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Guide to Takeovers and Mergers in Singapore Colin Ng & Partners LLP (UEN T08LL0

Guide to Takeovers and Mergers in Singapore Colin Ng & Partners LLP (UEN T08LL0403K) is registered with limited liability. © 2017 Colin Ng & Partners LLP; images (or clipart) © Microsoft Corporation CONTENT Introduction What governs and regulates a take-over and merger in Singapore Main liabilities in a take-over and merger Modes of acquisition Consideration Specimen timetable for a take-over offer Specimen timetable for a take-over offer in competitive situations Case study: F&N Take-over 2013 Contact details 3 4 7 7 15 21 22 23 25 PAGE 3 INTRODUCTION This guide discusses some of the regulatory requirements to be complied with by parties involved in a take-over in Singapore, following the revision to The Singapore Code on Take-overs and Mergers ("Code") effective on 25 March 2016 ("2016 amendments"). There were amendments to the Companies Act, govern- ing the compulsory acquisition mechanism that came into effect on 3 January 2016 (“Companies Act Amend- ments”). This memorandum states the position under the laws, regulations and rules as on July 2016. Readers should note that this guide seeks only to be an introduction to some of the compliance obligations involved in a take-over in Singapore and should not be treated as comprehensive. This guide should not be relied on as legal advice. PAGE 4 The Singapore Code on Take-overs and Mergers While the Code is non-statutory in nature, it is issued by the Monetary Authority of Singapore ("MAS") pursuant to the power conferred upon it by Sections 139(2) and 321 of the SFA. The body which administers and enforces the provisions of the Code is the Securities Industry Council (“Council”). Basically, the Code states its rules on the Ap- proach, the Conduct, the Timing, the Docu- mentation and the various types of offers and their terms in a Take-over. General principles a. General Principle 6: the offer should only be announced after careful consideration and when the offeror has every reason to be- lieve that it can and will continue to be able to implement the offer in full; b. General Principle 2: there are limits on the freedom of action which directors would normally have, outside the context of a take-over, to act in what they consider to be in the best interests of the company and its shareholders. They must therefore accept that there are limitations on the manner in which those interests can be pursued in a take-over situation; c. General Principle 3: an offeror must treat all shareholders of the same class in a target company equally. This applies not only to the terms of the offer but also to the nature, quality and timing of information made available to them; d. General Principle 10: shareholders of the target company must be given sufficient information, advice and time to make an adequate assessment and an informed decision on the offer. No relevant informa- tion must be withheld from them; e. General Principle 12: all parties to a take- over must make full and prompt disclosure of all relevant information and use every endeavour to prevent the creation of a false market in the shares of the offeror or t h e t a r g e t c o m p a n y ; a n d f. General Principle 11: all documents to shareholders must be prepared to the high- est standards of care and accuracy, to en- sure that they are not misleading. Special care is required in respect of profit fore- casts. Application The Code applies to take-over offers of shares or units of:  Corporations (whether or not incorporated in Singapore) with a primary listing of their shares in Singapore  Business trusts with a primary listing of their units in Singapore  Real Estate Investment Trusts (“REITs”) under the Securities and Futures Act (SFA)  Unlisted Singapore incorporated public companies with more than 50 shareholders and net tangible assets of $5 million or more  Unlisted registered business trusts with more than 50 unitholders and net tangible assets of $5 million or more The terms “business trust” and “registered busi- ness trust” have the same meanings attributed to such terms by Section 2 of the Business Trust Act (Cap. 31A). Presently, the Code also has a table of prescribed lodgement fees for various thresholds of takeovers. Although the Code is not law, a breach of the Code may prompt the Council to issue a pri- vate reprimand or public censure or further action as the Council thinks fit, including one designed to deprive an offender of the benefits of the capital markets. In the case of advisers, the Council may also require such advisers to abstain from taking on Code-related work for a stated period. If the Council finds evidence to show that a criminal offence has taken place whether under the Companies Act, the SFA or under the criminal law, it will refer the matter to the appropriate authority. The Council may also require an offender to pay to the holders of securities of the offeree company a just and reasonable amount to ensure the holders receive what they would have been entitled to if a relevant Rule had WHAT GOVERNS AND REGULATES A TAKE-OVER AND MERGER IN SINGAPORE In Singapore, the take-over of a public company (“company”) is principally regulated by the following regulations and statutes. PAGE 5 been complied with. In addition, the Council may also make a ruling requiring simple or compound interest to be paid at a rate and for a period determined by the Council until full payment is made. The 2016 Amendments The 2016 amendments to the Code came into effect on 25 March 2016. In summary, the key amendments in the 2016 amendments are as follows: 1. clarifying that the offer timetables will be aligned to that of the latest offer, where there are competing offers in the new Note on Rule 22.9; 2. prescribing a default auction procedure, if neither offeror has declared its final offer price in the later stages of the offer period in the new Rule 20.5; 3. extending the deadline for a potential competing offeror to announce the mak- ing of a competing offer in the new Note 6 on Rules 3.1, 3.2 and 3.3; 4. clarifying that soliciting a competing offer or running a sale process does not amount to frustration of the existing offer and that SIC should be consulted in cases of doubt in the new Note 8 on Rule 5; 5. clarifying that an offeree board can con- sider sharing available management pro- jections and forecasts with the independ- ent financial adviser in the new Note 5 on Rule 7.1; 6. requiring earlier disclosure of any material change to information previously published in an offer in order to ensure that share- holders and investors are apprised of mate- rial information on a timely basis in Note 1 on Rule 8.1; 7. adopting a 7 business day settlement pe- riod instead of the previous 10 calendar day settlement period as reflected from the amended Rules 16.6 and 30; 8. codifying and streamlining the standards required of pre-conditions in a pre- conditional voluntary offer in the new Note 5 on Rule 15.1; 9. permitting the offeree company to post the offer document at an earlier date in a pre-conditional offer in the new Note on Rule 22.1 of the Code; and 10. clarifying how the offer value for a different class of shares (e.g. preference shares) should be calculated in the new Note 1 on Rule 18 of the Code. Securities and Futures Act (Cap. 289) (the “SFA”) Part VIII of the SFA (Securities Industry Council and Take-over Offers) contains legal provisions pertaining to take-overs. Offences The SFA lists offences relating to take-overs. For instance, pursuant to Section 140, it is an offence for anyone to make a take-over offer if he has no grounds to believe that he will be able to fulfil the relevant terms and conditions once the take-over offer is being accepted. Application Section 139 of the SFA (Take-over Code) effectively states that the Code shall “apply to and in relation to all natural per- sons, whether resident in Singapore or not and whether citizens of Singapore or not, and to all corporations or bodies unincor- porated, whether incorporated or carrying on business in Singapore or not, and shall extend to acts done outside Singapore.” Part VIII of the SFA (Securities Industry Council and Take-over Offers) applies to all offerors regardless whether they are incor- porated or carrying on businesses in Singa- pore or are foreigners or Singapore citizens. The SFA governs the disclosure require- ments on the part of substantial sharehold- ers of listed companies on the Singapore Exchange Securities Trading Limited ("SGX- ST"). Section 135 SFA (Duty of substantial share- holder to notify the incorporation of his in- terests) Anyone (i.e. including a body corporate) who acquires an interest or interests in one or more voting shares (excluding treasury shares) in a Singapore company whose shares are listed on the SGX-ST or uploads/S4/ takeover-guide.pdf