
all corporations and business trusts with a primary listing of their equity securities and units on the Singapore Exchange Securities Trading Limited (SGX-ST) (see box, The regulatory authorities);
Singapore unlisted public companies and Singapore unlisted registered business trusts with more than 50 shareholders or unitholders and net tangible assets of S$5 million or more; and
property trusts structured as collective investment schemes under the SFA (REITs).
The Code applies whether the bidders are natural persons, companies or unincorporated bodies, and whether local or foreign.
SGX-ST Listing Rules (Listing Rules). Where the bidder is listed on the SGX-ST, the bidder must seek the approval of its shareholders if the bidder is offering its own shares as consideration for the offer, or for an acquisition that exceeds certain thresholds (Chapter 10, Listing Rules). Where the target is listed on the SGX-ST, it must comply with certain requirements (Chapter 11, Listing Rules). If the bidder intends to de-list the target, a reasonable exit alternative (which should normally be in cash) should be offered to the target's shareholders (Chapter 13, Listing Rules).
Companies Act. Certain provisions apply to takeover offers, for example, relating to schemes of arrangement and amalgamations (see Question 2), shareholding reporting requirements (see Question 8), and compulsory acquisition of minority interests (see Question 20).
SFA. Insider trading provisions in the SFA prohibit an individual in possession of material price-sensitive information that is not generally available from:
communicating the information to a third party where the third party is likely to deal in the securities;
dealing, or procuring others to deal, in the securities.
It is also an offence for a person to publicly announce a takeover offer if he has no intention of making an offer, or if he has no reasonable or probable grounds for believing that he will be able to perform his obligations under the offer.
Regulatory bodies that regulate public takeovers include:
The SIC. This administers and enforces the Code.
The MAS. This administers the SFA and regulates other industry sectors such as banking and insurance. MAS' approval is required before a takeover can be made on a target within such industry sectors (see Questions 25 and 26).
The SGX-ST. This administers the Listing Rules.
In a recommended bid situation, a target can usually provide the bidder access to a secure data-room and access to the management team for interviews. However, the information available is likely to be limited and does not contain price-sensitive information. This is because there are constraints on:
Selective disclosure (subject to exceptions such as disclosure according to a major corporate exercise with appropriate confidentiality restraints) imposed by the Listing Rules.
Confidentiality obligations contractually agreed by the target.
Issues of insider trading according to prohibitions under the SFA (see Question 4).
The requirement under the Code to maintain absolute secrecy before the announcement of an offer also limits the extent of due diligence available (see Question 6).
A bidder usually only has access to publicly available information. However, in a competitive bid situation, given that the Code requires information to be provided equally to all competing bidders, the target should also consider that it may be required (unless the SIC rules otherwise) to provide the same information to a competing recommended bidder and a competing hostile bidder.
The obligation to provide parity of information to competing bidders includes situations where one of the offers is for all or materially all of the target's assets and/or businesses. The SIC typically considers this to be the case when the proposed asset and/or business offer is for assets and/or businesses accounting for or contributing more than 30% of the target's sales, earnings, assets or market capitalisation.
Information on Singapore-incorporated companies available from the Accounting and Corporate Regulatory Authority (ACRA) includes:
Details on issued share capital and shareholders. Under the scripless system through which shares of SGX-ST-listed companies are traded, the company's register of shareholders shows the central depository as the only shareholder of the shares that are traded on the SGX-ST.
Details on directors.
The memorandum and articles of association including the voting rights of the shares.
Annual audited accounts and related directors' and auditors' reports.
Information relating to a target that is listed on the SGX-ST that is available from the SGX-ST includes:
Public announcements on material developments (for example, significant acquisitions and disposals, and changes in substantial shareholdings) released by the target in the last five years.
Annual reports containing information on the target's substantial shareholders and corporate governance procedures.
Half-yearly financial results (quarterly for companies with market capitalisation that exceeds S$75 million).
Absolute secrecy is required before an announcement of an offer is made (Rule 2, Code). The conduct of persons with confidential information relating to an offer is highly restricted. Information should only be passed to another person where necessary and if he is aware of the need to maintain secrecy. There are announcement obligations where there is undue movement in the share price of the target (see Question 12).
Agreements with shareholders
Bidders often seek undertakings (usually irrevocable) from major shareholders to accept their proposed offer to secure the success, or increase the success rate, of their offer.
The terms of these undertakings must be disclosed in the bidder's offer announcement and offer document to the target's shareholders (see Question 14). These disclosure requirements include circumstances in which irrevocable undertakings cease to be binding (for example, if a higher competing offer is made) (Rule 23.3, Code) or, if the undertakings are revocable, the conditions under which the undertakings may be revoked (Rule 3, Code). Irrevocable undertakings must be made available for inspection (Rule 23.6, Code).
Without the SIC's consent, irrevocable undertakings cannot contain any arrangements that contain any favourable conditions or special deals that are not extended to the target's other shareholders (Rule 10, Code).
Shareholding reporting requirements
Generally, a bidder who has acquired an interest (as defined under section 7 of the Companies Act) in voting shares of 5% or more of a company incorporated and listed in Singapore, whether through an acquisition of voting shares or other securities of the company, must disclose its interest to the company and the SGX-ST. Any subsequent changes must also be disclosed.
These disclosures must be made within two business days of the bidder acquiring a qualifying shareholding, or of subsequent changes in the percentage level (rounded down to the next whole number if it is not a whole number). The notice must include certain information required under the Companies Act and must be announced by the listed company.
Mandatory offer requirements
A potential bidder should give careful consideration to the number of shares it is proposing to acquire, as it may be required to make a mandatory offer for all the target's shares if the relevant thresholds are triggered (see Question 16). The acquisition of instruments convertible into voting shares in a target or options in respect of securities that carry voting rights does not give rise to an obligation to make a mandatory offer. However, the exercise of any conversion rights or options is considered to be an acquisition of voting rights that may give rise to an obligation to make a mandatory offer (Rule 14.1, Code).
Shareholding interests of associates are aggregated for the purposes of stakebuilding if the associates are deemed to be persons acting in concert with the bidder. Persons acting in concert are persons (individuals or companies) who, under an agreement or understanding (formal or informal), co-operate by acquiring shares to obtain or consolidate effective control of a company. The Code sets out a list of persons who are presumed to be persons acting in concert with the bidder.
Insider trading prohibitions
If the target proposes to provide price-sensitive information to the bidder, it may be an insider trading offence for the bidder to acquire target shares. Therefore, the bidder should not deal in the shares of the target until the information ceases to be price-sensitive or becomes publicly available. One way to make public such price-sensitive information in the course of making a general offer is to disclose the price-sensitive information in the offer announcement or offer document, with the target's consent.
While the fact of a proposed offer is itself price-sensitive information, there is an exception under the SFA that allows the bidder to purchase shares without contravening the insider trading prohibitions if he is merely aware of his own intentions.
Agreements in recommended bids
In a recommended bid made as a general offer, the bidder and the target's board usually have some arrangement (although not necessarily a formal agreement). This generally sets out the process for releasing a joint recommended offer announcement and contains certain mutual undertakings, such as confidentiality and exclusivity.
In a recommended bid structured as a scheme of arrangement (except perhaps in cases of privatisations by a parent company of its listed subsidiary), a merger or scheme implementation agreement (containing conditions precedent, pre-completion undertakings from the target and representations and warranties from the target or substantial shareholders of the target) is often used.
There is no express prohibition in the Code against a target board agreeing not to solicit or recommend other offers. However, any agreement by the target board not to solicit or recommend other offers is subject to the overriding principle that the directors of the target have fiduciary duties and are therefore obliged to act in the best interests of the target. In addition, if the target board agrees not to recommend another offer in the situation of a competing offer, this may be seen as frustration of the competing offer (see Question 23).
A break fee arrangement is allowed where a fee is paid by the target to the bidder if a specified event occurs that prevents the offer from succeeding. However, payment of a break fee might not be enforceable if it has been assessed as a penalty and not a genuine pre-estimate of loss.
The SIC's approval should be sought if a break fee is proposed, as the SIC would be concerned that the target's shareholders' interests might be adversely affected. This is because a break fee may be anti-competitive in that it could discourage the target's board from recommending a competing bid and may result in shareholders not getting full value or being coerced into accepting an offer. It could also diminish the value of the target in the event the offer fails, dissuading potential competing bidders from putting up a bid.
The bidder must ensure that the target has the capacity to enter into a break fee arrangement and that, among other things, the directors and advisers of the target are acting in the best interests of the company.
A break fee must be minimal (normally no more than 1% of the value of the target based on the offer price). In addition, the target board and its financial adviser must confirm in writing to the SIC, among others, that they each believe that the break fee is in the best interests of shareholders. The break fee arrangement must be fully disclosed in the announcement and the offer document.
There have been cases in Singapore where the target has agreed to pay a break fee to the bidder if the bid is unsuccessful (for example, in schemes of arrangement). However, break fees are currently not common.
In a cash offer or where an offer involves a cash element, the bidder must include in its offer announcement an unconditional confirmation by its financial adviser or by another appropriate third party that the bidder has sufficient financial resources to satisfy full acceptance of the offer (see Question 14). The SIC can request evidence to support such statements of sufficient financial resources (Rule 3, Code).
Announcing and making the offer
Making the bid public
An announcement of a firm intention to make an offer is made by the bidder after approaching the target's board. In a hostile offer, the announcement is usually made immediately after approaching the target's board to restrict the time for the target's board to prepare its defence. An immediate announcement is required where an obligation to make a mandatory offer is triggered (see Question 16).
Where there is evidence of a leak regarding a possible offer, the SIC requires an immediate announcement to avoid the risk of a false market developing. Such an announcement may be a holding announcement stating no more than that an offer for the target is under consideration. A holding announcement must be followed up by further monthly announcements on the progress of the talks, until a firm intention to make an offer or a decision not to proceed with an offer is announced. A holding announcement made by or on behalf of a potential bidder must name the potential bidder. A holding announcement made by the target need not name the potential bidder unless the potential bidder has been identified in the rumour in question.
In certain circumstances (namely where there is undue movement in the share price or a significant increase in the trading volume of the target), the target may be required to make an announcement. However, if such an event occurs before the bidder approaches the target, and it can be reasonably attributable to the actions of the potential bidder or potential seller, the responsibility for making the announcement lies with the potential bidder or seller.
A target must make an announcement in any of the following situations:
On notification of a firm offer from a serious source. In addition, if the bidder has not published a press notice, the target must publish one.
When negotiations between the bidder and the target are about to extend to include more than a very restricted number of people.
When the target's board is aware of negotiations between a potential bidder and a seller holding 30% or more of the target's voting rights, or when the board is seeking potential bidders, and one of the following applies:
the target becomes subject to rumours relating to an offer (or there is undue movement in share price or volume); or
more than a very restricted number of potential buyers or bidders are about to be approached.
The announcement of a firm intention to make an offer triggers an obligation to make an offer (subject to any offer conditions). The SIC only permits a bidder not to proceed in highly exceptional circumstances.
An announcement of a firm intention to make an offer must contain:
The terms of the offer.
The identities of the bidder and the ultimate bidder or ultimate controlling shareholder (where appropriate).
Details of existing holdings of securities in the target that the bidder and/or its concert parties own, control or have received irrevocable commitments to accept their offer for (including circumstances, if any, where commitments cease to be binding).
All conditions (including normal conditions) of the offer.
Any other arrangements material to the offer.
Unconditional confirmation by a financial adviser (or appropriate third party) that the bidder has sufficient resources to satisfy full acceptance of the offer, if the offer involves a cash element.
In addition, where an obligation to make a mandatory offer, a cash offer or to revise an offer arises due to an acquisition of voting rights by a bidder, an announcement must be made to also include:
The number of voting rights acquired.
The price paid.
Any revisions to the terms of the offer.
The following is a simplified illustration of the key dates for a public offer in Singapore (assuming there is no competing bid):
Day 0 minus 14 to 21. Offer announcement.
Day 0. Offer document (see Question 14) despatched to target's shareholders (no earlier than 14 days but no later than 21 days after offer announcement).
Day 14. Last date for despatch of circular by the target in response to the offer document (see Question 14).
Day 28. Earliest date for first closing date.
By 8am on the first business day after first closing date (and all subsequent closing dates). Announcement of acceptance levels and (if appropriate) extension of the offer.
After day 39. Target cannot announce trading results, profit or dividend forecasts, asset valuations or major transactions, except with the SIC's consent.
Day 60 (5.30pm). Last date for fulfilment of acceptance conditions.
If it has reserved its right to do so, an original bidder can depart from the offer timetable and revise its offer if a competitive situation arises. The SIC typically considers a competitive situation to arise if a competing offer has been announced. The SIC should be consulted in all other situations (including pre-conditional offers).
In a recommended bid, a document containing both the details of the offer and the target board's recommendations is prepared as a joint bidder/target document, and released no later than Day 0 (that is, 14 to 21 days after the offer announcement).
Every takeover offer must be conditional on a minimum level of acceptance. For both mandatory offers and voluntary offers, the minimum level of acceptance is that which would result in the bidder (and its concert parties) holding more than 50% of the voting rights. This requirement cannot be waived.
Voluntary offers that are conditional on a higher level of acceptance are subject to approval by the SIC and the bidder must satisfy the SIC that it is acting in good faith in imposing a high level of acceptance.
A mandatory offer must not be subject to any condition other than the conditions as to the minimum level of acceptance.
The SIC does not usually allow a voluntary offer to be subject to conditions that require subjective judgments by the bidder or lie in the bidder's hands, as this can create uncertainty.
In addition, the bidder should not invoke a condition (except as to a minimum level of acceptance) causing the offer to lapse, unless the circumstances giving rise to the offer lapsing are of material significance to the bidder in the context of the offer, and information about the condition is not available from public records or is not known to the bidder before the offer is announced.
Common conditions attached to a voluntary offer include:
In proposed privatisations, valid acceptances for not less than 90% of shares being received by the first closing date (see Question 20), although this threshold can usually be reduced by the bidder (with the consent of the SIC and subject to certain conditions as set out in the Code) as long as it is more than 50%.
Passing of any resolutions necessary to implement the offer at an extraordinary general meeting of the bidder.
In a securities exchange offer, admission of new shares in the bidder to listing by the SGX-ST.
Necessary regulatory filings being made and clearances obtained.
A bidder should post an offer document setting out the details, terms and conditions of the offer to the target's shareholders not earlier than 14 days and not later than 21 days from the date of the offer announcement. The offer document should set out the following information:
The offer consideration.
The conditions of the offer.
The acceptance procedure.
The bidder's arguments in support of the offer and an explanation of its plans for the target (for example, whether the bidder intends to exercise powers of compulsory acquisition (see Question 20) and its intentions regarding the listing status of the target).
Details of the bidder's shareholding in the target (if any).
Information on the bidder, particularly where shares of the bidder are offered as consideration.
Special arrangements between the bidder and the target's shareholders or directors.
Confirmation of the bidder's financial resources.
A responsibility statement by the directors of the bidder assuming responsibility for the information.
Such other information as may be prescribed under the Code.
The target's board must advise its shareholders of its views, having obtained competent independent advice, within 14 days after the bidder has despatched the offer document. The target's circular should set out the following information:
Financial information on the target.
Advice of an independent financial adviser and the recommendations of the target's board.
Views of the target's board on the bidder's plans for the target and its employees.
Details of the bidder's and target directors' shareholdings in the target and the bidder (if any).
A responsibility statement made by the directors of the target assuming responsibility for the information.
Such other information as may be prescribed under the Code.
The shareholders of the target receive the above documents, regardless of whether an offer is recommended or hostile. The only difference is that in a recommended offer, the parties may issue a joint bidder and target document that includes the target board's recommendations.
There is no requirement for a target board to inform or consult its employees about the offer. However, the target's directors are entitled to have regard to the interests of the company's employees generally, when exercising their powers.
The offer document should contain a statement on the bidder's intentions concerning the continued employment of the employees of the target and its subsidiaries (if any).
Where relevant, the target's board should also comment in a letter (annexed to the target document) to its shareholders on such statements.
A mandatory offer (Rule 14, Code) must be made when either:
A person acquires (together with shares held or acquired by any concert parties) shares carrying 30% or more of the voting rights in a company.
A person holding (with any concert parties) at least 30% but no more than 50% of the voting rights of a company, acquires additional shares, increases his percentage of the voting rights by more than 1% in any six-month period.
Within 30 minutes of incurring an obligation to make an offer or to revise an offer, the bidder must make an announcement or request for suspension of trading (and make an announcement before lifting the suspension).
Consideration can be in cash or securities (generally consisting of the bidder's shares, although other equity-related securities may be offered), or a combination of both.
Cash consideration is compulsory in mandatory offers. This means that if a bidder in a mandatory offer wishes to offer securities as consideration to the target's shareholders, the bidder must give the target's shareholders an option to receive cash in lieu of securities.
If 10% or more of a target's shares are purchased:
For cash by the bidder (or any of its concert parties) during the offer period or within six months before its commencement, the offer must be in cash or accompanied by a cash alternative.
By an exchange of securities (consideration securities) by the bidder (or any of its concert parties) during the offer period or within three months before its commencement, the offer must generally include an offer for consideration securities. An acquisition of target shares by consideration securities during the offer period or six months before its commencement is deemed to be a cash purchase and a cash alternative is also required. This is unless the seller is required, under the terms of the purchase, to hold the consideration securities until either the offer has lapsed or the offer consideration has been posted to accepting target shareholders.
If the bidder (and any concert party) has bought 10% or more of the target's voting rights during the offer period and/or six months before the offer commencement, for a mixture of cash and consideration securities, the SIC should be consulted as to the form of consideration required to be offered for the takeover.
Mandatory general offer
The offer price for target shares must be at least the highest price paid by the bidder (or any of its concert parties) for target shares during the offer period and within the six months before its commencement (Rule 14.3, Code).
Voluntary general offer
The offer price for target shares must be at least the highest price paid by the bidder (or any of its concert parties) for target shares during the offer period and within the three months before its commencement (Rule 15.2, Code).
Acquisitions for consideration other than cash
The SIC must be consulted in such a situation. If target shares have been acquired in exchange for listed securities, the price is normally established by reference to the simple volume weighted average market traded price (VWAP) of the listed securities on the date of acquisition. However, the SIC reserves the right to set aside any inexplicably high- or low- traded prices. The relevant timeframes are three months for a voluntary offer and six months for a mandatory offer.
When target shares have been acquired under a conditional agreement, the offer price is established by reference to the VWAP of the listed securities on the date of the announcement of the conditional agreement if the offer is made within three months of the date of the announcement. If the offer is made more than three months after the date of the announcement, the offer price is to be established by reference to the VWAP of the listed securities on the date the conditions to the agreement are fulfilled and the offer is made.
The SIC can, in certain situations (for example, where regulatory approval is required for the offer), extend this three-month period.
No acquisitions before the offer
The SIC should also be consulted on an offer to be made for any class of share capital for which no acquisitions by a bidder for target shares have taken place within the preceding six months or when there is more than one class of equity share capital involved (Rule 14.3, Code).
Acquisitions during offer period
If, after the announcement of a firm intention to make an offer by the bidder but before the offer closes for acceptance, the bidder (or any of its concert parties) buys shares at above the offer price, the bidder must increase its offer to at least the highest price paid for the shares acquired.
Dispensation from highest price
The SIC's consent must also be sought if a bidder considers that the highest price should not apply in a particular case.
Compulsory purchase of minority shareholdings
Where a takeover offer is made for a Singapore company and acceptances are received for at least 90% of the shares to which the offer relates within four months of making the offer, the bidder can compulsorily acquire the shares of the non-accepting shareholders (section 215, Companies Act).
Shares acquired by the bidder, its related company or their respective nominees before making the offer cannot be counted in calculating whether the 90% threshold has been reached, although shares subject to an irrevocable undertaking can usually be counted. Shares acquired by the bidder during the offer period but not due to acceptances (for example, through market purchases or private deals) can be counted towards the 90% threshold.
Notices must be served on the non-accepting shareholders within two months of reaching the 90% threshold. The non-accepting shareholders have a right to apply to the court for an order that the bidder is not entitled to acquire the shares, or specifying different acquisition terms from those of the offer.
Restrictions on new offers
Except with the SIC's consent, a bidder (and its existing or future concert parties) of a failed offer (other than a partial offer) cannot make an offer for the target, or acquire target voting rights triggering a mandatory offer, within 12 months from the withdrawal or lapse of the first offer (Rule 33, Code).
However, the SIC allows new offers that are either:
Recommended by the board of the target if the bidder is not acting in concert with any director or substantial shareholder of the target.
A competing offer to a third party's offer.
Any person who intends to make a partial offer for the same target within 12 months from the date of the close of a previous partial offer (whether successful or not) must seek the SIC's prior consent. The SIC does not normally grant its consent unless the subsequent partial offer is recommended by the board of the target and proposed to be made by a person not acting in concert with the previous bidder (Rule 16.7, Code).
Except with the SIC's consent, a bidder and his concert parties who have been successful in an offer (other than a partial offer), and who have acquired more than 50% of the voting rights in the target, cannot make a second offer at a higher price than the first offer price within six months from the close of the first offer. They must also not enter into any special deals (see Question 7) with a shareholder.
This restriction applies to an exercise of existing convertible instruments or options, and may be relevant to an acquisition of convertible instruments or options. However, the restriction does not apply to an issue of new shares by placement, subscription or in exchange for assets.
A target can apply to the SGX-ST to de-list if the target obtains approval from a majority of at least 75% in value of the shares held by the shareholders present and voting at a shareholders' general meeting, and the resolution has not been voted against by 10% or more in value of the shares held by the shareholders present and voting (Rule 13, Listing Rules). A reasonable exit alternative, normally in cash, should be offered to the target's shareholders and a target normally appoints an independent financial adviser to provide advice on the exit offer.
Following a successful scheme of arrangement, amalgamation proposal or compulsory acquisition (see Questions 2 and 20), the target can apply to the SGX-ST to de-list its shares without having to go through this shareholder approval process, and without requiring the exit offer.
De-listing by SGX-ST
If the public float of a target's shares falls below 10% after a successful offer, the SGX-ST suspends trading of the target's shares on the SGX-ST at the close of the offer. It can also de-list the target if the target does not restore the public float to at least 10% within three months (or a longer period as agreed by the SGX-ST) from the date of suspension.
Once a bid has been announced, a target's board must not take any action without the approval of its shareholders that could effectively result in a bona fide offer (or imminent bona fide offer) being frustrated or the shareholders being denied an opportunity to decide on the merits of the offer (General Principle 7, Code). Apart from the duty not to frustrate an offer, the target's board must generally act in the best interests of the target's shareholders as a whole.
Specifically, during the offer period the target's board must not, among other things, do any of the following without shareholders' approval at a general meeting (except under a contract already entered into) (Rule 5, Code):
Issue new shares or any convertible securities (including options).
Sell, dispose or acquire assets of a material amount.
Enter into contracts not in the ordinary course of business.
Cause the target or any subsidiary or associated company to purchase or redeem any target shares or provide financial assistance for any such purchase.
Subject to the above, the target's board is not prohibited from pursuing other corporate initiatives (including looking for friendly strategic investors prepared to put in a competing bid). Similarly, the target's board can declare dividends and issue employee share options but only to the extent that such actions are in the normal course of business. The target's board can recommend its shareholders, in the target's document, to reject the offer, setting out its reasons for doing so.
Even when no formal bid has been announced, the above restrictions may apply in situations where the target's board reasonably believes that there is an imminent bona fide offer. When in doubt, the SIC should be consulted as to whether the target is within an offer period.
Transfer of scrip shares
The rate of stamp duty for the transfer of shares in a company incorporated in Singapore is 0.2%. The amount of stamp duty payable is calculated based on:
The higher of the consideration paid per share or the net asset value attributable to each share (determined by reference to the latest available audited financial statements of the company).
The higher of the consideration paid per share or the closing price on the SGX-ST on the date of the share transfer instrument, if the share is listed on the SGX-ST.
Unless otherwise agreed, the buyer of shares pays the stamp duty (Stamp Duties Act).
A transfer of shares may be relieved from the obligation to pay stamp duty if the transfer falls within the rules relating to the transfer of assets (including shares) between "associated companies" (as defined in the Companies Act), and subject to such conditions as may be set out in the Stamp Duties Act. Subject to certain criteria being met, the transfer of shares for qualifying merger and acquisition transactions executed from 1 April 2010 to 31 March 2015 (both dates inclusive) will also be eligible for stamp duty relief, which is capped at S$200,000 per year.
Transfer of scripless shares
Stamp duty is not payable on shares that are traded on the SGX-ST scripless system.
No stamp duties are imposed in Singapore on the transfer of shares (whether in scrip or scripless form) of foreign targets, even if they are listed in Singapore, if the foreign targets do not keep any share registers in Singapore.
Other regulatory restrictions
Without obtaining permission from the MAS/Minister of Finance, a bidder cannot control more than, for example:
5%, 12% and 20% of any bank incorporated in Singapore or any financial holding company (Banking Act).
5% of any finance company incorporated in Singapore (Finance Companies Act).
5% of any insurance company incorporated in Singapore (Insurance Act).
Other examples include the requirement for the approval of:
The Info-communications Development Authority of Singapore for ownership of shares of certain percentage thresholds in a telecommunications company incorporated in Singapore.
The Minister for Information, Communications and the Arts for ownership of shares of certain percentage thresholds in any newspaper company in Singapore.
Where regulatory approvals are required, a pre-conditional offer is usually initially announced, stating that the announcement of the formal bid will be conditional on the relevant regulatory approval being obtained. Only when the regulatory approval is obtained is the formal offer announcement made by the bidder.
Unless they are excluded or exempted, there are three types of prohibited activities under the Competition Act:
Anti-competitive agreements that appreciably prevent, restrict or distort competition in Singapore (section 34 prohibition).
Abuse of a dominant position (section 47 prohibition).
Mergers and acquisitions that have resulted, or may be expected to result, in a substantial lessening of competition within any market in Singapore (section 54 prohibition).
The section 34 and section 47 prohibitions came into force on 1 January 2006. The section 54 prohibition came into force on 1 July 2007.
Parties to the merger can enter into non-statutory confidential pre-notification discussions with the Competition Commission of Singapore (CCS). The purpose of these discussions is to facilitate parties' preparation for notification and to expedite the review process. From a strategic point of view, parties to the merger can use the pre-notification discussions to familiarise the CCS with the applicable competition analysis and this may reduce the timeline for a final decision once the merger becomes public and an official notification is made.
The formal merger notification procedure comprises two stages:
An initial review phase, which generally lasts no more than 30 working days. This initial phase is intended to allow mergers that clearly do not pose competition concerns to proceed quickly.
A more thorough assessment, which generally lasts no more than 120 working days.
During this two-stage process, parties are at liberty to complete the merger. However, parties run the risk that the CCS may subsequently require that the merger be unwound if it comes to an unfavourable view of it.
While there are generally no restrictions on foreign ownership of shares in a Singapore-incorporated listed company, there are restrictions on ownership of shares in specific sectors (see Question 25). In addition, where national security issues arise, certain arrangements or approvals may need to be made or obtained.
Following the commencement of an offer, a bidder must publicly disclose to the SGX-ST and the SIC by 12 noon the following business day any dealings in the target shares for itself, its associates or discretionary investment clients (discretionary investment clients include individuals and funds for whom the bidder, target or any of their associates is accustomed to make investment decisions without prior reference).
The Code defines an associate (and lists examples) as including all persons (whether or not a concert party of the bidder, target or another) who both:
Directly or indirectly own, or deal in, the shares of the bidder or target in a takeover or merger transaction.
Have (in addition to their normal interests as shareholders) an interest or potential interest (examples of which are listed in the Code) in the outcome of the offer, whether commercial, financial or personal.
In particular, the SIC normally considers that a holder of 10% or more of the voting rights of the bidder or target is an associate of that bidder or target.
In a securities exchange offer, the above dealings disclosure requirement extends to dealings in the relevant securities of the bidder.
On 10 October 2011, the SIC issued a public consultation paper in which it proposed several reforms to the Code. These include:
Enforcement Regime. The regime clarifies that the SIC retains flexibility to calibrate its sanctions in flagrant cases and that advisers may be required to abstain from Code-related work as a sanction and specify the circumstances in which compensation orders may be ordered (see box, The regulatory authorities).
REITs and Business Trusts. It clarifies the application of the Code in the context of REITs and business trusts.
Disclosure of Charged, Borrowed or Lent Shares. Requiring bidders to disclose whether the shares which they hold in the target have been charged, borrowed or lent.
Collective Shareholder Action. Setting out the circumstances in which voting together in a single resolution may cause shareholders to be regarded as concert parties.
Concept of Joint Offerors. Adopts the approach taken in the UK Takeover Panel's statement on Canary Wharf plc in respect of joint offerors. The rule against special deals (Rule 10, Code; see Question 7) will not be breached where two or more persons (one or more of whom is already a shareholder of the target) come together to form a consortium on such terms and under such circumstances that each of them can be considered to be a joint offeror.
Concept of Associates. To lower the shareholding percentage threshold from 10% to 5% for a person to be deemed an associate (see Question 28).
Options and Derivatives. Clarifies that all acquisitions of long options and derivatives would normally be regarded as acquisitions of shares for the purposes of the rule relating to mandatory offers (Rule 14, Code; see Question 16).
Dealings Disclosure. Requires disclosure of dealings in long options and derivatives during the offer period by persons holding 5% or more of the shares in the target (see Question 28).
On 20 June 2011, the Ministry of Finance and the Accounting and Corporate Regulatory Authority of Singapore jointly released a consultation paper in which it proposed reforms to the Companies Act. Some of the key proposals having an impact on public takeovers in Singapore include:
Scheme of Arrangement (see Question 2):
stating explicitly that it includes a compromise or arrangement between a company and holders of units of company shares (for example, options and convertibles); and
granting the Singapore courts discretion to deal with "share-splitting" in the context of determining the majority in number for the approval of the scheme.
Compulsory Acquisition (see Question 20):
allowing a compulsory acquisition of units of a target's shares (for example, options and convertibles);
permitting bidders, who are individuals, to invoke the compulsory acquisition provisions;
clarifying that where an offer is made jointly by more than one person, all the joint offerors will have the same legal obligations under the compulsory acquisition provisions;
setting the "cut-off" date as the date of the offer to determine the 90% threshold for the bidder, so that shares issued by the target after that date are not taken into account; and
providing that target shares acquired by the "associates" of the bidder before making the offer cannot be counted in calculating whether the 90% threshold has been reached. The definition of "associate" under section 983(8) of the UK Companies Act 2006 will be adopted for this purpose.
The regulatory authorities
Securities Industry Council (SIC)
Main area of responsibility. The SIC administers and enforces the Code. In addition, the SIC is available for confidential consultation on points of interpretation of the Code. The SIC's members consist of representatives mostly from the private sector and some from the public sector. The SIC has the power (under the SFA) to:
- Make enquiries into any matter relating to the securities industry, including investigating securities trades in connection with a takeover offer.
- Summon any person to give evidence on oath or affirmation, or to produce any document or material necessary for its enquiries.
The sanctions available to the SIC to enforce the Code include:
- Public or private censure.
- Depriving the offender of its ability to access the Singapore securities market.
The SIC also reviews takeover rules and practices periodically, and recommends changes. It can also issue guidance notes on the interpretation of the general principles and rules in the Code, and set out the practice to be followed by parties to a takeover offer or matters connected to a takeover.
Monetary Authority of Singapore (MAS)
Main area of responsibility. The MAS functions as a central bank, and is the main financial regulator in Singapore. It administers the SFA and regulates the financial and insurance industries.
Singapore Exchange Securities Trading Limited (SGX)
Main area of responsibility. The SGX administers and enforces the Listing Rules.
Qualified. Singapore, 1998
Areas of practice. Local and cross-border mergers and acquisitions; corporate restructurings; joint ventures; privatisations; private equity investments.
- Asahi Group Holdings Ltd's, US$7 million acquisition of Permanis Sdn Bhd, PepsiCo Inc's bottler in Malaysia.
- Abraaj Capital Ltd's divestment of a stake in Turkish hospital chain Acibadem Saglik Yatirimlari Holding AS and affiliated companies, to Integrated Healthcare Holdings Sdn Bhd and Khazanah Nasional Bhd.
Qualified. Singapore, 2006
Areas of practice. Private and public mergers and acquisitions; general corporate matters and commercial transactions.
- CDH China Management Company Limited's acquisition of Sinomem Technology Limited.
- Mr Peter Lim's bid to acquire Liverpool Football Club.
- Peak Retail Investments Pte Ltd's acquisition of RSH Limited.