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Considerations on Chilean law govering tender offers

Tender offers in Chile are not restricted by current laws and regulations. In fact, Chile does not have a law such as the US Williams Act and, consequently, there are no mandatory provisions requiring that the offeror purchase tendered shares on a pro rata basis or that all shareholders be paid the same price for their shares. Furthermore, there is no minimum offering period for a tender offer.

A bill of law aiming at regulating tender offers is being discussed in the Congress but from the debate that has ensued it is safe to assume that it will become law only after many substantial changes are made to the original draft. Our estimate is that such a bill of law will not be approved before September 1999.

At present, two provisions of the Chilean Securities Act need be taken into consideration regarding a tender offer process:

Section 54 provides that any person or entity who, directly or through any affiliate, is seeking to take control of a listed company, must disclose in advance the transaction to the public, stating the price and conditions under which it will be carried out. The law does not distinguish as to whether the acquisition will be effected through a tender offer, a private transaction or directly on a stock exchange. Therefore, this disclosure requirement applies to every kind of takeover. The acquirer must report its intention to make a tender offer to the Chilean Superintendency of Securities and Insurance (SVS) and to the stock exchanges in which the targeted securities are traded and, thereafter, must announce the offer in a newspaper of national circulation. The acquisition of the shares may only be completed five business days after such publication is made.

Section 12 provides that any person or entity who directly or indirectly holds 10% or more of the capital stock of a listed corporation, or who acquires 10% or more of its shares through a stock purchase, must disclose each and everypurchase or sale of shares within five days of the transaction's completion. Disclosure must be made to the Chilean SVS and to each stock exchange on which the corporation's stock is listed. Disclosure must also be made by the members of the board of directors, the general manager and managers of the corporation concerned, if a director or officer purchases or sells securities of such corporation.

For purposes of the Securities Act control is defined in Section 97 thereof as the ability of a person or group of persons to command the majority of the votes in the shareholders' meetings, the right to elect the majority of the board members of the corporation concerned, or the right to materially influence the management of such corporation.

Cristián Eyzaguirre

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