The Securities Industry Council (SIC) has proposed enhancing disclosures to investors and shareholders in the take-overs and mergers process, also known as M&A, in Singapore.
This enhancement is among four proposed amendments in a consultation paper released by SIC on May 5 to improve regulation of M&A transactions in Singapore. It takes into account market developments since the Singapore Code on Take-Overs and Mergers was last revised in 2019.
The first proposal is to regulate deal protection measures, which could deter higher offers from competing offerors. For instance, break fees that an offeree agrees to pay an initial offeror if this offeror's offer does not succeed would count as a loss of value to any subsequent offeror, should the subsequent offeror succeed.
The deal protection measures would be prohibited except in limited circumstances.
The second proposal is to improve certainty and timeliness via schemes. An offeror should take the procedural steps necessary for the scheme to be effective without delay once shareholders have approved the scheme. The SIC also proposes that the meeting to approve the scheme of arrangement to effect a take-over or merger should be held within six months of the announcement of the scheme.
The third proposal is to prevent a false market by holding an offeror to its earlier statement, or requiring clarity on earlier statements.
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Offerors who have issued a no increase or no extension statement would not be permitted to make a subsequent offer. In addition, where a potential offeror has made a holding announcement about a possible offer and has not clarified its intentions for a prolonged period, it would be given a 28-day deadline to clarify its intentions by announcing a firm offer or stating that it would not be making an offer.
If an indicative offer price is disclosed prior to a firm offer, the firm offer must be at no less than such indicative price.
The final proposal is to enhance information provided to shareholders to enable their decision-making on frustrating actions.
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A frustrating action is an action taken by an offeree board which could result in shareholders being denied an opportunity to consider an offer.
An example would be a competing asset offer for all or materially all the assets of the offeree company. It is proposed that where there is a competing asset offer, the offeree company would be required to issue a statement quantifying the cash sum expected to be paid to shareholders from the asset offer.
This would allow shareholders to compare the economic outcomes of the two transactions (i.e. asset offer versus take-over offer). Where shareholders' approval is sought for a proposed frustrating action, the code would require independent advice to be obtained.
The SIC is formed in 1973 with the legal backing of the Securities Industry Act. Its main function is to administer and enforce the take-over code, and review take-over rules and practices periodically, and recommend changes for promulgation by MAS.
