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Thailand’s takeover rules

The takeover of a Thai-listed public company is subject to the Securities and Exchange Act BE 2535 (1992) (SEC Act) and the new Notification of the Capital Market Supervisory Board No. TorChor 12/2554 Re: Rules, Conditions and Procedures for the Acquisition of Securities for Business Takeovers. The Notification became effective on June 1 2011 and revised the former rules as follows:

The first threshold for making a mandatory tender offer was changed from 25% of the total number of shares issued by the business to 25% of the total voting rights of the business, excluding treasury stocks.

Any person making a public announcement of a business takeover but failing to meet certain pre-conditions for making a tender offer for securities of such business because of uncontrollable external factors will be exempted from the one-year prohibition. This is to allow the offeror to make the tender offer within one year and give the securities holders of such business the opportunity to consider the offer.

Any person who has acquired shares that reach or exceed any 25%-50%-75% trigger points and has made a tender offer must, after the closing of the tender offer period, comply with certain conditions regardless of whether there is any securities holder selling securities in the offer. The said conditions include prohibitions from (i) purchasing or acquiring securities of the business at the price higher than that specified in the tender offer document within six months, and (ii) taking any action which is different from those stated in the tender document within one year.

Any person acquiring shares that reach or exceed any trigger point to make a tender offer will be exempted from the duty to make the offer if (i) within seven business days, such person reduces the portion of shares in the business to the level that is below the respective trigger point, and (ii) during the reduction process, such person abstains from exercising the voting right in the portion to be reduced.

In summary, the SEC Act and the new takeover rules require reporting thresholds for substantial acquisitions or dispositions, by an investor's own act or acting in concert with others, of Thai-listed shares based on multiples of 5% of the total voting rights of such listed company. This means that each acquisition and/or disposition of securities of any business which aggregately reaches any multiple of 5% of the total voting rights shall be reported to the SEC Office within three business days. Acquisitions triggering the disclosure obligation include both an acquisition by an investor of 5% of a listed company's total voting rights, and an acquisition by an investor and those deemed to be "related persons" and/or "concert parties" with the said investor of an aggregate of 5% of a listed company's total voting rights.

The holding of securities as mentioned above includes the right to purchase or to be delivered of securities issued by the business resulting from holding of securities issued by other businesses or from engaging in an agreement with any other persons as specified in the Notification of the Capital Market Supervisory Board. Moreover, the general reporting requirements based on acquisitions in multiples of 5% of the total voting rights as mentioned above will apply whether or not the transfer has been registered and regardless of the amount of such increase or decrease.

The SEC Act and the takeover rules also require that any person or entity acquiring shares (by his own act or acting in concert with others) or that does any other acts which results or will result in such person or others acquiring or holding securities equal to or more than the thresholds of 25%, 50%, or 75% or more of the total voting rights of such listed company, make a tender offer to purchase all of the listed company. The offer price must be fair and in accordance with the said Notification.

The so-called chain principle rule relates to indirect ownership of listed companies. This rule provides that the acquisition of business control in a listed company by holding shares (by such person or by related persons under Section 258) indirectly through other entities (the chain principal or intermediate entity) until business control or voting rights reach or pass any of the 25%-50%-75% trigger points must be subject to a tender offer obligation to purchase all securities of the listed company.

In determining the holding of securities, the "concert party" as defined in the Notification and the "attribution" rules as specified in Section 258 of the SEC Act are also applied.

After making a tender offer, the offeror, whether or not it acquires securities from the making of tender offer, is prohibited from:

(i) purchasing or doing any other act resulting in acquisition or holding of securities of such business at a price or remuneration higher than that in the tender offer during a six-month period after the end of the offer period, unless it is an acquisition of newly-issued securities or an acquisition due to a tender offer approved by the SEC; and

(ii) taking any action, for the period of one year from the closing date of the offer period, which is of a material nature different from those specified in the offer document, unless a shareholders' meeting of the business otherwise adopts a resolution with a vote of not less than three-quarters of the total votes of shareholders present at the meeting and having the rights to vote, and the Office has been notified accordingly.

A person can be exempted from the requirement to make a tender offer for all securities of the business if:

(i) the source of acquisition or nature of the acquirer falls within the scope allowed under the Notification;

(ii) the acquirer reduces his shareholding or controlling interest in accordance with the provisions set out in the Notification;

(iii) a waiver of the requirement to make a tender offer has been granted by the SEC; or

(iv) a waiver for an acquisition in relation to the making of a partial tender offer has been granted.

Chantima Limpananda

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