FRA’s BOD has approved a proposal to amend some of the provisions of Chapter 12 of the Executive Regulations of Capital Market Law on tender offers and acquisitions. The main feature of this amendment is taking into consideration the rights of minority shareholders and ensuring that their interests are not affected.
The amendment is stressing on the accuracy and adequacy of the data that is related to tender offers. In addition, it obliges the bidders to take the utmost precautions to maintain the confidentiality of the information related to the offers. Also, the said amendments oblige companies which are listed on foreign exchanges to disclose on these exchanges according to their rules in order to ensure equality upon providing data related to the tender offers in a time that suits all shareholders.
It is also necessary to disclose the acquirer’s interest and its related parties to all shareholders and all data related to the offer if there are rumors indicating that such offer exists.
Moreover, the amendments introduce the need to provide a detailed statement of the basis of estimating the purchasing price and valuating the shares in the case of combined tender offer and presentation by swap method and the directions of the bidders towards the company’s activity during a year following the success of the offer and the plan towards the minority shareholders.
The updated Executive Regulations defines purchase price determination mechanism in cases of active and inactive shares. The Board authorized the appointment of an independent financial advisor to assess the fair value of the shares when the Board finds it necessary in order to protect minority rights.
The amended Executive Regulations prohibits the acquisition of a third of the company’s capital or voting rights without FRA’s prior approval. Also, it obligates the potential acquirer to disclose his intention to keep the shares of the company traded on the Stock Exchange or to delist them. If he wishes it to remain tradable, then the acquiree shall acquire as much as he can to remain on the Stock Exchange in accordance with the applicable listing rules.
The regulations also show that the acquisition of voting rights in case of issuing the company’s preferred shares is all that matters. In addition, the amended regulations gave the authority the right to take the necessary measures in cases of breach, including preventing voting on shares that exceed the set percentage and freeze it. The regulations also introduced a new limit for the acquisition of two-thirds of the company’s capital whose shares are listed on the Egyptian stock exchange. Besides, the amendments allowed increasing the percentage of ownership in companies not exceeding 5% annually without reference to the Authority. The amendments allow those who own more than one-third of the listed company’s capital to raise their contribution to half the capital not exceeding 5% per annum without reference to the Authority. And for those who exceed half of the company’s capital to raise their contribution to less than two thirds of the capital, not exceeding 5% per annum. In addition, those who exceed two-thirds of the capital to raise their contribution to less than three quarters of the capital not exceeding 5% per annum.
The Regulations also added many cases where, if available, the offer could be excluded.
These amendments to Chapter 12 of the Executive Regulations of the Capital Market Law were the first amendments since its issuance in early 2007. The said amendments come within the context of the international standards and practices on tender offers and acquisitions.
It is expected that the draft amendments will be sent to the Council of State through the Minister of Investment and International Cooperation to be reviewed in the next few days.