Tender offers have been coming to the attention of the public more and more due to the increase in mergers and acquisitions of publicly-owned companies. The Communiqué Serial IV, No 8 issued by Turkey's Capital Markets Board sets forth the principles relating to tender offers. According to the Communiqué, tender offers fall into two categories: voluntary and mandatory tender offers.
Mandatory tender offer
Under article 17 of the Communiqué, in the event any party or parties acting together acquire, directly or indirectly, 25% or more of the capital and voting rights or management control of a publicly-owned company, such party or parties are required to make an offer to the other shareholders to buy their shares. In addition, if a party or parties who, acting together, own between 25% and 50% of the capital and voting rights of a publicly-owned company, then increase this stake by 10% or more in any given 12-month period, such party or parties are also required to make an offer to the other shareholders to purchase their shares.
Price to be paid for shares
The price proposed for shares in a tender offer cannot be less than the highest price paid for the targeted shares. If the purchase has been made through a voluntary tender offer to collect shares, as provided under article 14 of the Communiqué, then the highest price paid to those shareholders must be offered in the tender offer to the remaining shareholders. In the event that the purchase has been made through a block sale, then the highest price paid per share must be offered. In cases where the purchase has been made by any other means, then the price cannot be less then the highest price paid during the last three months before the purchase. The offer to the shareholders must remain open for at least 15 days.
Article 17 of the Communiqué states that in the event one or more of the following conditions exist, the Capital Markets Board may grant an exemption from the tender offer.
If the acquisition of shares and voting rights of the corporation are necessary to strengthen the financial structure of the corporation: This evaluation is within the Capital Markets Board's discretion. This exemption is particularly significant in the privatization process, since the majority of the entities that fall under the scope of the privatization programme are suffering economic difficulties due to a lack of efficient management policies and financial resources. Consequently, privatization can be considered a necessity for strengthening the financial structure of a corporation. In the case of privatization particularly, the relevant authorities should consider cautiously whether the obligation of a mandatory tender offer should be imposed on the parties or whether an exemption should be granted. The granting of such an exemption is significant should the mandatory tender offer obligation prevent the sale of an entity under the privatization programme or decrease the sale price of that entity.
If the acquisition of shares and voting rights of the corporation is approved at a shareholders' meeting of the corporation in accordance with the quorum requirements set forth in article 388 of Turkish Commercial Code: During the privatization process of Petrol Ofisi, which was realized through the block sale of 51% of its shares, an exemption was granted to the purchaser since the acquisition was approved at a shareholders' meeting convened in accordance with the quorum requirements of article 388 of the commercial code. However, more recently the Capital Markets Board did not grant an exemption for the acquisition of the majority shares of Viking Ka by SCA Packaging, although the shareholders had duly approved such acquisition.
If the acquisition of the shares and voting rights of a corporation would not cause any change in the control of management due to the capital distribution of the corporation: In this case, on the application of the related parties, the capital structure of the corporation is examined by the Capital Markets Board, and if it is determined that the acquisition would have no impact on the control of the management, the Capital Markets Board may grant an exemption from the mandatory tender offer requirement.
If the acquisition of the shares and voting rights is a result of a legal requirement or if the thresholds are exceeded unintentionally, then the Capital Markets Board may grant an exemption provided that the purchaser undertakes to sell such portion of shares necessitating the tender offer.
Voluntary tender offers
Article 14 of the Communiqué governs voluntary tender offers. A voluntary tender offer is an offer to purchase shares with the intent to acquire control of the corporation., made by a person directly to the shareholders of a publicly-owned company and communicated to such shareholders by means of newspaper advertisements and by general mailing.
According to article 14, individuals intending to make a tender offer must submit an "Information Form" to the Capital Markets Board and, pursuant to article 15 of the Communiqué, must execute a contract with a brokerage house that will purchase the shares on their behalf. The Capital Markets Board must then approve the form and content of all kinds of advertisements, announcements and notices related to a tender offer.