Mandatory Tender Offer
Tender Offer Procedure
Terms and Conditions

Congress has recently passed a law that regulates tender offers of shares and convertible securities of public corporations. Prior to the Tender Offer Act, tender offers of shares and convertible securities of public corporations were subject to simple requirements regarding the dissemination of information to the public.

Mandatory Tender Offer

Certain acquisitions of shares or convertible securities issued by public corporations must be made by tender offer. These include:

  • acquisitions that allow a person to obtain control of a company;
  • offers that the controlling shareholder must make if, as a consequence of an acquisition, the control of two-thirds or more of the voting shares of a company is reached;
  • acquisitions where a person acquires control of a company that, in turn, controls another public corporation and which represents 75% or more of its consolidated assets. The person must make a prior tender offer to shareholders of the corporation for an amount of shares not lower than the percentage that would allow her/him to obtain control; and
  • acquisitions where a controlling shareholder acquires additional shares within 12 months following the transaction when it took control of the company, unless the acquired shares do not reach 3% of the outstanding capital of the company.

The superintendency may exempt one or more rules of the act for offers of up to 5% of the shares, if they are (i) made through a stock exchange and (ii) pro rata to the remaining shareholders, in accordance with stock exchange regulations approved by the superintendency.

Exceptions may be either general or transitory.

General exceptions
General exceptions include acquisitions of shares sold by the controlling shareholder, provided that they have presence in the stock markets, and the price of the purchase is paid in cash and is not substantially higher than the market price. The act defines 'market price' as:

"the average weighted price of the shares between 90 and 30 business days prior to the acquisition, and substantially higher as the value in excess of the market price, to be yearly determined by the superintendency, and which excess may not be lower than 10% nor higher than 15%".

Other general exceptions include acquisitions that occur as a consequence of (i) capital increases made by issuing shares which, due to their number, would allow the acquirer to obtain the control of the issuer and (ii) mergers, inheritances or forced sales.

Transitory exceptions
Transitory exceptions cover shareholder agreements that are (i) registered in the public corporation's shareholder registry and (ii) executed prior to the date of enactment of the act, in which the parties agreed preferential rights to purchase or sell shares. These exceptions also include situations where shareholders who controlled a public corporation at the date of enactment of the act may elect to sell their shares, even if the price is substantially higher than the market price for three years following this date. To be entitled to this exception, a resolution of the shareholders meeting of the company must be adopted.


If the bidder in a tender offer acquires shares 90 days before or 120 days after the offer at a better price than that included in the offer, those who sold their shares to the bidder are entitled to the price difference or the benefit.

For 12 months following the transaction, shareholders who obtain control of a company cannot purchase additional shares for an amount equal to or higher than 3% without making a tender offer at a price per share no lower than the price paid in the earlier transaction. However, this rule is not applicable if the acquisition is made in a stock exchange and pro rata for the rest of the shareholders, pursuant to stock exchange regulations approved by the superintendency.

Tender Offer Procedure

The bidder must publish a prospectus outlining the terms and conditions of the tender offer, and a notice in two national newspapers informing the public about the start of the offer. In the offer the bidder must declare whether its intention is to maintain the target company, subject to the rules applicable to open corporations.


The bidder may include a banking guaranty with the launching of the offer, to secure payment of damages in case of non-performance of the obligation to pay the offered price. The value of the guaranty may not be lower than 10% of the total amount of the offer.

The offer cannot be in place for less than 20 or more than 30 days. However, the bidder may renew the offer once for no less than five and no more than 15 additional days.

The offer must be made to all the shareholders of the relevant company or the applicable series of shares or convertible securities. If the number of shares tendered by the shareholders exceeds the number of shares offered to the bidder, the bidder must purchase them pro rata among the shareholders.

Terms and Conditions

Generally offers are irrevocable but they may contain conditions to be effective. Offers may be amended while in effect only to increase the offered price or the number of shares to be acquired. Any increase in price will benefit shareholders who have tendered their shares at the original price. These shareholders may retract at any time prior to the date when the offer ends.

During the period of the offer, third parties may present competitive offers but they will be valid only if they are launched at least 10 days prior to the end of the other bidder's tender offer period.

As a result of the offer announcement, the target company and members of its board of directors are subject to certain restrictions and obligations:

  • During the period in which the offer is outstanding, the target company may not acquire shares of the target company, create subsidiaries, sell assets that represent more than 5% of the aggregate value of the company assets or increase the target company's indebtedness by more than 10% of the debt maintained before the beginning of the offer. The superintendency may authorize any of these actions.
  • The target company must give the bidder an updated list of shareholders.
  • Within five business days of the announcement of the offer, each company director must issue a written report concerning the value of the offer for the shareholders.

Three days after the last day of the offer or its renewal, the bidder must publish the result of the offer, detailing:

  • the total number of shares tendered;
  • the number of shares that it will acquire;
  • the pro rata factor, if applicable; and
  • the controlling percentage that it will reach as a consequence of the offer.

For further information on this topic please contact Roberto Guerrero Valenzuela at Guerrero, Olivos, Novoa y Errázuriz Ltda. by telephone (+562 639 0169) or by fax (+562 639 0170) or by e-mail ([email protected]).

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