On April 10 2009, the Turkish Capital Markets Board (CMB) published a draft communiqué on the rules for mandatory and voluntary tender offers, an area currently regulated by the Communiqué on Principles Regarding Proxy Voting at Shareholders' Meetings of Publicly Held Joint Stock Corporations, Proxy Solicitation and Tender Offers, Serial: IV, No: 8. (A revised version of the Draft Communiqué was published on June 3 following initial comments.)
The draft communiqué is still open for comments, and its enactment date is still unknown. Most of the general principles concerning tender offer rules set forth in EU Directive 2004/25/EC on Takeover Bids have been adopted in the draft communiqué, since reflection of Directive 2004/25/EC's principles in Turkish legislation is among the items listed in the Turkish National Plan 2009. Below is a brief summary of certain changes introduced with the draft communiqué.
Control: Now a defined term
Acquisition of control is an element triggering the mandatory tender offer requirement, both under the current rules and the draft communiqué.
However, as opposed to the current rules, the draft communiqué defines the term control and provides that "owning more than 50% of a company's share capital or voting rights" corresponds to having control over the management of a certain entity. It is further stated that, regardless of the shareholding percentage, having the right to appoint or nominate a simple majority of the board of directors also corresponds to having control.
In addition to this definition, the draft communiqué states that control will be deemed acquired under circumstances in which such power is to be exercised (i) individually or as a group, (ii) directly or indirectly, or (iii) solely or jointly. The definition of control, as introduced by the draft communiqué, accords with CMB precedent, where exemption applications are reviewed from the perspective of change of control.
Rules in force provide that a mandatory tender offer requirement arises if shares or voting rights of publicly held companies are acquired at a percentage of 25% or more. This threshold increases to 50% in the draft communiqué. As opposed to the current rules, there is no provision in the draft communiqué requiring entities owning 25-50%, and who increase their shareholding in an amount corresponding to 10% of the share capital and voting rights of the concerned entity, to launch the mandatory tender offer.
Exemption conditions amended
Under the draft communiqué, general assembly approval concerning the share transfer triggering the mandatory tender offer requirement and no change of control are no longer listed among the exemption conditions. However, new exemption conditions are introduced, such as change of control concerning the parent company that has no objective of controlling the related entity.
While making this evaluation, the CMB will take into account factors such as the shareholding amount of the parent entity in the affiliated company and the degree of importance of the affiliated company's activities to the overall commercial activities of the parent. Intra-group share transfers are also listed among the transactions that may be subject to an exemption.
According to the draft communiqué, the offer price in a mandatory tender offer cannot be below the maximum price paid by the offeror for the same class of shares during the six-month period prior to the date on which the mandatory tender offer requirement arises, including the price paid in the transaction triggering the mandatory tender offer requirement. The current rules provide for a three-month period, as opposed to the six-month period in the draft communiqué.
If the mandatory tender offer requirement arises over an affiliated company acquiring shares of the parent company, the offer price cannot be below the higher of (i) the average stock price of the affiliated entity's shares during the six-month period prior to the acquisition of the shares of the parent company, and (ii) the average stock price of the affiliated entity's shares during the six-month period prior to the date of the public disclosure regarding future acquisition of the parent company's shares.
If the offer price cannot be determined according to these principles, the offer price should be determined by a CMB-appointed firm that is capable of valuation services.
Voluntary tender offer
The draft communiqué regulates voluntary tender offers, a matter also addressed by the current rules, but provides more details in that regard. A voluntary tender offer may be made for all or part of the shares of a publicly held company. If the amount of shares of the entity the shareholders are willing to sell exceeds the amount the offeror is willing to buy, the purchase should be realised pro rata to the shareholding of the shareholders willing to sell their shares.
The current period of 30 days for finalising the purchase of the shares has been amended to between 10-20 days in the draft communiqué. In line with Directive 2004/25/EC, the draft communiqué also provides that the mandatory tender offer requirement should not apply even if such requirement arises as a result of the voluntary tender offer.
The draft communiqué directly addresses public disclosure of events concerning the mandatory and voluntary tender offer and does not leave much room for regulation by the general rules set forth in the Communiqué on Public Disclosure of Material Events, Serial: VIII, No: 54.
According to the draft communiqué, public disclosure should be made at every step. This includes disclosure of the adoption of a tender offer resolution or triggering of the requirement, any exemption or tender offer application, and the outcome of any such applications. The final management and shareholding structure of the concerned entity should also be disclosed after finalisation of the tender process.